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OTTAWA (Reuters) - Canadian building permits fell dramatically and housing prices held steady in November, signaling a slowdown in the housing market but economists warned against dire predictions of a U.S.-style meltdown.
The Canadian dollar tumbled on Thursday after Statistics Canada reported a 9.9 percent drop in the value of building permits in November from October. Markets had expected a milder 2 percent pullback after a big jump in October.
But the value of permits were still on track for a record high in 2007, rising 12.4 percent in the first 11 months compared with the same period in 2006.
"The mistake would be to bind today's report on permits to yesterday's soft housing starts number and try to spin it into the makings of a US styled real estate story," said Stewart Hall, markets strategist at HSBC Canada.
"This is moderation from very high levels to still high levels."
The sharp monthly drop in building permits combined with weaker-than-expected December housing starts, reported on Wednesday, sent shudders through markets, which are on high alert for any sign the U.S. housing crisis is spilling over into Canada.
The Canadian dollar skidded versus the U.S. dollar after the report to a three-week low of 98.58 U.S. cents, valuing each U.S. dollar at C$1.0144, compared with 99.03 U.S. cents, or C$1.0098 at Wednesday's close.
"This dramatic fall in permits offers some credence to the view that the Canadian housing market may have hit a soft spot in the fourth-quarter of 2007, and validates the significant fall reported in housing starts yesterday," said Millan Mulraine, economics strategist at TD Securities.
"We would, however, simultaneously emphasize that the Canadian housing market remains in reasonable shape, with an expectation for some moderate adjustments during 2008," he said.
Permits for the housing fell by 5 percent in November as a small increase in single-family units was not enough to offset a sharp decline in multiple-family dwellings.
Permits for non-residential buildings plummeted 17.5 percent to their lowest level since April.
Statscan also said on Thursday that new home prices grew at an annual rate of 6.1 percent in November, unchanged from October and marking the 15th straight month of either declining or flat year-over-year price growth.
New homes cost 0.5 percent more when compared with October 2007, beating the market consensus of 0.3 percent increase, as the red-hot real estate market in Western Canada continued to cool.
Saskatoon led the country with an annual price increase of 47.9 percent but prices held steady there in the month of November. The year-over-year price rise was 3.4 percent in Toronto, 4.1 percent in Montreal and 6.4 percent in Vancouver.
($1 = $1.01 Canadian)
Reporting by Louise Egan; Editing by Renato Andrade