TORONTO (Reuters) - The number of housing starts dropped in June but the previous month’s figure was upwardly revised, which convinced economists the sector is not headed for a U.S.-style meltdown.
Housing starts fell 4.3 percent to a seasonally adjusted annualized rate of 217,800 units last month from an revised 227,700 units in May, Canada Mortgage and Housing Corp. said on Wednesday.
The data came in ahead of the median estimate of analysts, who had expected 217,000 starts in June, and helped send the Canadian dollar to its highest level in nearly a week.
“Despite the decrease in June, total housing starts remain at high levels.” Bob Dugan, chief economist at CMHC, said in a statement. “This is mostly due to the multiple segment, which has been continuously above the 100,000 unit threshold since the beginning of the year.”
Even though the June numbers showed the sector is cooling, analysts were not fretting the decline could turn into the type of meltdown that has plagued the U.S. housing sector since last year amid the subprime mortgage crisis.
“Canadian housing construction is cooling at a gentle pace and remains healthy,” Benjamin Reitzes, an economist at BMO Capital Markets, wrote in a note.
“While there are no signs of a U.S.-style bust, the downward trend in the more stable single-family starts, along with falling home sales and a drop in consumer sentiment, point to a continued decline in activity in the months ahead.”
According to CMHC, construction of condominiums and single family homes fell in every region in June except Ontario, where a 30 percent surge in condos helped lift overall starts by 10.8 percent.
Urban singles declined 7.8 percent to 74,600 units from 80,900, while urban multiples fell 3 percent to an annualized rate of 114,700 units from 118,300 in May.
Rural starts in June were estimated at an annual rate of 28,500 units, unchanged from the prior month.
Combined housing starts in rural and urban areas for the first half of 2008 rose 1.5 percent from the same six-month period of 2007, the federal housing agency said.
“On the whole, the Canadian housing market continues to moderate as the pace of activity declines to levels that are more consistent with a balanced market, following the boom period not too long ago,” Millan Mulraine, economics strategist at TD Securities, wrote in a note.
“However, the decline appears to be both measured and orderly, and is in no way comparable to the correction seen in the U.S.”
Mulraine expects housing starts to be somewhere in the range of 210,000 and 220,000 on an annualized basis.
The news helped the Canadian dollar rally as high as C$1.0099 to the U.S. dollar, or 99.02 U.S. cents, from its pre-data levels around C$1.0155 to the U.S. dollar, or 98.47 U.S. cents.
Editing by Rob Wilson