Years before housing starts top 200,000 again, says CMHC

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OTTAWA - It will likely be at least four years before home-construction in Canada returns to the level experienced earlier this decade during the boom, a federal housing agency says.
Canada Mortgage and Housing Corp. said Tuesday it expects housing starts will tumble to 141,900 this year from last year's 211,056, the last of several years of 200,000-plus starts.
And while the CMHC expects starts to rise moderately to 150,300 next year, it doesn't see a return to the 200,000-level over the years covered by its forecast.
The agency predicts starts to be 162,650 in 2011, 163,450 in 2012 and 176,800 in 2013.
''As the economy picks up, so will starts,'' says the market outlook report.
''(But) given the short-lived nature of the housing market slowdown, we do not expect a significant build-up of pent-up demand. Because of this, we do not expect housing starts to return to the 200,000-plus unit pace of recent years.''
While indicative of an economic slowdown, Canada's housing market has not experienced the kind of collapse that has characterized the U.S. market, which has seen starts fall to about a quarter of previous levels.
There was more indication that the U.S. housing market remains stalled Tuesday with a U.S. Commerce Department report showing construction plunged to a record low in April, falling 12.8 per cent from the previous month and the lowest pace in at least 50 years.
Applications for new building permits also dropped 3.3 per cent to an annual rate of 494,000, also a record low.
The CMHC said Canada's experience is more in line with an orderly decline from record levels, both in terms of starts, sales and prices.
''The decline in housing starts in 2009 can be attributed to several factors, including the current economic climate, increased competition from the existing home market and the impact of strong house price growth between 2002 and 2007,'' explained chief economist Bob Dugan.
''However, housing market activity will begin to strengthen in 2010 as the Canadian economy recovers, bringing housing starts more in line with demographic fundamentals over the forecast period.''
The agency said home sales are expected to decline to 357,000 units this from last year's 433,990, but to start heading back up next year to 386,100.
The average price of resale homes is expected to fall to $283,100 this year and stabilize next year.
The agency said starts will fall the most in the West, where the market had been the hottest.
Starts are expected to tumble 53 per cent in Alberta, 50 per cent in Saskatchewan, 42.5 per cent in British Columbia, compared to the national average of 32.8 per cent.

Organizations: Canada Mortgage and Housing, U.S. Commerce Department

Geographic location: Canada, OTTAWA, U.S. Alberta Saskatchewan British Columbia

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