OTTAWA -- The Canadian Real Estate Association raised its home sales forecast Monday on the back of stronger than expected sales in recent months following a slow start to the year.

The association said sales through its Multiple Listing Service are now expected to total 475,000 homes for 2014, up from a June prediction of 463,400.

The new forecast would mean sales would be up 3.8 per cent compared with 2013 and 2.5 per cent higher than the previous forecast.

Regionally, CREA said the five provinces from Ontario and the West will show gains while the five eastern provinces will show declines.

The association said the frigid winter delayed the start to the 2014 spring home buying season and helped boost sales in May and June.

"Although this boost was and still is expected to be transitory, sales have yet to show signs of cooling as activity strengthened slightly further over the summer," CREA said in its updated forecast.

"The increase reflects continuing strength in home sales among large urban markets that initially drove the spring rebound together with gains in markets where activity had previously struggled to gain traction. Lowered mortgage interest rates supported this trend."

CREA said British Columbia is expected to lead the country with a gain of 11.9 per cent over 2013 sales, followed by Alberta with a gain of 7.7 per cent. Saskatchewan, Manitoba and Ontario are expected to post small increases in the range of one to two per cent.

Meanwhile, Quebec and New Brunswick are expected to post slightly lower sales this year, falling about one per cent compared with 2013. Nova Scotia is expected to fall 3.9 per cent, while Newfoundland and Labrador is forecast to be slip 5.2 per cent.

TD Bank economist Diana Petramala said the Canadian housing market has defied expectations so far this year but she still expects it to cool from its current levels.

"With home prices continuing to rise above incomes, affordability will become an obstacle to housing demand once interest rates do eventually begin to rise," Petramala wrote in a note to clients.

"In addition, there remains a record number of new homes currently under construction, some of which are likely to end up on the existing home market, although construction delays suggest it may happen later than expected."

The higher forecast came as CREA said sales through its MLS system in August were up 2.1 per cent compared with a year ago as sales were up in just over half of all local markets, led by Vancouver and Calgary.

Compared with July, sales were up 1.8 per cent.

The national average price for homes sold in August was $398,618, up 5.3 per cent from a year ago. Excluding Vancouver and Toronto, the average price was $324,738, up 3.9 per cent from a year ago.

The national sales-to-new listings ratio was 55.5 per cent in August, up from 53.9 per cent in July, within the 40 and 60 per cent band that CREA uses to mark a balanced market.

The number of months of inventory stood at 5.8 months at the end of August, down from six months in May, June and July.

However, national figures don't reveal the full picture of what is going on in housing markets across the country, BMO chief economist Doug Porter noted.

Twelve of the 26 major markets tracked by CREA reported lower sales compared with a year ago including double-digit drops in Halifax, Sudbury, Ont., and Winnipeg.

"The level of sales is the best in over four years, and is closing in on the pre-recession highs reached in 2007. Meantime, the seemingly calm exterior on sales and prices masks a deepening divide between large cities and small, and West and East," Porter wrote in a report.

He noted that the market remains healthy and well balanced overall, albeit with regional disparities.

"The major potential flashpoint is that prices in the three hottest cities-Calgary, Toronto and Vancouver-are rising faster than family income, further straining affordability," Porter said.

"The persistent strength in these cities is no doubt what prompted the Bank of Canada to stop talking about the inevitably of a soft landing for Canadian housing, and to suggest that the sector has been stronger than they expected. But we would reinforce the message that talk about the 'hot housing market' is really only a three-city story."