A strong showing by Ontario cities pushed Canada's new homes starts up in June, according to new figures released Monday.

Canada Housing and Mortgage Corporation (CMHC) said Canada saw housing starts rise by 1.7 per cent in June compared to May, driven by increased activity in the country's most populous province.

"Housing starts increased in June due to an increase in single and multiple starts in Ontario," said Bob Dugan, CMHC's chief economist, in a news release.

Home builders began 197,400 units — adjusted for seasonal variations and calculated on an annual basis — in the sixth month of the year. Many economic and industry organizations re-calculate monthly figures to show what the number means in terms of a full year's worth of activity to make comparisons between months and different years more meaningful.

The June figures represented an improvement of more than 3,000 homes compared to May's figures and more than 5,000 higher than the results for June 2010.

Leading the charge was a large rise in new home sales in Ontario which experienced a rise of 24 per cent, or 6,390 units, in June. When you calculate Ontario's results over an entire year, the province's industry broke ground on 69,000 new homes in June.

Higher Canadian sales

Canada has continued to enjoy higher home sales and rising prices even as the threat of increased interest rates looms in the coming winter months.

In recent months, the Bank of Canada has warned about Canadians borrowing too much money especially to purchase new homes and mused about the need to slow growth in that sector. 

As well, earlier in 2011, the federal government brought in new restrictions on mortgage lending as a way of cooling the national home market.

Still, the average Canadian house sold for $376,817 in May, 8.5 per cent higher than May 2010.

U.S. housing woes

By contrast, U.S. home prices were down 4.6 per cent in May compared to the same month one year earlier.

American homebuyers faced widespread foreclosures during the recession of 2008-09 as their mortgage rates rose even as their ability to cover these higher payments fell. That resulted in a housing market that has remained in the doldrums two years after the overall economy began to turn around.

Indeed, a recent survey has a number of American economists predicting a bottom for the U.S. housing market in mid-2012.

CMHC's Dugan said the moves by Ottawa to slow down the housing market and prevent a U.S.-style sector crash should take hold toward the end of 2011.

"The revised numbers show that housing starts have been above their trend line since March. However, we expect housing starts to move back towards levels consistent with demographic fundamentals in the near term," he noted.