By Paul Vieira

OTTAWA--Canadian housing starts decelerated markedly in September after months of strong gains, and the slowdown is expected to last through the remainder of the year.

Housing starts for September came in at a seasonally adjusted annualized rate of 208,980 units, a decline of 20.1% from a revised 261,547 units in the previous month, Canada Mortgage and Housing Corp. said Thursday. Market expectations had housing starts increasing by 245,000, according to economists at Bank of Nova Scotia.

The trend measure, or a six-month moving average of the monthly seasonally adjusted annual rate of housing starts, was 214,647 units in September, up slightly from 212,609 units in the previous month.

The housing-starts indicator, along with trade data from earlier this week, signal the supercharged recovery that began in the spring has now slowed, perhaps earlier than anticipated.

In remarks Thursday morning, Bank of Canada Gov. Tiff Macklem said housing has bounced back strongly after a deep virus-induced plunge, reflecting pentup demand and support offered by near-zero interest rates.

"We are not back to the frothy housing markets we saw in 2016, and we expect the bounceback in housing to dampen," Mr. Macklem said.

CMHC said the building of single-detached homes rose in September, by 3.4%, although that was more than offset by a 27% plunge in starts for multifamily units, such as condominiums. This likely reflects a sharp drop in rent costs in major urban centers such as Toronto.

Economists at CIBC Capital Markets said they expect activity in multifamily units to decline further. While single-detached starts have held up well, that could change should the Canadian economy begin to cool as the country deals with a second wave of Covid-19 infections and the arrival of winter, CIBC added.

This week, the seven-day average of confirmed Covid-19 cases in Canada reached a fresh high since the onset of the pandemic, reflecting the rapid climb in infections in the country's two biggest provinces, Ontario and Quebec. This has already prompted Quebec to introduce new economic restrictions.

Write to Paul Vieira at paul.vieira@wsj.com

(END) Dow Jones Newswires

10-08-20 0951ET