The Canadian Real Estate Association said Friday it has cut its national outlook for home sales activity for the year by five per cent, saying the decline stems almost entirely from a downward revision to its outlook for the Ontario market.

CREA said in a release that it's now forecasting sales activity through the Multiple Listing Service (MLS) system will come in at 506,900 units in 2017, a drop of more than 20,000 transactions from the June forecast.

"Sales in British Columbia and Ontario are both now projected to decline by about 10 per cent in 2017 compared to all-time records set in 2016," CREA said in its report.

Alberta is still projected to post the largest provincial increase in resale activity in 2017, with a gain of 7.4 per cent, but that will still leave sales below the province's 10-year average, the report said.

CREA also said the national average price for resale transactions is forecast to rise by 3.4 per cent this year to $506,700. Again, that is a downward revision to CREA's previous forecast of $526,000, mostly due to fewer high-priced sales in Ontario's Greater Golden Horseshoe region.

Changes in sales activity in the Greater Golden Horseshoe have a large influence on results for the province and nationally because the region is home to roughly a quarter of the Canadian population, CREA said.

August sales higher

The group also reported Friday that national home resales in August via the MLS system rose by 1.3 per cent compared to July.

The small gain broke a string of four straight declines, but still leaves activity 13.8 per cent below the record set in March.

CREA said an August rebound in the Greater Toronto Area, where resales rose 14.3 per cent from July, fuelled the national increase. Factoring out the impact of the GTA from the national picture, sales activity was flat.

Compared to August last year, sales last month were down by 9.9 per cent, with CREA reporting that year-over-year sales were down in about 60 per cent of all local markets across the country.

The latest sales report follows the Bank of Canada move to begin raising lending rates in July. The central bank bumped up a key rate by a quarter of a percentage point, marking its first interest rate hike in seven years. The bank also raised the lending rate by another quarter percentage point this month.

"Experience shows that homebuyers watch mortgage rates carefully and that recent interest rate increases will prompt some to make an offer before rates move higher, while moving others to the sidelines," said CREA president Andrew Peck in a statement.

"After a few very difficult months for the Toronto market, the August data suggest the worst may have passed, though what comes next remains a question mark, said BMO senior economist Benjamin Reitzes.

"The Bank of Canada's rate hikes should help contain any renewed exuberance, but if things do heat up again, expect policymakers to step in before too long," he said in a commentary.