Housing starts sag, but no meltdown seen

By Renato Andrade

TORONTO (Reuters) - Housing starts fell more than expected in April after a strong first quarter, but economists believe the sector is not heading for a U.S.-style meltdown, just cooling to a more down-to-earth level of activity.

Canada Mortgage and Housing Corp. said on Thursday that 213,900 new homes were put under construction last month, a 12 percent decrease from its seasonally adjusted annualized rate in March.

The figures for March were revised down to 243,000 units from an originally reported 254,700. Analysts had expected a rate of 222,500 starts in April.

"This doesn't mean housing is collapsing, it just means the construction peak is best viewed through a rearview mirror," said Derek Holt, an economist for Scotia Capital.

"This is still a strong number, but it fits our view that new home construction will cool this year," added Holt.

Most of the decrease in April reflected a drop in multiple starts, said CMHC Chief Economist Bob Dugan.

The construction of multiple units in urban areas fell to 113,900 units last month from 141,000 in March. Single units decreased by 11.3 percent, to 71,500. The seasonally adjusted annual rate of urban starts, as a whole, fell 16.3 percent in April from March, to 185,400 units.

Rural starts were estimated at a seasonally adjusted annual rate of 28,500 units last month.