CMHC says 135,000 units Started in February
The last several-months' pattern of Canada's housing starts appears quite familiar. It very much resembles what has been happening in the United States over the past couple of years. Canada Mortgage and Housing Corporation (CMHC) reports that national housing starts in February were only 134,600 units, seasonally adjusted at an annual rate.

Total starts in Canada are now down by 50% versus their most recent peak level of 277,000 units in September 2007. The speed of the descent has been remarkably swift over the last four months. In the U.S., current starts have declined by nearly 80% from their most recent cyclical peak. However the U.S. drop has come over a period of three years, since the beginning of 2006.

Unsold Inventory Levels Too High
Canada's housing starts are going to be depressed for some time to come. The inventory of unsold multiples is too high by 100%. The inventory of unsold singles is too high by 75%. Furthermore, with "units under construction" remaining relatively strong, the unsold inventory problem is going be prolonged.

As for job-site activity levels, which determine employment on the ground, the next year or two can only offer some wrenching adjustments. While year-over-year starts for both singles and multiples have been cut in half, "under construction" levels have not adjusted to anything like the same degree.

Single-family units under construction are -25%, but multi-family units (i.e., mainly condos) still being built are actually +1.9%. It is the multiples market where construction workers are doing okay for now, but where they had better be prepared for an altogether different future.

Regional Markets
This pattern is to be expected. Multi-unit projects are bulky and the carry-forward of work lasts long after starts. This year's work levels reflect last year's starts. The numbers on multi-unit starts in Canada's six largest cities, year to date in 2009 versus January-February 2008, tell a different story: Calgary -93%; Edmonton -76%; Vancouver -65%; Toronto -43%; Montréal -41%; and Ottawa -11%.

In singles and multiples combined, the city markets in the West are contracting faster than the markets in the East. The same can be said for the provinces. So far this year, Saskatchewan (-74%), British Columbia (-70%), Alberta (-66%) and Manitoba (-41%) have turned in dismal records. Québec (-32%) and several Atlantic provinces have been doing better only by comparison. Ontario (-41%) sits in the middle of the pack.

A Rise in Litigation in Condo Markets
Home prices in many centres have not been holding up in this scenario. The most dangerous fault line lies in condominium markets. In a number of instances, purchasers are walking away from their deposits as market prices drop below mortgage values.

On the other side of the sale, developers want buyers to stick to their purchase agreements, or at least make up the difference between the original selling price and what can be realized today. A rise in litigation will be the inevitable result.