OTTAWA - Declining housing starts will cut home builders' profits by almost 20 per cent this year, according to the Conference Board's Canadian Industrial Outlook: Canada's Residential Construction Industry - Winter 2009.

"Years of frenzied construction activity had left the market overdue for a correction," said Valerie Poulin, Economist. "With demand for new homes waning across Canada due to poor economic conditions, the market drop-off appears to be more severe than expected. Even the federal government's budget measures to stimulate the industry are expected to have only a mild impact in the short term."

Residential construction industry revenue growth is expected to fall drastically this year, recording its largest decline since 1995. A small price drop is expected to contribute to the fall in industry revenues, but the primary cause will be the decline in housing starts.

With consumer confidence at levels not seen since the 1982 and 1990-1 recessions, consumers are postponing expenses such as undertaking renovations or buying a home. As well, the tighter credit conditions are further dampening new home demand.

Residential construction profits will drop to $3.2 billion in 2009 and are expected to fall further in 2010 to below $3 billion.