Canadian housing starts fell 10.9% in January to 195,500 units from a 219,400 units in December, Canada Mortgage and Housing Corp. reported this morning.

The sharp decline is being blamed on the severe winter weather blanketing much of the country.

“The cold January weather took a sizeable chunk out of monthly housing starts. Starts were weaker than expected, falling 10.9% to an annualized level of 196,000, whereas the market was expecting starts to be unchanged at 215,000,” says RBC Financial. “Both singles and multiple-unit measures took a hit in January, falling 7.9% and 15.4% respectively.”

“This morning’s report provides further evidence that the pace of new additions to the housing stock may have peaked in the current cycle, which should come as no surprise given the unsustainably lofty levels of building activity registered throughout the second half of last year,” offers TD Bank. Still, it says, overall demand conditions for housing remain favourable from coast to coast, with Canada’s job machine still holding up well and interest rates remaining attractive. “The bottom line: look for starts to bobble around the 200,000-unit mark throughout 2004 — still a level that would exceed any estimate of a demographically-driven rate by roughly 30,000 units.”

“The January dip in starts is expected to be a blip, although it bears watching, especially with auto sales suddenly skidding into reverse in recent months. Housing has been the one consistent bright spot in the Canadian economic picture in recent years, and is likely to remain healthy,” says BMO Nesbitt Burns. “Low, and falling, mortgage rates and consistent employment gains suggest that starts will remain strong in 2004 — we look for them to hit 205,000 this year after close to 220,000 last year.”