OTTAWA - The pace of housing starts in Canada defied expectations and picked up in June to a seasonally adjusted annual pace of 198,185 in June, compared with 196,993 in May.
Economists had expected the rate to come in at about 190,000 for the month.
However, a jump in rural starts and a slight increase in urban starts pushed the total higher for the month.
CIBC economist Nick Exarhos said the increase goes against the conventional reasoning that this year would bring an expected slowdown to the market.
"Today's report also gives us more confidence that the weakness seen in April GDP due to a drop in construction was indeed transitory, and that for the second quarter as a whole, the building sector-along with other economic activity,will show signs of heating up," Exarhos wrote in a note Wednesday.
CMHC said the overall increase came as the pace of urban starts increased to 181,979 units in June, compared with 181,359 in May.
The tick higher came as the pace of multiple urban starts edged higher to 118,815, compared with 118,750 in May. The rate of detached homes increased to 63,164 last month from 62,609.
Rural starts were estimated at a seasonally adjusted annual rate of 16,206 compared with 15,634 in May.
BMO senior economist Robert Kavcic noted that Alberta increased to 53,700 starts on an annual basis, up from 33,600 in May, a pace topped only in the pre-recession housing boom in 2006-07.
"Like almost everything else we're seeing these days, upward momentum is largely concentrated in Alberta â€” but that's okay, they need the houses," Kavcic wrote.
The CMHC report came as real estate company Royal LePage said big cities Toronto, Vancouver and Calgary are driving increases in national average home prices, while smaller cities had more moderate gains.
Royal LePage said the average price of a home in Canada increased between 3.9 per cent and 5.2 per cent in the second quarter of 2014 and prices are expected to go up steadily for the rest of the year.