Housing slowdown seen, but no meltdown

Thu Sep 18, 2008 12:11pm EDT
 
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TORONTO (Reuters) - Canadian residential home builders' profits will slide in 2008 and 2009 due to weaker demand, but the market is not showing signs of a U.S.-style meltdown, the Conference Board of Canada said on Thursday.

The Conference Board said it expects profit in the industry to slide 3 percent to $3.6 billion on the heels of a 16 percent skid in 2007. Builders' profits doubled between 2004 and 2006.

"This slowdown is an overdue correction in the market, after housing supply outstripped demand for several years," Michael Burt, associate director of the study wrote. "We are now moving into a buyer's market, as home construction and sales activity return to a more normal pace."

According to the study, new home prices are rising at their slowest pace since 2002 because demand is slowing in response to weaker economic conditions and constrained affordability.

The Conference Board also said it expects profits to fall again in 2009 before starting to improve in 2010 as demand for new homes recovers.

"Market conditions in the U.S. have little effect on the Canadian market, so there is little evidence of a looming market crash in this country," said Burt.

(Reporting by Frank Pingue; editing by Rob Wilson)