By Mary Gazze, The Cana­dian Press

Canada’s national hous­ing agency says it expects home sales and con­struc­tion activ­ity will cool but remain healthy in the sec­ond half of the year, due to favourable eco­nomic con­di­tions that push up demand for homes.

Canada Mort­gage and Hous­ing Corp. said Mon­day that lower unem­ploy­ment, a steady level of immi­gra­tion, and low inter­est rates are work­ing together to prop up Canada’s real estate industry.

“I think the Cana­dian hous­ing mar­ket is healthy at the moment despite the uncer­tainty we observed in the finan­cial mar­ket,” Math­ieu Laberge, deputy Chief Econ­o­mist at CMHC said in an interview.

He was refer­ring to the stock mar­ket ups and downs ear­lier this month as investors wor­ried about the Euro­pean debt cri­sis and feared the U.S. could slip back into recession.

“Employ­ment is expected to grow at a mod­er­ate pace in the next few years,” he said.

“We expect inter­est rates to remain flat for the remain­der of the year and increase in 2012, and new immi­gra­tion is an addi­tion to demand in the hous­ing market.”

Laberge said the CMHC pre­dicts the mar­ket sales vol­umes will hold at a sta­ble level next year.

Canada Mort­gage and Hous­ing Corp. said low unem­ploy­ment, immi­gra­tion and low inter­est rates led to fewer claims in the first half of the year under its mort­gage insur­ance pro­grams, which pro­tect lenders from defaults by borrowers.

The agency said it expects fixed mort­gage rates to stay rel­a­tively flat for most of the year, with the five-year posted rate at between 4.1 per cent and 5.6 per cent, then increase slightly in 2012.

CMHC said vari­able rate mort­gages would remain near his­tor­i­cally low lev­els, although some banks recently increased their vari­able rates to reflect the higher cost of rais­ing money.

Prices of homes shown on the Mul­ti­ple List­ing Ser­vice are expected to grow only slightly going for­ward because the sup­ply and demand for resale homes will likely stay in bal­anced ter­ri­tory, CMHC said.

A least one ana­lyst agreed that the real estate mar­ket should stay fairly healthy for the rest of 2011, but said it’s already cool­ing slowly and home prices may decline in the longer term.

“What you’re prob­a­bly look­ing at is a period where prices are rel­a­tively flat, maybe a lit­tle bit lower in the next few years,” said Adri­enne War­ren, an econ­o­mist at Sco­tia­bank who spe­cial­izes in the real estate industry.

“Afford­abil­ity from a price per­spec­tive has dete­ri­o­rated and that’s going to have to, over time, come back to more nor­mal lev­els but it doesn’t imply that that has to hap­pen quickly as a type of cor­rec­tion that occurs quickly.”

She said inter­est rates are low and attrac­tive right now and encour­age first time home buy­ers to enter the mar­ket, which dri­ves up prices. Once those rates begin to rise — likely in the sec­ond half of 2012 — the cur­rent price of homes will become unaf­ford­able for many, putting down­ward pres­sure on future prices.

In its report Mon­day, CMHC said changes to mort­gage rules intro­duced by the fed­eral gov­ern­ment ear­lier this year played a part in reduc­ing mort­gage inter­est pay­ments and allowed Cana­di­ans to build equity in their homes faster.

Cana­di­ans are find­ing it eas­ier to pay off their mort­gages, with arrears lev­els improv­ing and the vol­ume of mort­gage insur­ance claims lower than expected.

In March, the fed­eral gov­ern­ment put through new rules that reduced the max­i­mum amor­ti­za­tion period to 30 years and cut the max­i­mum amount Cana­di­ans can bor­row to 85 per cent of the home’s value.

After the changes, refi­nanc­ing activ­ity fell by nearly 40 per cent, which means fewer Cana­di­ans took on more debt. Fed­eral Finance Min­is­ter Jim Fla­herty and Bank of Canada gov­er­nor Mark Car­ney have repeat­edly warned of the dan­gers of the bal­loon­ing debt level of Cana­dian consumers.

Ten per cent fewer Cana­di­ans bought mort­gage insur­ance imme­di­ately after the new rules began, and the level was five per cent lower than sales before the changes came into effect.

CMHC also reported its net income for the quar­ter was $383 mil­lion, up $61 mil­lion from $322 mil­lion in the same quar­ter last year. Rev­enues were down slightly at $3.3 bil­lion, ver­sus $3.4 billion.

The agency’s pre­dic­tions for the rest of the year echo a revised fore­cast by the Cana­dian Real Estate Asso­ci­a­tion released ear­lier this month. CREA said it expected higher national home resales this year, revers­ing upward its pre­vi­ous fore­cast of a one per cent dip.

National aver­age prices will be in the range of $347,700 to $374,300, grow­ing to between $349,500 to $385,000 in 2012, CREA predicted.

CMHC said sales of exist­ing homes should range between 429,500 and 480,000 units in 2011 and between 410,000 and 511,900 units in 2012.

Ear­lier this month, the CMHC said that national hous­ing starts rose to 205,100 units on a sea­son­ally adjusted basis in July, 11.6 per cent higher than the 188,900 reported in the same month last year and 4.3 per cent more than the 196,600 recorded in June.

The uptick, dri­ven by strong con­struc­tion on con­dos and apart­ment build­ings in urban cen­tres, is likely due to builders catch­ing up to robust demand last year rather than expec­ta­tions of com­ing growth, it said.

Home build­ing activ­ity has been increas­ing through the first seven months of 2011, but starts are still down 4.6 per cent from a year ago.

Pre­dic­tions for the Cana­dian mar­ket were in stark con­trast with the most recent fig­ures from the United States, which showed that country’s depressed hous­ing mar­ket is still try­ing to get back on track.

The U.S. National Asso­ci­a­tion of Real­tors said Mon­day that its index of sales agree­ments fell 1.3 per cent in July to a read­ing of 89.7. A read­ing of 100 is con­sid­ered healthy by economists

The asso­ci­a­tion also said a grow­ing num­ber of buy­ers had can­celled con­tracts after appraisals showed the homes they wanted to buy were worth less than they bid.