Housing market cools further

Mon Aug 11, 2008 1:58pm EDT
 
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By John McCrank

TORONTO (Reuters) - The Canadian housing market cooled further in the summer, with reports on Monday showing fewer than expected housing starts in July and the smallest year-over-year new-home price increases in six years in June.

Canadian housing starts fell 14.8 percent in July to a seasonally adjusted annualized 186,500 units from 215,900 units in June, Canada Mortgage and Housing Corp. said.

That missed the consensus expectation of analysts for 210,000 starts.

"Falling sales, tighter lending standards, slowing economic activity and declining confidence all point to downward pressure in the coming quarters, though not to the extent that we've seen south of the border," said Robert Kavcic, economist at BMO Capital Markets in a note to clients.

The U.S. housing market has been battered by a crisis that started in its subprime mortgage sector and spread to other sectors of the market and economy. U.S. housing starts in June saw an uptick that was attributed to a change in New York building codes. The month before that, U.S. starts fell to their lowest level since March 1991.

In Canada, much of the decline in new residential construction in July was in the province of Ontario, down 38 percent. Ontario is Canada's manufacturing heartland and has been hit hardest by the slowing U.S. economy.

But there may be more factors at work, said Stewart Hall, markets strategist at HSBC Canada.

"Ontario has experienced its rainiest summer in decades which tends to support the idea that the magnitude of the construction decline may have more to do with weather than (being) entirely economic related," he said.   Continued...

 
<p>A construction worker swings his hammer at a new home development in Ottawa July 9, 2008. The Canadian housing market cooled further in the summer, with reports on Monday showing fewer than expected housing starts in July and the smallest year-over-year new-home price increases in six years in June. REUTERS/Chris Wattie</p>