With just a few weeks left to go in 2021, the Canadian Real Estate Association (CREA) has once again revised its quarterly housing market forecast.

Following an "unexpected" rebound in sales activity in the final quarter of the year, CREA says it now expects some 668,000 properties will trade hands in 2021. If this prediction is correct, the association says it will be a record-setting number by a margin of about 21% over 2020.

CREA also expects that the national average home price will rise by 21.2% on an annual basis to $687,500 in 2021. This average price is higher than the association's 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 its typical five months.

READ: Average Price for a Home in Canada Surges to All-Time High in November

Interestingly, CREA says while monthly home sales weren't as volatile this year as they were in 2020, they were still nonetheless very unstable -- similar to what was seen during the 2008-2009 financial crisis, but at a much higher level.

"This volatility, ranging from a seasonally adjusted annualized high of 807,250 sales in March 2021 to a low of 585,250 sales in August 2021, then back up to around 650,000 at the time of this writing, was not the result of lockdowns or any major fluctuations in demand," said CREA.

Rather, with the end-of-month supply of homes for sale setting new record-lows every month this year, CREA says, "it would seem the ups and downs of sales in 2021 had more to do with where and how many properties came up for sale. When they did, the demand was there to scoop them up."

The association says it expects that interest and mortgage rates are expected to rise and impact some market activity, yet demand for housing will still be strong and the lack of properties available will mean there won't be much slack in terms of prices.

Looking ahead, on both a monthly and quarterly basis, CREA says it expects home sales to remain historically strong in 2022. Yet at the same time, sales are expected to trend slowly back toward more typical levels due to limited supply, higher prices, and higher interest rates.

The real estate association forecast that national home sales will fall by 8.6% to around 610,700 units in 2022 -- which would still work out to be the second-best year on record.

The easing of sales is expected across most of the country with buyers facing both supply and affordability constraints, while the urgency to purchase a home or FOMO over not buying continues to fade.

Meanwhile, CREA expects tightening supply conditions to push housing costs even higher in 2022, with the national average home price forecast to rise by a further 7.6% on an annual basis to around $739,500. However, CREA warned that this forecast is “conservative” because, in November 2021, the national average price was almost $721,000.

That being said, CREA added," 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."

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