Housing starts and sales of existing homes are expected to increase next year, says a CMHC report. (Associated Press)

Housing starts have begun to recover and should improve in the second half of 2009, according to the Canada Mortgage and Housing Corporation.

However, the CMHC also warned in its newly released report that the high level of activity in the first part of 2009 was the result of delayed transactions and would not likely continue at such a pace.

In its fourth-quarter "Housing Market Outlook," CMHC forecast that starts would reach 141,900 for the year and 164,900 for 2010.

Sales of existing homes are also predicted to increase from 441,300 units in 2009 to 445,150 units in 2010. The average home price is expected to reach $312,950 in 2009 and $324,500 in 2010.

CMHC referenced the Multiple Listing Service, owned by the Canadian Real Estate Association, for its information.

"We expect housing markets across Canada to strengthen leading into and over the course of 2010 as economic conditions improve," CMHC chief economist Bob Dugan said in a news release.

"Demand for existing homes has rebounded since the beginning of the year. In addition, lower inventory levels characterize both the new and existing home markets. As a result, stronger housing demand will be reflected in higher levels of housing starts in 2010."

However, the strong pace of MLS sales in the second and third quarters of this year reflects, in part, activity that was delayed in the previous two quarters and is not likely to be sustained, the report said.

The agency predicted the level of sales would move back closer in line with anticipated economic conditions.