A new forecast from a major Canadian real estate company predicts that the national housing market is stabilizing, after seeing a “remarkable turnaround” in the second quarter of 2009.

Royal LePage predicts that the selling price of the average house will drop by only two per cent this year — an improvement over the real estate company’s prior forecast from six months ago that predicted a three per cent drop.

The real estate company also predicts that the number of unit sales will drop about one per cent in 2009 to an estimated 430,000 sales.

Phil Soper, the president and CEO of Royal LePage Real Estate Services, said that the forecast adjustment is the result of the improved real estate sales numbers seen in the second quarter of this year.

“We’ve got the most important quarter in the real estate calendar behind us — the second quarter — and it really was a remarkable turnaround,” Soper said during an interview on CTV’s Canada AM on Tuesday morning.

“As steep as the decline was, the bounce-back was just as dramatic,” he added.

While the year’s second quarter saw housing prices beginning to appreciate, the average national housing prices still remain below their values from 12 months ago.

According to the Royal LePage figures:

* The average price of a detached bungalow declined to $327,964, about 3.5 per cent below what it was the year before
* The average price of a two-storey home was down 3.7 per cent to $392,378
* The average price of a condominium dropped four per cent to $236,612

Soper said a combination of lower mortgage prices and a housing supply shortage in parts of Canada helped push the market upward during the second quarter.

But he cautioned that the market still has a long way to go, when it comes to recovering the value lost during the recent setback.

“It’s going to look better for the second half of this year,” he said. “It’s not going to be a startlingly good year like earlier in the decade, but I think just the bounce-back, the comeback from where we were, is going to make a lot of Canadians feel a lot more comfortable about the homes they live in.”

In many Western Canadian cities, including Calgary, Edmonton and Vancouver, housing prices are still between 10 and 15 per cent below what they were a year ago, Soper said. But they are “gaining back ground,” he said.

In Ontario, Royal LePage said Ottawa would likely see stable prices throughout 2009, with Toronto’s market stabilizing towards the end of the year.

Montreal is expected to remain a strong real estate market this year, helped by low interest and unemployment rates.

In Atlantic Canada, housing prices were much more stable than in cities further west in Canada throughout the recession, meaning that their pricing fluctuations have been less volatile overall, Soper said.

And according to the Royal LePage figures, demand for housing has so far been strong in 2009, due to strong local economies coupled with moderate housing prices.

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The Royal Bank says the Canadian economy will shrink by 2.4 per cent this year, due in part to the substantial 5.4 per cent annual GDP contraction in the first quarter.

That’s the worst quarterly economic performance since 1991 and likely the worst in the current recession.

“Our forecast is for the second quarter’s contraction to be smaller, although, like the United States, Canada is facing the headwinds from the auto industry’s problems,” the bank says.

“The outlook for the consumer for the remainder of this year is a mixed bag. Spending has sagged in recent months as the financial market crisis and job cuts took a large bite out of confidence and sent consumers to the sidelines. However, with interest rates falling to all-time lows and impending government spending programs expected to limit the number of jobs lost, a moderate rebound in spending is likely later this year.”

It also said activity in Canada’s real-estate markets has already picked up, with sales of existing homes rising 11.2 per cent in April, marking the third monthly increase compare car insurance rates.

The Royal predicts growth will return next year as the U.S. and Canadian economies benefit from low interest rates, firmer credit markets and government stimulus programs.

“Export demand is likely to rise as commodity prices stabilize and the U.S. economy (still Canada’s biggest trading partner) climbs out of recession. However, tempering this source of future strength will be an attendant rise in imports, reflecting both increasing Canadian domestic demand and an appreciating loonie.”

In a forecast of the provincial economies in Canada, the bank says growth will hit 2.5 per cent next year.

After shrinking this year because of lower energy prices, Newfoundland will lead all the provinces in growth in 2010, while Ontario and Prince Edward island will have the slowest growth.

The bank says the national jobless rate will hit nine per cent, compared with an average of 8.5 per cent this year.