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Housing starts stumble

Globe and Mail Update

Canadian housing starts fell 2.4 per cent in September as construction on condos and apartments hit its lowest level in more than two years, Canada Mortgage and Housing Corp. said Tuesday.

Starts unexpectedly fell to 211,300 units in September, on a seasonally-adjusted annual basis, from 216,600 units in August. Single-house construction rose for the second month in a row while multiple starts hit their lowest point since July, 2004.

Canada's red-hot housing market has cooled, somewhat, as mortgage rates have climbed and house prices have streaked upwards. In August, CMHC predicted the market would soften next year, even though residential construction this year has been stronger than it had anticipated.

“The lower level of housing starts in recent months is consistent with our forecast for a gradual easing in the pace of new home construction,” said Bob Dugan, chief economist at CMHC's market analysis centre.

Economists had expected a rebound in starts last month. Nonetheless, several said the weakness in condominium construction doesn't mean the real-estate market is headed for a hard landing.

“Canada's housing market is nowhere near a U.S.-style downturn,” said Marc Lévesque, chief strategist at TD Securities Inc.

That's because consumer spending remains strong in Canada, the inventory of unsold homes is healthier than in the U.S., incomes are growing, house prices are rising and interest rates are lower, he said.

The annual rate of urban starts fell 2.9 per cent as a 7-per-cent drop in urban multiple units outweighed a 0.8-per-cent gain in single starts, CMHC said.

For the first nine months of this year, total actual starts increased 1.2 per cent compared to a year ago.

The CMHC is Canada's national housing agency.

Posted on Wednesday, October 11, 2006 at 10:37AM by Registered CommenterElaine in | CommentsPost a Comment

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