The seasonally adjusted annual rate fell to 201,000 units in August, led by a decline in multiple-unit construction, from 242,600 units in July, the Canada Mortgage and Housing Corp. said Friday. It was the lowest level since January, 2004.
While housing starts tend to be volatile, the report comes on the back of another weaker-than-expected housing report this week. Statistics Canada said Wednesday that building permits fell for the third time in four months in July, countering expectations of a gain.
“Moderately high mortgage rates and rising prices are likely to gently cool the housing market as it heads into 2006,” said Carl Gomez, an economist at TD Bank Financial Group, in a research note. “ While he expects starts to ease to an average pace of 200,000 a month next year, they should still be “well above the demographically driven level of 175,000 units, suggesting no sign of an imminent collapse in the housing market.”...
Analysts polled by Reuters had expected 230,000 starts for the month.
While Gomez points out the rise in interest rates as the main factor in the reduction, there's little reason to think that the decline will stop anytime soon when the Bank of Canada is expected to keep boosting rates. Unfortunately, the booming oil sector seems to be leading the Bank of Canada to take actions which inevitably cut into every other sector of the economy. And based on this report, the housing market is already feeling the pinch.
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