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House prices advanced 0.6 per cent from June, the largest monthly gain in two years, and 0.2 per cent from a year ago, according to the MLS Home Price Index. Ontario cities and Montreal were mostly responsible for the increase.

“The extent to which recent declines in mortgage interest rates have helped lift sales activity varies by community and price segment,” CREA President Jason Stephen said in a statement. “All real estate is local.”

The average transaction prices, which tend to be more volatile than the MLS index because they don’t take into account changes in the housing mix, rocketed 3.9 per cent compared with a year ago. Porter says the average price is still good leading indicator for the index and prices “are clearly headed higher.”

There was a first-quarter sales lull as buyers and sellers came to grips with last year’s regulatory measures on mortgages.

“We’ve now had a reawakening of sales for several months, Avery Shenfeld, Chief Economist at CIBC Capital Markets in Toronto, said by phone. “In addition, mortgage rates have been edging lower so the combination of the two is making for an active market.”

Ontario’s housing market continues to warm up, the data show. Niagara, London and Windsor led gains in prices with double-digit increases over a year ago while six of 7 reporting cities in Western Canada declined.

The number of new listings was almost flat, easing by 0.4 per cent in July as increases in Calgary, Toronto and Edmonton offset a decline in B.C. and Montreal, CREA said.

“Sales continue to rise in housing markets where the mortgage stress test had little impact due to upbeat local economic conditions and a supply of affordably priced homes,” CREA Chief Economist Gregory Klump said in the statement.

“Meanwhile, the mortgage stress test is doing no favours for homebuyers and sellers alike in places facing challenging local economic prospects and subdued consumer sentiment.”

• Email: cmcclelland@postmedia.com