OTTAWA - Canada heard fewer hammers building new homes in July after prices rose at their slowest pace in over six years in June, as a result of a sharply slowing economy in many parts of the country, although some areas remained hot.
Canada's national economy is flat on its back after two straight monthly declines in employment and people are not inclined to make big ticket purchases like homes, said Sal Guatieri, senior economist at BMO Capital Markets.
The Canadian economy has been hurt by the slowdown in the United States, brought on by the worldwide credit crunch, which has hurt Canada's export sensitive foresty and automotive industries leading to thousands of layoff announcements.
Softening commodity prices, especially for oil, are also creating uncertainty in the market place.
Canada Mortgage and Housing Corp. reported Monday that July's annual rate of housing starts was 186,500 units, down from 215,900 units in June.
Meanwhile, Statistics Canada said Western Canada's softening market slowed housing prices to their slowest pace in over six years in June.
Nationally, contractors' selling prices rose 3.5 per cent between June 2007 and June 2008, compared with the 4.1 per cent year-over-year increase in May.
The housing market is downshifting from the elevated rates of activity of recent years, Guatieri said.
Sales volumes fell sharply around the start of 2008, then price growth downshifted and now homebuilders are scaling back, he said.
Brent Weimer, a senior economist at CMHC, said the figures bring the year's activity more in line with the agency's 2008 forecast of about 200,000 housing starts.
The seasonally adjusted annual rate of urban starts fell 14.8 per cent in July from June.
The June price increase was the slowest rate of growth since March 2002 when year-over-year prices increased by 3.4 per cent.
Prices edged up 0.1 per cent between May and June this year.
Regina homebuyers suffered the largest gains in new home prices, at 28.5 per cent over June 2007, while St. John's, N.L., had the second largest increase, at 22.2 per cent.
