Frank Salvatore
Realty News

TD Economics

February 22, 2011 by · Leave a Comment 

TD Economics

Data Release: Homebuilding Activity Remained Steady in January

  • Housing starts totaled 170K in January, roughly in line with the 174K unit market expectations.  This level of activity is largely unchanged from the final numbers posted for December (169K).
  • Breaking it down by type of housing, single-detached starts were down M/M by 1,300 units to reach 64K in January.  Multiple unit activity was down M/M by this same amount to land at 83K units in January, on par with December’s tally.
  • A subdued pace of activity was particularly noted in urban regions.  In January, urban activity decreased M/M by 2,600 units or 1.7%.  Rural activity, on the other hand, increased M/M by 4K units or 20.5%.
  • At a regional level, there was no provincial standout in terms of big winners or losers or a particular housing type showing acute weakness.  Ontario (+4.5K) and the Atlantic region (+1K) posted small M/M increases.  At the other end of the spectrum, the Prairies (-5.5K) and BC (-2K) saw M/M declines.

Key Implications

  • January’s housing start numbers confirm that homebuilding has indeed downshifted into second gear.  The subdued pace of activity in both the new and resale markets is indicative of a soft landing where markets are stabilizing.
  • Housing starts were 193K units in 2010, a level not seen since the market heydays in 2008.  Increasing household debt levels and mortgage rate increases suggest that a return to the 2008 high water-mark is not in the cards anytime soon.  Rather, we anticipate activity to ease to 160K in 2011 and January’s numbers are on track with our Q1 forecast.  It will likely take a few years before 2010 levels are once again revisited.
  • Multiple unit activity has seen some significant swings in recent months.  This is in part because housing starts capture shovel-ready projects and one condo site ready for construction can lead to a sizeable boost in the month’s tally.  In spite of this volatility, we do expect multiple starts to return to a more sustainable 75K annual average in 2011.
  • In a separate Statistics Canada data release yesterday, the number of residential building permits increased M/M by 3.7% in December.  Although this suggests that there is new activity in the pipeline, particularly for multi?family units in Ontario, the lag between new permits and actual housing starts can be long especially for large projects.

Sonya Gulati, Economist

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Frank Salvatore