There will be fewer homes sold this year, but for more money than initially thought, the Canadian Real Estate Association said Friday.

CREA downward revised its 2010 housing market forecast after a weak spring buying season in four of Canada’s most crucial markets.

National sales activity via the Multiple Listing Service is now expected to reach just 459,600 units this year, representing an annual decline of 1.2%.

That’s because the pent-up demand resulting from the recession is now running out and further interest rate hikes will keep homebuyers in a cautious mood, CREA said.

As new listings shrink to adjust to fewer buyers, home prices are now forecast to jump 3.5% in 2010 to reach a national average of $331,600.

“Slowing first-time home buying activity means lower- and mid-priced homes are making a smaller contribution to the average price calculation, causing the average price to be skewed upward as a result,” said Gregory Klump, CREA Chief Economist.

Prices are expected to ease off by 0.9% again in 2011, though some provinces could see modestly higher price tags.

“The hangover from accelerated home purchases earlier this year is expected to persist over the rest of the year, but positive economic and job market trends bode well for home price stability,” Klump said.

Big swings in the market could finally be behind us, he said.

“Homebuyers will no doubt welcome a more relaxed housing market in places where there was a shortage of supply earlier in the year.”

CREA expects that in 2011, slower economic growth and consumer spending will contribute to a 7.3% decline in home sale activity.

“While the jump in national sales activity earlier this year likely borrowed from the future, local markets trends are not necessarily in sync with national trends, so buyers and sellers would do well to consult with their local realtor to best understand the outlook in their market,” said CREA President Georges Pahud.