CanaData is expecting monthly housing starts (seasonally adjusted at annual rates) in the second half of 2008 to average well below their level in the first half (227,000 units). Nevertheless, because starts were so strong at the start of this year, the forecast for all of 2008 has been revised slightly upwards to 212,500 units from 210,000 units. The official annual figure in 2007 was 228,000 units, according to Canada Mortgage and Housing Corporation (CMHC). For 2009 and 2010, CanaData is dropping its forecasts by 5,000 units in each year to 190,000 units and 200,000 units respectively.

Early 2008 was remarkably strong for new housing mainly due to exceptional levels of multi-unit starts, primarily in Calgary (+84% through July) and Toronto (+57%). However, overall starts in the latest month dropped 13% from June and this is a pattern that is expected to hold, on average, through the remainder of the year. The jobs market is beginning to deteriorate and the slowdown is gaining a firmer grip over more of the economy.

Largest Adjustments are in Ontario and Alberta
Versus CanaData's previous 2008 housing starts forecasts, made in April, the biggest adjustments are to the Ontario figure − bumped up from 65,000 units to 73,000 units, mainly due to the surprising strength in Toronto − and the Alberta number − marked down from 42,000 units to 32,500. The cut in Alberta is warranted by the nearly 50% decline in Edmonton's starts so far this year.

Some major trends that have been factored into the forecasts, provincially and by major cities, are as follows. In Toronto, there is a considerable inventory of condo units that have been sold but for which construction still has not started. This will lend support to that metro area's starts figures going forward throughout the remainder of this year and into early next year.

Several provinces are seeing better net migration numbers. For example, Saskatchewan and Newfoundland & Labrador (resource-rich in their own rights) are actually experiencing increases in population as workers return from Alberta. On the flip side, the rapid influx of individuals into Alberta looking for work in the oil patch has moderated to a considerable degree.

Finally, the run-up in home prices in Alberta of a year or two ago are now having an impact in lowering demand this year. Similarly, Saskatchewan is likely to get caught in this fix some time in the future, given that it has been leading the nation in home price advances for about a year now.