Canada housing starts drop, mortgage sector to slow

Mon Nov 8, 2010 2:51pm EST
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TORONTO (Reuters) - Canadian housing starts fell 9.2 percent in October, sliding to their lowest in more than a year, data indicated on Monday, suggesting the slowing housing market could become a drag on economic growth.

New home construction fell to a seasonally adjusted annual rate of 167,900 units from a downwardly revised 185,000 units in September, Canada Mortgage and Housing Corp said on Monday.

The number came up short of analyst forecasts for 183,000 starts. September starts were previously reported at 186,400 units on an annualized basis.

It was the fifth monthly decline in the six months since new home construction came close to a two-year high in April, and the lowest level of starts since September 2009.

"Canadian housing demand has cooled significantly this year, and supply now appears to be following," said Robert Kavcic, an economist at BMO Capital Markets.

A powerful source of economic growth for much of the past decade, the Canadian housing sector began to slow after the recession and the cooling has accelerated in recent months.

Data shows that home sales have slowed, construction has moderated and prices are showing signs of stabilizing after a period of sharp increases.

The heated activity in all corners of the housing market was a major reason that residential mortgage credit expanded rapidly to top C$1 trillion as of August 2010, a separate report showed on Monday.

The gain marked a 7.6 percent rise from the year before, the Canadian Association of Accredited Mortgage Professionals said of its annual mortgage survey. Data was collected from various sources, including an online survey of 2,005 Canadians. More than one-half of the sample were homeowners with mortgages.   Continued...