The ''collapse'' of new home construction across Canada is yet another sign of the seriousness of the current recession, economists said Monday after new figures show the building pace has slowed to levels not seen since early this century.
Canada Mortgage and Housing Corp. said housing starts fell for the sixth straight month in February, down 12.3 per cent to a seasonally adjusted annual rate of 134,600 units. That's after falling 10.9 per cent in January.
February's figures are a 30 per cent drop from the same period last year, and were lower than most economists expected.
''Last month's collapse in housing starts in Canada is surprising by its scope,'' said Desjardins economist Helene Begin in a note to clients.
''Just like other economic statistics that have been released lately, the change of direction is particularly brutal. Levels below 135,000 new homes had not been seen since June 2000, another sign that the Canadian economy is facing serious difficulties.''
Begin said the drop in construction ''confirms that the economic troubles are widespread.''
The federal housing agency, known as CMHC, said the retreat is most significant in multi-family units such as condominiums and townhouses.
Urban multiple starts, such as condominiums and townhouses, decreased 17.5 per cent to 63,300 units, while urban single starts fell 11 per cent to 44,500 units.
CMHC said the drop is due to the reduced sales and increased listings of existing homes. That is causing builders to park their bulldozers and wait for signs of a recovery.
''This latest data suggests homebuilders have quickly and swiftly responded to significantly weaker demand for new homes across the country,'' said TD Bank economist Pascal Gauthier.
Gary Friend, president of the Canadian Home Builders' Association, believes buyers are holding back because of concerns about the economy.
''People are conflicted,'' said Friend. ''They are hesitating, but they are shopping.''
Friend said housing demand couldn't keep rising, as it had over the past seven years, and the current drop has created a more friendly market for buyers.
''I am buoyed by the fact that I have buyers,'' said Friend, a new home builder in Surrey, B.C.
CMHC chief economist Bob Dugan said housing starts so far this year have fallen below the agency's 2009 annual forecast of 160,250 units, but that it's too soon to say if the forecast needs to be lowered.
Dugan said the results aren't surprising given the recession in Canada and the fact that the industry was producing more houses than there were households between 2002 to 2008 period.
He said demand has been at about 175,000 units, but building has been at a pace of more than 200,000 units.
That happened because there was pent-up demand from when housing starts were low in the 1990s and people were driven to buy in better economic times, Dugan said.
CHMC said starts dropped everywhere last month except in Atlantic Canada, where they rose 10.8 per cent.
Urban starts fell by 19.6 per cent in Quebec, 14.4 per cent in Ontario, 19.4 per cent in the Prairies, and 12.8 per cent in British Columbia.
The Bank of Montreal said the drop was almost 30 per cent on a year-to-year basis, taking into account over the last three months. On the same basis, home construction in the U.S. is down 48 per cent.
The bank said multiple starts were the lowest since 2002, while single-family starts were at their lowest since 1996.
Rural starts were estimated at a seasonally adjusted annual rate of 26,800 units.