Housing construction will strengthen this year, the Canada Mortgage and Housing Corporation predicted Tuesday.

The national housing agency said in its first-quarter outlook that housing starts will range between 152,000 and 189,300 units in 2010, up from 149,081 in 2009.

The CMHC predicts housing starts will range between 152,000 and 189,300 units in 2010. (Canadian Press)

It expected starts will rise to between 156,400 and 205,600 units next year.

CMHC chief economist Bob Dugan expected housing markets will benefit from economic recovery and low mortgage rates.

Dugan said recent federal government measures — such as requiring a larger down payment — would help moderate housing construction.

Mr. Dugan said in the beginning of 2009, a decline in the number of new listings for existing homes shifted the emphasis from a buyers' to a sellers' market and increased demand for new homes.

He said the strong pace of sales seen in the second to fourth quarters of 2009 reflects pent up activity from purchases that were delayed in the previous two quarters with the recession.

But as that demand slackens and interest rates begin to rise, the CMHC predicted existing home sales will be in the range of 455,350 to 509,900 in 2010 and then move slightly lower in 2011 to a range between 426,300 to 494,600.

It expected as demand and supply come into balance, the average price for most of 2010 will remain close to the average in the last quarter of 2009 and then rise modestly in 2011. The Canadian Real Estate Association reported in December that the national residential average price in December was $337,410.