As the Canadian market witnesses moderation, home sales will begin to slide and the price increases from last year will also shrink. This has already started happening in many cities, according to the CREA (Canadian Real Estate Association).

Home sales started on a slow note this year and marked the biggest 18-month decline; sales were down 4.5% from December last year. For January, the increase in average home prices from last year was just 1.2% at $348,178.

Can you only go by the average national price?

CREA said that the market would maintain a balance, as strong demand in some cities would offset the weaker markets in others. The demand would largely be based on the local economic and employment trends.

CREA also warned that it would be wrong to go just by the national average price, as this could be skewed due to abnormal sales movements in one or more Canadian cities. In 2011′s first half, for instance, the homes in the priciest neighborhoods of Vancouver saw huge upswings and played a major role in moving the average national price upwards.

What can home buyers and sellers expect?

Royal LePage Real Estate Services CEO Phil Soper said that Canadians will have to understand that the market performance will remain moderate at best. Buyers won’t have to face double digit increases in prices.

At the same time, he added that sellers may not see a huge demand, as a low interest rate can only do so much. With discount offers by banks ending, there won’t be as much enthusiasm to take out a home mortgage. But the low interest rate climate still offers a good opportunity for home refinancing.

Soper, while noting that last month’s sales numbers were on the weaker side, said that they were up 4% from 2011 and had met market forecasts. However, as the months roll on, sales and prices are likely to cool.