UPDATE 1-Canadian housing starts slow modestly in January

Mon Feb 10, 2014 10:33am EST
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By Andrea Hopkins
    TORONTO, Feb 10 (Reuters) - Canadian housing starts fell
more than expected in January, data released on Monday showed,
reinforcing the view that the country's housing market is
stabilizing after a recent boom.
    Starts slowed to 180,248 units last month at a seasonally
adjusted annualized rate, a report from Canada Mortgage and
Housing Corp showed, shy of the 184,000 forecast by economists. 
    In December, starts were a downwardly revised 187,144. They
were originally reported as 189,672. 
    The January figure continues a trend that has seen
groundbreakings slow from 187,923 units in 2013 and the
breakneck pace of 214,827 starts in 2012, when the housing
market was at record highs and the government intervened to
tighten mortgage lending rules.
    Economists are largely predicting a softer but stable
Canadian market this year as mortgage rates edge higher and the
economy continues to chug along slowly.
    "We anticipate that construction activity will continue to
edge lower over the course of the year as the forecast increase
in interest rates should restrain demand," David Tulk, chief
Canada macro strategist at TD Securities, wrote in a research
    "A smaller contribution from the housing market is
consistent with the macro theme of domestic fatigue that will
leave headline (economic) growth at or below its trend rate
until net exports are able find their footing both in response
to a weaker currency and a fundamentally stronger U.S. economy,"
Tulk added.
    Multiple urban starts - typically condos - fell 6.0 percent
to 102,289 units in January, while single detached starts rose
3.4 percent to 60,869 units, a modest rebound after two months
of weakness.
    Starts were down in British Columbia, Quebec and the
Atlantic region, but rose strongly in Ontario and the Prairies.
    RBC economist Josh Nye said unusually bad weather in
December and January may have weighed on activity, and that
housing starts could stage a small recovery in the next few
months. Nye also noted that building permits outpaced starts in
the fourth quarter of 2013 - 210,200 permits versus 194,500
starts - which could mean homebuilding will strengthen in the
near term.
    "However, we expect modestly higher interest rates as 2014
progresses will weigh on housing affordability and lead to some
moderation in residential building activity going forward," Nye
wrote in a research note.