Annual Pace of Canadian Housing Starts in January Down 10% From December

The annual pace of housing starts in January slowed by 10% compared with December, as the rate of starts for new multi-unit projects such as apartments, condominiums and townhouses pulled back. Canada Mortgage and Housing Corp. said that the seasonally adjusted annual rate of housing starts came in at 223,589 units for the first month of 2024 compared with 248,968 for December 2023.

TD Bank economist Marc Ercolao said the beginning of 2024 saw housing starts pare back some of their recent strength after a strong rebound in December. “The level of homebuilding is still elevated relative to historical norms, but today’s print supports our view that near-term starts will remain subdued in spite of the recent strength in home sales,” Ercolao wrote in a report.

The decrease came as the annual pace of urban housing starts fell 11% to 208,119 units, with the rate of multi-unit urban starts down 14% at 164,789 units and single-detached urban starts up 0.08% at 43,330 units.

The annual rate of housing starts in Toronto was up 179%, boosted by an increase in multi-unit starts, but Montreal fell 28% and Vancouver dropped 55% due to drops in multi-unit starts.

The Kitchener-Cambridge-Waterloo region in Ontario also saw a drop of 88%, while Ottawa declined 64%. Edmonton saw a 53% drop in housing starts, but the annual rate in Calgary rose 39% compared with December.

The annual rate of rural starts was estimated at 15,470.

CMHC noted that the actual number of housing starts across Canada in urban centres was up 13% at 14,878 units in January compared with 13,220 in January 2023.

The agency said actual housing starts were 49% higher year-over-year in Toronto, but down 44% in Vancouver and 6% lower in Montreal.

“In fact, from a historical perspective, we observed the second highest number of housing starts for the month of January going back to 1990,” CMHC chief economist Bob Dugan said in a statement. The six-month moving average of the monthly seasonally adjusted annual rates of housing starts in January was 244,827, down 2% from 249,757 units in December 2023.

To read the full report, visit the CMHC website. 

Source: Globe and Mail
Source: The Star
Source: CMHC

January Home Sales in Canada Rise as Markets Tighten but Prices Still Softening: CREA

Home sales rose in an unseasonably warm January to mark a second month of rising activity and softening prices, the Canadian Real Estate Association said. January sales were up 3.7% compared to December 2023 after seasonal adjustments, and up 22% from January 2023 when sales were particularly soft. The increase added to the 8.7% seasonally adjusted jump in December activity from November.

The rise in sales is helping tighten market conditions, though areas with the highest sales gains are still seeing prices trend lower, said CREA senior economist Shaun Cathcart in a press release. “Taken together, these trends suggest a market that is starting to turn a corner but is still working through the weakness of the last two years.”

The sizeable jump in January sales 2023 reflects how weak the market was in early 2023, when it had the worst start to almost any year in the past two decades. Sales in January were still about 9% below the 10-year average.

Sales gains in January from December were most notable in Ontario, which saw a seasonally adjusted 6.9% gain, and B.C., where sales rose 4.5%.

The aggregate benchmark price, which aims to represent price changes of a typical home, was up 0.6% from January 2023 to $717,800. However, the benchmark price fell 1.2% month-over-month.

Rising activity and soft prices is mostly an Ontario and B.C. story, said TD economist Rishi Sondhi in a note. “Our take on this dichotomy is that sellers capitulated on their asking price to move their homes, as conditions in these markets previously favoured buyers,” he said.

The rise in sales, helped by the weather and falling bond yields, are moving past TD’s expectations, said Sondhi. “While we had expected Canadian home sales to increase in the first quarter … they are on track to exceed our forecast by a considerable margin.”

Rising sales outpaced the number of newly listed properties, up 1.5% month-over-month, to create a more balanced market. Sondhi said average home price growth is expected to continue in tighter markets, but that severe affordability deteriorations in some markets should limit runaway price growth.

BMO senior economist Robert Kavcic cautioned in a note that sales are generally weak in the winter months, so it won’t be until spring housing numbers start to appear that there will be a clear picture on the trend.

“We’ll really need to see how the numbers start to look in March and beyond,” said Kavcic. “So far, there remain encouraging signs that the market has troughed alongside improved sentiment and some lower fixed mortgage rates — and there is pent-up demand on the sidelines.”

To read the full report, visit the CREA website. 

Source: Globe and Mail
Source: The Star
Source: Financial Post
Source: CREA

Housing Market Headed for Another Soft Patch: Desjardins

Marc Desormeaux, principal economist at Desjardins Group talks with the Financial Post’s Larysa Harapyn about the Canadian housing market. To watch the video, visit the Financial Post website. 

Desormeaux said Desjardins is expecting the market to go through a soft patch the remainder of the winter and in the spring because of an expected economic slowdown as high interest rates continue to work their way through the economy. A rebound could come in late 2024 into next year, he said.

Source: Financial Post

Canada is Underestimating the Number of New Homes Needed — by a Lot, Says CIBC

Current projections for the amount of additional housing Canada needs are way off the mark and out-of-date population forecasting is to blame, according to one top economist. Canada needs to build five million extra units by 2030 on top of annual construction, said Benjamin Tal, deputy-chief economist with CIBC World Markets in a report on Feb. 6.  That’s well above widely circulated estimates of 3.5 million additional homes needed by the end of the decade.

“That significant forecasting/planning gap is a direct result of the fact that currently there are no credible forecasts, targets, or capacity plans across governments for non-permanent residents — the population which accounts for the vast majority of the planning shortfall,” Tal said. “That must change.”

The figure of 3.5 million additional new homes above the “business as usual” pace by 2030 to solve the affordability crisis was first floated by the Canada Mortgage and Housing Corporation in June 2022. It later affirmed its projection, which has been widely circulated in media reports about the housing shortage and affordability crisis, in September 2023.

However, the latter projection was “obsolete” before it was out of the gate, according to Tal, because it was built on a base population assumption of 38.9 million — 1.2 million short of the actual population. As of October 2023, Canada’s population was 40.5 million, a 1.1% increase from the previous quarter, Statistics Canada reported.

CMHC isn’t the only one to have underestimated Canada’s population growth. A decade ago, Statistics Canada, along with the federal housing agency, forecast the population would reach 38.7 million in 2024.

“That was a big miss,” Tal said. “The reality is that today municipalities are facing 1.4 million more people than they were told they needed to plan for,” representing an almost three-year shortfall in the housing supply.

Even the federal statistics agency’s population forecast for 2023 is already out of date, Tal said, noting that it called for the population to hit 39.4 million.

While all this is bad news for people searching for somewhere to live, it also bodes ill for affordability. “The current recessionary conditions in the Canadian housing market will hardly dent the affordability crisis home buyers and renters currently face,” he said.

Tal isn’t the only economist who is pessimistic that housing affordability will be restored any time soon. Marc Desormeaux, principal economist at Desjardins Group, doesn’t see affordability returning to pre-pandemic levels over the next two years despite a reduction in interest rates and a slowdown in the economy. Population growth is one reason for that. “We expect strong population growth to remain a tailwind for housing market activity,” Desormeaux said in a Feb. 6 note, despite the cuts to non-permanent residents programs and foreign student admissions announced by the federal government.

Canada’s housing shortage boils down to a forecasting failure, said CIBC’s Tal. “The housing shortage issue is largely a planning issue with official planning targets falling notably short of actual population growth,” he said. “You cannot build an adequate supply of housing for population growth that you fail to forecast.”

Toronto’s benchmark home price declined for the seventh consecutive month in January, but a surge in home sales compared to the same period a year ago has the region’s real estate board warning that prices might not stay subdued for long.

Source: Financial Post