Housing starts in Canada in January 2008 climbed back over 220,000 units on an annualized basis, after the lowest figure in many months in December (185,000 units), according to Canada Mortgage and Housing Corporation (CMHC).

Strong housing markets have been one of the saviors of the Canadian economy over the past two years. (The other has been high world commodity prices). While U.S. new home starts have declined dramatically from their peak level in January 2006 (see chart below), homebuilding activity in Canada has stayed strong and relatively even.

Canada has not had the same degree of problems with the subprime mortgage meltdown, and resulting foreclosures, that are underway south of the border. Nor has there been an excessive run-up in prices, leading to a speculative collapse, that characterized a number of U.S. regional markets.

January 2008 down versus January 2007
It should be noted that starts in this latest January were considerably lower than in January of 2007. The first month of last year was abnormally strong, even after taking into account normal seasonality, due to unusually-mild winter weather.

Looking forward, CanaData does expect a softening in housing demand in Canada as a result of the overall slowdown in the economy, some loss of affordability and the after-effects of satisfied pent-up demand, resulting from strong residential real estate activity over the past six years.

Reed Construction Data-CanaData is currently forecasting starts for all of 2008 to be 200,000 units, which compares with the 2007 full-year "official" figure of 228,343 units. At this point in time, the forecast appears to be on the conservative side.