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The Canadian Real Estate Association says housing sales will moderate next year, but prices aren’t expected to ease any time soon.

The association said in its 2022 forecast released on Wednesday that it expects tightening supply conditions to push housing costs even higher in 2022.

“While price growth is not expected to be as extreme in 2022, many of the conditions that supported it right up until the end of 2021 will still be there on New Year’s Day,” the association said in a release.

CREA’s forecast indicates that the heated conditions that have plagued the country for years and been exacerbated by the Covid-19 pandemic won’t fully subside soon.

While interest and mortgage rates are expected to rise and temper some market activity, the forecast suggests appetite for home ownership will still be strong and the lack of properties available will mean people won’t get much of a break on costs.

In November alone, the MLS Home Price Index rose 2.7% month-over-month and was up a record 25.3% year-over-year.

CREA has projected that the national average home price will have risen by 21.2% on an annual basis to $687,500 by the end of this year.

This is higher than its previous forecasts and CREA said it reflects the unprecedented imbalance of housing supply and demand, which has left the country with about two months of inventory instead of it’s typical five months.

With supply continuing to hit “fresh lows” every day, CREA predicted the national average home price will rise by 7.6% on an annual basis to around $739,500 in 2022.

It warned that the forecast is “conservative” because in November 2021, the national average price was almost $721,000.

CREA said the highest prices will be seen in B.C. and Ontario, where it forecasts average home prices to reach $990,038 and $971,080 respectively.

The lowest will come in New Brunswick and Newfoundland where average prices are predicted to hit $275,190 and $286,341 respectively.

CREA expects sales to remain “historically strong” but ease more toward typical levels as they fall in every market but New Brunswick.

“Limited supply, higher prices and higher interest rates are expected to tap the brakes on activity in 2022 compared to 2021, although, increased churn in resale markets resulting from the Covid-19-related shakeup is expected to continue to boost activity above what was normal before Covid-19,” CREA said in its forecast.

“This easing trend is expected to play out across most of the country with buyers facing both supply and affordability constraints, while at the same time, the urgency to purchase a home base to ride out the pandemic continues to fade.”

It predicted national home sales will fall by 8.6% in 2022 to around 610,700, making it the second highest year on record for sales.

CREA’s predictions came as the organization released its November sales figures.

The association found that seasonally adjusted home sales rose 0.6% to 54,222 in November from 53,915 in October, a month in which they posted a 9% increase.

On a non-seasonally-adjusted basis, the sales amounted to 49,272, down 0.7% from the year before.

Sales were up month over month in about three-quarters of all local markets and in all major cities.

The actual national average home price was $720,850 in November, up 19.6% from $602,565 a year ago.

On a seasonally-adjusted basis the national average home price was $719,102, up 1.4% from $709,147 in October.

CREA said excluding Greater Vancouver and the Greater Toronto Area, two of the country’s most active and expensive housing markets, cuts $158,000 from the national average price.

BMO Capital Markets senior economist Robert Kavcic interpreted the figures as signs of a “market that is feasting on low interest rates and reinforcing itself with expectations of price gains.”

He feels the next test for the housing industry will be rising interest rates and 100 basis points of tightening he expects from the Bank of Canada next year.

“Is that enough to seriously cool the market?” Kavcic said, in a note to investors.

“It will certainly be a dampener, but the job market is very strong, wage growth is picking up and, after adjusting for inflation or house-price growth expectations (which have been allowed to harden), those mortgage rates would still remain negative in real terms.”