TORONTO (Reuters) - Canadian housing starts fell by a greater than expected 12.3 percent in February, marking a sixth consecutive monthly decline and their lowest level since June 2000, as the domestic economy struggles through a major downturn.
Groundbreakings on new homes dropped to a seasonally adjusted annualized rate of 134,600 units last month from 153,500 in January, with declines seen in the single- and multiple-dwelling sectors, Canada Mortgage and Housing Corp. said on Monday.
The number of starts in February was below analyst forecasts for 145,000 starts.
The Canadian dollar briefly fell to its lowest level against the U.S. dollar since September 2004 following the housing data.
But there was a silver lining in the weak numbers. While it suggests builders are responding to weaker demand, which could have a short-term negative effect on economic activity, it also indicates there may not be a severe oversupply of homes.
"As an economist looking at this, it's good news that the markets are working. They're taking their cues from the price signals and those signals are telling them not to build right now," said Pascal Gauthier, an economist at TD Bank.
Economists continue to describe the Canadian housing downturn as a "correction" that will last the better part of 2009, and few predict the sector is facing a U.S.-style meltdown. Most economists and trade groups expect the market to recover in 2010.
Recent statistics show broad weakness within the housing sector as existing homes sales activity has slowed, home prices have eased and building permits have fallen.
CMHC said the decline was in line with its forecast for 2009. It sees housing starts of around 160,250 units this year, within a range of 141,000 to 180,000 units.
"These decreases, however, should be viewed in the context that housing starts have been exceptionally strong over the past seven years, exceeding 200,000 units per year," the federal housing agency said in its monthly report.
Construction of urban single-family homes fell 11 percent to 44,500 units last month from 50,000 in January. Construction of multiple dwellings, such as condos, dropped 17.5 percent to an annual rate of 63,300 units.
All regions except for Atlantic Canada had weaker starts in the month, led by a 19.6 percent drop in Quebec. Atlantic Canada reported a 10.8 percent rise in starts.
Rural starts were estimated at a seasonally adjusted annual rate of 26,800 units in February.
Reporting by Ka Yan Ng; editing by Rob Wilson