The nation’s housing starts ascended partway out of the basement in May, according to the latest report from Canada Mortgage and Housing Corporation (CMHC). In the most recent month, they were 128,000 units on a seasonally adjusted annualized basis, versus only 118,000 in April. In the first five months of this year, they have averaged 133,000 units annualized, which is -42% versus the same January-to-May time frame last year.

Home Prices are Playing a Dual Role

Home prices, both new and existing, are currently playing a dual role in buying decisions. The fact that they are staying at reasonably high levels in most markets, even in a downturn, reinforces the notion that housing is a good long-term investment. But some moderation in price is also an opportunity to lock down a bargain. Plus there is one more factor that has been attracting buyers, historically low interest and mortgage rates. (story continued below)

Data Source: Canada Mortgage and Housing Corporation (CMHC)/Chart: Reed Construction Data - CanaData.

Inventory of Completed But Unoccupied Dwelling Units:
Centres in Canada with Populations of 50,000 or More

The unsold inventory of multiples is too high by 111%; the unsold inventory of singles is too high by 75%.

Data Source: Canada Mortgage and Housing Corporation (CMHC)/Chart: Reed Construction Data - CanaData.

Eastern Cities

Among the nation’s largest cities, Ottawa is doing relatively best in year-to-date starts (-21% versus last year) thanks to the local economic stability provided by the federal government. Montréal (-27%) and Québec City (-31%) are next among the nation’s six largest cites, by population. Then comes Toronto (-43%), which is performing worse than many other eastern centres, but better than the major cities in Western Canada.

Western Cities

The four largest cities in Western Canada were “riding high” while commodity prices were elevated. This led to overbuilding and some price run-ups that have necessitated a correction phase. Edmonton (-59% year to date in starts versus last year), Vancouver (-67%), Calgary (-79%) and Victoria (-79%) have been caught in the downdraft.

Toronto’s Bellwether Condo Market

In those four western cities, the decline in multi-family starts has been more severe (between -70% and -90%) than for singles. But the bellwether indicator for multi-unit starts is Toronto’s condo market. After a big drop in April, Toronto’s May multi-unit starts were up 44% on a month-to-month basis. This still left them 42% below May 2008. Year-to-date multi-unit starts in Toronto are -38% versus a figure of -54% for singles.

Percent Change in Year-to-Date Housing Starts - Ranking of Canada's Provinces
(January-May 2009 vs January-May 2008)

Data Source: Canada Mortgage and Housing Corporation (CMHC)(based on actuals rather than seasonally adjusted data.)/Chart: Reed Construction Data - CanaData.

Percent Change in Year-to-Date Housing Starts - Ranking of Canada's Cities
(January-May 2009 vs January-May 2008)

Canada's Census Metropolitan Areas (CMAs) have core populations of 50,000 plus.
The six CMAs in capital letters are the largest cities in Canada by population.

Data Source: Canada Mortgage and Housing Corporation (CMHC)(based on actuals rather than seasonally adjusted data.)/Chart: Reed Construction Data - CanaData.