Canada Mortgage and Housing Corp. raised its expectations for housing starts this year on Thursday, but said it expects both new and existing home markets to moderate in coming months after getting off to a strong start early in the year.
The agency's second-quarter housing market outlook said housing starts will be in the range of 182,300 to 220,600 units this year, up from a forecast in February for 164,000 to 212,700 starts in 2012.
CMHC deputy chief economist Mathieu Laberge said condo construction helped drive housing starts in the early part of the year, but noted it varies significantly from month to month.
"Although economic conditions are expected to remain supportive of housing demand, housing starts activity is expected to moderate as 2012 progresses," Mr. Laberge said in a statement.
"Similarly, balanced market conditions in the existing home market will result in modest house price gains through to the end of the year."
CMHC expects housing starts for 2013 to range between 175,100 and 213,500 units compared with an earlier forecast of between 168,900 and 219,300.
It forecasts that the number of existing home sales will be in the range of 431,200 to 516,100 units this year and the 2013 range will be about the same at between 431,300 and 522,400 units.
The outlook suggests the average Multiple Listing Service price will range between $341,100 and $406,700 this year and between $346,000 and $419,900 next year.
It said the moderate increases in the average price, of 2 to 3 per cent, are consistent with the balanced market conditions that are expected to continue in 2012 and 2013.
The report came as Statistics Canada said its new housing price index rose 0.2 per cent in April, following a 0.3 per cent increase in March. On a year-over-year basis, the index was up 2.5 per cent in April, following a 2.6 increase in March.
The agency said the metropolitan regions of Toronto, Oshawa, Ont., and Edmonton were the main contributors to the March to April increase.
St. John's, N.L., St. Catharines—Niagara and Windsor, Ont. all reported price declines of about 0.1 per cent.
Continued strength in the housing market, largely due to the staying power of low interest rates, has led some economists to warn the market is overvalued.
They have warned that could make homeowners vulnerable to a downturn, especially those who have used low interest rates to borrow more than they could otherwise afford.
The Bank of Canada and federal Finance Minister Jim Flaherty have warned Canadians repeatedly to moderate borrowing on real estate, declaring household debt to be the domestic economy's number one enemy.