July Housing Starts Drop to 187,000 Units
Canada Mortgage and Housing Corporation (CMHC) has announced a sharp pull-back in housing starts in the latest month, to 187,000 units (seasonally adjusted at an annual rate) in July 2008 versus 216,000 units in June. Year-to-date starts (-2.0%) have now fallen slightly behind last year’s comparable level. The most likely outlook is that the shortfall versus last year will continue to widen as the year progresses.

Latest indicators suggest that job prospects are weakening. Interest rates are unlikely to drop any further, with inflation above 3.0% in Canada and at almost 6.0% in the United States. However, one glimmer of hope for the economy’s future lies in the current fall-back in commodity prices. This is due to the slowdown in the world economy that has spread over from the U.S. subprime mortgage mess and financial market meltdown. Quieter activity in commodities trading will be welcome after the speculative excesses that have hurt business and consumer confidence.

So far this year, the single-detached housing market (-15%) has been affected to a considerably greater degree than the multiple-unit market (+19%). Singles carry a higher ticket price than multiples and this has undoubtedly played a role in shaping where new demand has been focused. At the same time, both market segments have an excess of unsold inventory.

Regional Housing Strength Shifts to the East
The regional housing market in Canada has altered considerably versus the pattern of the last several years. The strength so far this year has been in eastern Canada. New Brunswick (+19%), Ontario (+17%), Nova Scotia (+12%) and Newfoundland & Labrador (+12%) have all had greater percentage gains in starts than any province in the West. Saskatchewan (+8%) is the leader among western provinces and it is only fifth overall. Alberta (-25%) is in last place.

The shocker among the cities is Edmonton, at -48% in terms of percentage change in starts so far this year versus the same time period last year. Edmonton has been relatively weaker in singles (-69%) than in multiples (-22%), although both have adjusted downward dramatically. Also in Alberta, Calgary’s starts (+10% overall) have maintained some momentum. Calgary has been particularly strong in multiples (+84%).

Toronto (+25%) is the leader among the six largest cities, by population, in the country. That success has come thanks to multiples (+57%) as opposed to singles (-15%). As for the other three cities in the country with populations over one million, Ottawa-Gatineau (+13%), Vancouver (+11%) and Montreal (+5%) have all done a little better in multiples than in singles. The overall leader among all CMA’s is Barrie, Ontario (+99%) at almost exactly double last year’s pace.

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