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A recently sold house in Toronto.

Fernando Morales/The Globe and Mail

The number of existing Canadian homes changing hands hit its highest level in more than four years in June, a sign the country's housing market is flexing its muscles.

Sales over the Multiple Listing Service were 11.2 per cent higher than those in June, 2013, and topped the 10-year average, pulled up by activity in Calgary, Vancouver, Toronto and Hamilton.

The strength that the market is showing of late comes on the heels of a slump that ensued when the winter weather was unusually frigid. Economists have mixed opinions on whether the market is now simply recuperating or building new momentum. Most economists had been predicting that the market, which is generally believed to be somewhat inflated, would slowly lose steam this year.

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"Gains in the housing market over May and June have represented more than just a bounce back from weather-related weakness following the winter months," Toronto-Dominion Bank economist Diana Petramala said in a research note Tuesday. "Mortgage interest rates hit record low levels in June, helping to fuel an acceleration in housing activity – including sales, prices and home building. Existing home prices are on track to outstrip income growth for a second straight year in 2014, which only adds to concerns of an already-overpriced market."

Bank of Nova Scotia economist Adrienne Warren, on the other hand, suggested that the market appears to be settling down because on a seasonally-adjusted basis home sales rose by 0.8 per cent in June from May, while they had risen by about six per cent in May from April.

Sales have now risen for five months in a row. Last month's showing marks the third-best June results on record, said Royal Bank of Canada economist Robert Hogue, who also noted that price growth picked up.

The average sale price of a home in Canada was up 6.9 per cent from a year earlier, to $413,215, according to the Canadian Real Estate Association, which represents the country's Realtors and tracks sales by way of the Multiple Listing Service. Averages can be distorted, for example by a higher number of sales in a pricier city. Factoring the Toronto and Vancouver areas out of the equation, the average home price rose 5.2 per cent to $336,164, CREA said.

The MLS Home Price Index, which seeks to create a more apples-to-apples comparison of home prices than the average, was up 5.4 per cent, a faster pace than in recent months, when it had been rising by about 5 per cent.

Earlier this week, Fitch Ratings reiterated its opinion that Canadian home prices are about 20 per cent overvalued in real terms. "We believe high household debt relative to disposable income has made the market more susceptible to market stresses like unemployment or interest rate increases," the rating agency said.

"Canada's housing market continues to look balanced overall, with stark disparities persisting at the regional level," Bank of Montreal economist Robert Kavcic wrote in a research note. "That said, it is a tad concerning that prices are running firmly ahead of income growth in a few major cities. Calgary is understandable and Vancouver is shaking off a mild correction, but Toronto might be getting too hot for its own good."

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