UPDATE 1-Canada housing starts likely to fall in '09 -CMHC

Tue May 19, 2009 9:55am EDT

* Sees decline to 141,900 units from 211,056 in 2008

* Upturn in 2010 will still fall short of 2008 level

TORONTO May 19 (Reuters) - Canadian housing starts are expected to continue to decline in 2009 as a result of the economic recession before rebounding in 2010, Canada Mortgage and Housing Corp said in a forecast on Tuesday.

The government agency sees housing starts declining this year to 141,900 units from 211,056 last year. It predicts housing starts will rise again next year but still remain below the 2008 level at 150,300 units.

"The decline in housing starts in 2009 can be attributed to several factors, including the current economic climate, increased competition from the existing home market, and the impact of strong house price growth between 2002 and 2007," said Bob Dugan, chief economist for CMHC.

Sales of existing homes are expected to decline to 357,800 units in 2009 from 433,990 in 2008, but increase to 386,100 units in 2010. The average price is expected to decrease to C$283,100 ($244,000) in 2009 and to stabilize in 2010.

Housing starts fell 19.9 percent in the month of April, resuming a downward trend that began in 2008 despite a surprise upturn in March.

Housing activity has softened in Canada, though the sector has not experienced the same sort of plunge that has been seen in the United States. A sharp economic contraction and heavy job losses will continue to pressure the housing market throughout this year, analysts have said.

CMHC said earlier this month that new home construction in Canada was now at a "more sustainable level" after having been exceptionally strong over the previous seven years, exceeding 200,000 units per year.

In the United States, housings starts and permits unexpectedly fell 12.8 percent to record lows in April, a government report showed on Tuesday, denting hopes that stability in the housing market was imminent.

($1=$1.16 Canadian) (Reporting by Jeffrey Hodgson; writing by Louise Egan; editing by Peter Galloway)

FILED UNDER: