CanaData is now estimating that total Canadian housing starts in 2008 will total 212,500 units. This will be a mild drop from 2007's level of 228,000 units. Since 2002, annual starts in Canada have averaged slightly over 220,000 units per year. But there are indications that the market is turning sour quickly. The level of starts in 2009 is currently being projected at only 180,000 units.

Latest CMHC and CREA Data on Starts and Existing Home Sales
Canada Mortgage and Housing Corporation (CMHC) says that housing starts plunged in November to only 172,000 units on a seasonally-adjusted annual basis, versus 212,000 units the month before. According to the Canadian Real Estate Association (CREA), the number of existing homes sold in November was the lowest since January 2001 and the national average price of homes sold was off by 10% versus a year ago.

Existing home sales more often than not tie in with new home data, since the former is often a necessary step for someone wanting to move up to the latter. Home buying confidence generally has been sent into a tailspin since the late-September crash in stock markets that weakened individuals' and families' balance sheets.

Interest Rates, Affordability and Other Leading Indicators

Interest rates are not a problem in Canada − the Bank of Canada's overnight rate is only 1.50% − and mortgages are available for those with reasonable credit ratings. The long-term higher-risk mortgage market has been shut down by the federal government in a delayed response to the problems that have overwhelmed the U.S. housing market.

Affordability is coming back into line as a result of new and existing homes either stabilizing or coming down in price. But the major impediment to a buying commitment is growing worries about employment and incomes. Another factor that will slow starts next year has been the buildup in unsold inventories. While this is apparent in the singles market, it is even more dramatically evident in multiples. Toronto's condo market, for example, appears to be way overcommitted. Projects are in danger of being cancelled.

The Major City Housing Outlook
By major city, Toronto will see a marked decline in its new condo market next year. Ottawa will hang in relatively well, since it is the epitome of a government town and employment is relatively assured. Montréal is the major urban centre in a regional economy that is suffering along with the U.S. recession.

Edmonton has recorded a greater than 50% drop in starts in 2008 and should level out next year. Calgary's new housing market will be held back by an energy sector that is struggling with oil prices at only one-third of their peak value. Vancouver is the major player in a provincial economy that, through its forestry sector, will pick up in activity faster than any other region in Canada, once U.S. housing starts show some signs of life.