Canada’s housing industry showed more signs of softening amid reports of easing summer construction starts and slowing price increases for new homes

Housing starts fell sharply in July, as the volatile multiple segment readjusted, Canada Mortgage and Housing Corp. (CMHC) reported today.

According to CMHC, the seasonally adjusted annual rate of housing starts was 186,500 units in July, down from 215,900 units in June.

Economists had forecast annualized starts of 210,000.

“After a strong first half of the year, the volatile multiple segment is now readjusting itself,” says Brent Weimer, senior economist at CMHC’s Market Analysis Centre. “This brings activity since the start of the year closer in line with our 2008 forecast of more than 200,000 housing starts for the seventh consecutive year.”

The seasonally adjusted annual rate of urban starts decreased by 14.8% in July compared to June. Both urban multiples and singles moved down, with a drop of 20.2% for multiples to 91,600 units, and a 6.6% decline for singles to 69,800 units.

The seasonally adjusted annual rate of urban starts went down in Ontario and to a lesser extent in the Prairies, where housing starts decreased by 38.8% to 47,800 and by 1.6% to 30,600 in July, respectively.

Urban starts increased slightly by 2.2% to 41,200 units in Quebec, by 2.4% to 8,700 units in Atlantic Canada, and by 5.1% to 33,100 units in British Columbia.

While single starts decreased in all regions in July, with the exception of the Atlantic Canada where they remained unchanged, multiple urban starts only registered a decline in Ontario.

Rural starts were estimated at a seasonally adjusted annual rate of 25,100 units in July.

For the first seven months of 2008, actual starts in rural and urban areas combined were up an estimated 2.3% compared to the same period last year. Year-to-date actual starts in urban areas have increased by an estimated 2.4% over the same period in 2007. Actual urban single starts for the January to July period of this year were 15.5% lower than they were a year earlier, while multiple starts were up by 19% over the same period.

Separately, Statistics Canada reported that new housing prices in June increased at their slowest pace in over six years. That continued a slowdown that started in September 2006, the federal government agency said.

The June decline reflected a softening housing market in Western Canada, StatsCan said.

Across the country, contractors’ selling prices rose 3.5% between June 2007 and June 2008. That was down from the 4.1% year-over-year increase in May.

The June increase was the slowest rate of growth since March 2002 when year-over-year prices increased by 3.4%.