As confidence in the economic recovery grows, average prices are likely to increase, the real estate agency says.

Royal LePage executive Phil Soper says the real estate market enters 2010 with “considerable momentum from an unusually strong finish to the previous year.”

The stimulus effect of low borrowing costs has contributed to a sharp rise in demand that has driven activity to new highs, he says.

The data backs that up. New data released Thursday from Canada’s largest real estate market, Toronto, showed existing home sales were up a massive 115 per cent, year over year, in December.

Those gains came against a particularly poor showing in December 2008, but the 5,541 sales reported by the Toronto Real Estate Board are the strongest December on record back to 1980, BMO economist Robert Kavcic said in a note to clients on Thursday.

Listings in the city were down 47 per cent, year on year, causing average prices to be pushed up 14 per cent. “Too much (cheap) money chasing too few goods,” Kavcic said.

The average home price in 2009 climbed four per cent to $395,460, the TREB said.

That follows the national trend, according to Royal LePage. House prices appreciated in late 2009, with fourth quarter price averages higher than fourth quarter 2008

The move follows decisions by Countrywide Financial Corp. CFC.N, Wells Fargo & Co. (WFC.N) and other major mortgage lenders to tighten their underwriting standards as homeowner delinquencies and defaults increase.

The changes at Citigroup’s main home loan unit, CitiMortgage Inc., would limit no-money-down second mortgages and raise the minimum credit scores needed to obtain them. Borrowers take out second mortgages when they cannot get 100 percent financing from a single lender.

Asked to confirm the changes in mortgage policy, a Citigroup spokesman, in an e-mailed statement, said: “We routinely review our criteria and make adjustments as appropriate according to market conditions.”

CitiMortgage made $50.6 billion of loans between October and December, ranking third in the United States, according to National Mortgage News.

According to e-mails obtained by Reuters, CitiMortgage will stop offering second loans to some customers who want to finance 100 percent of homes’ values and cannot fully document their own finances.

The unit will require 5.01 percent down on some second — sometimes called combo — loans, and 10.01 percent down where financing involves home equity or interest-only loans, the e-mails show.

The bank will allow 100 percent financing to some customers who can document their finances, and to some customers who lack full documentation but obtain their secondary financing elsewhere, the documents show.

The documents also show that CitiMortgage will raise the minimum “FICO” credit score needed to obtain any combo loan to 650, and eliminate the 620-649 category.

Borrowers with FICO scores below 620 are commonly labeled “subprime,” meaning they have higher credit risks.

Citigroup is tightening its lending standards as a slowing housing market dampens profitability even at many lenders specializing in higher-quality loans.

“Citigroup will come around and start lending more freely as soon as the housing market starts to see some profits” says Sandy Hutchens who has been watching the mortgage crisis unfold over the past few months.