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Blog by Linda M Linfoot

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Housing Starts Surge

Housing starts surge Latest month available: September


  • Canadian housing starts continue to defy expectations with starts rising a phenomenal 19.6% in September to an annualized 278,200 units, the highest level of starts since 1978. Market expectations had been for starts to moderate to 218,000. The increase came on top of an upwardly revised level in August of 232,700, originally estimated at 226,500.
  • All of September's strength came from the urban multiples component, which rose an outsized 47.5% to an annualized 154,100 due to a jump in condominium starts that are responding to strong condo sales during the past 12 to 24 months. In contrast, urban singles dropped 4.3% to an annualized 90,300 units.
  • September's strength was cross-country with double-digit increases in the multiples component in all major regions, led by a 75.2% increase in Quebec.
  • Third-quarter starts averaged 242,000, a 7% increase from the second-quarter average of 221,000. This suggests that residential activity likely contributed to growth once again in the third quarter. This is in sharp contrast to the United States where third-quarter residential activity is expected to record another double-digit decline following similar-sized drops in the previous five quarters.
  • There has been some deterioration in Canadian housing affordability in recent quarters that is likely flagging some weakening in the housing market going forward. As well, with most of the strength in September concentrated in the volatile multiples component, a weaker level of activity is likely to emerge.
  • Our forecast assumes that starts will generally trend lower, eventually averaging a little over 200,000 in 2008. However, the near-term strength suggests another factor that will keep the Bank of Canada wary about the risk of too strong activity despite the ongoing credit crunch and the surge in the Canadian dollar.