CMHC says Housing Starts in January were only 153,500 Units
Until recently, Canadians had been taking comfort in a high level of monthly housing starts long after they began their decline in the United States. Over the past three months, however, circumstances have changed. Canada Mortgage and Housing Corporation (CMHC) reports that national starts in the latest month, January 2009, were only 153,500 units, on an annualized basis. This is a big step downward from the approximately 175,000-unit levels recorded in November and December and the 200,000-plus figures recorded consistently before that.

A Long Struggle for the U.S. Economy
For the U.S., the current economic hard times are an accumulation of forces that have been gathering over several years. Home price speculation and starts peaked in January 2006 leading to the sub-prime mortgage crisis that reared up in August 2007. The period since then has been characterized by falling home prices, banking sector failures, the credit crunch, auto sales declines and month-over-month employment drops that have added up to nearly four million.

A Delayed Reaction for Canada
Canada is only lately experiencing the same kinds of problems. For this nation, the slide was really brought home by the crash in equity prices in late September of last year. Since then, Canada has been playing catch-up on the downside, with jobs dropping precipitously and commodity markets in full retreat. Housing starts are only the latest indicator of how quickly and dramatically the recession is gaining a foothold.

High Inventory Levels and Job Concerns also Undercut Housing
Furthermore, based on unsold inventory levels, there is no reason to expect that the housing starts picture will reverse any time soon. Unsold inventories have been moving out of line with underlying demand for some time. The level of unsold multiples has moved up to double what it should be. Unsold singles are too high by about 75%.

Finally, there is the most important consideration of all. While prices have been moderating in many major markets and mortgage rates are near record lows, these positives with respect to affordability are being overwhelmed by concerns about employment. People do not buy new homes when they are worried about their jobs. Saturation media coverage of the recession and job cuts by major firms across many sectors is simply dealing too many body blows to home-buying confidence.