New home construction in Canada tumbled 7.5 per cent in 2008 and is forecast to fall another 24 per cent this year, the Canada Mortgage and Housing Corporation says.
According to the CMHC, there were 211,956 housing starts in 2008, compared to 228,343 in 2007. The agency predicts that rate will drop more drastically this year, to an estimated 160,250 housing starts, before rising slightly in 2010 to 163,350.
Thursday's release followed CMHC's report last week that the number of housing construction starts in January plummeted 35.8 per cent from the unusually strong first month of 2008.
Housing starts are seen as a key economic measure, since the construction of new homes translates into demand for everything from timber to carpets.
The CMHC also predicts sales of existing homes will fall 14.6 per cent this year to 370,500. By 2010, existing home sales as measured by the Multiple Listing Service are expected to begin to bounce back, with a projected increase of 9.3 per cent to 405,000 units.
Along with the slowing of new construction projects and existing home sales, house prices are also expected to drop this year, CMHC reports.
The average house price in Canada is predicted to fall to $287,900 in 2009 -- a decline of 5.2 per cent from 2008. That average is expected to remain steady through 2010.
The depressing numbers are directly linked to the slowing global economy and flagging consumer confidence, CMHC said.
"The economic downturn will result in a decrease in demand for home ownership leading to a decline in housing starts and existing home sales in 2009," Bob Dugan, CMHC's chief economist, said in a statement.
"Housing market activity will begin to strengthen as the Canadian economy rebounds in 2010 and the level of housing starts over the forecast period will be more in line with demographic fundamentals."
The deteriorating housing market was a key reason that Statistics Canada's composite index of leading indicators also fell off a cliff Thursday.
The statistics agency said the leading indicator - which is comprised of 10 components and is intended to foreshadow future economic activity -- dropped 0.8 per cent last month, compared with a 0.5 per cent decline in December.
It was the largest and most widespread slump in the leading index since it turned downward in September.
The housing portion of the indicator contracted by seven per cent, its largest monthly decline since June 1990, the last time the home market in Canada crashed.
Despite the housing slide, Statistics Canada noted that purchases of furniture and appliances rose last month, albeit slowly.
Also on the bright side: "deteriorating financial and economic conditions" are forecast to keep inflation steady at 0.7 per cent, making it a little easier for Canadians to keep ahead of the cost of living.
