Canadian New Housing Starts Slow, But A Supply Tsunami Is Still Coming

Canadian new housing supply is slowing, but no need to worry about a lack of inventory coming to market. Canada Mortgage and Housing Corporation (CMHC) data show new housing starts slipped lower in August. It might be premature to worry they might be falling too low though. Starts are significantly higher than usual, and not far off from the record peak

Canadian Housing Starts See Trend Begin To Slow

First let’s look at the trend measure, which is a 6-month moving average. The seasonally adjusted annual rate (SAAR) trend of starts dipped to 283,971 units in August. This is down from 286,076 the month before. A decline might sound like bad news, but activity is still elevated from typical levels. It’s actually only tapered from the record high reached earlier this year.

Urban New Housing Starts Falls To 235,800 Units

The trend measure smooths volatility, but even the regular data looks lofty. The SAAR of new home starts reached 260,239 homes in August, down 3.9% from July. Of those homes, 235,782 of the units were in urban areas, down 4.7% from a year before. Same deal, where a drop sounds bad, but we’re actually looking at an elevated number of units. 

New Home Building Is Slowing, But It’s Far From Slow

The CMHC made a point to highlight the difference between the two measures. SAAR numbers are more volatile due to multi-family project starts. Just a few buildings launched at the same time can look like a boom, followed by a bust shortly after. In this case, a huge number of multi-family units were launched earlier this year, leaving a lull now.  It might look like things are spiraling lower, but the trend helps to keep some perspective.  There’s plenty of new housing in the pipeline, before election handouts stimulate more.

The new housing starts are going to provide a big boost to supply, but it won’t be until the distant future. Expect today’s starts to hit the market in 18 to 24 months — or longer in red tape regions. When it does come to the market though, it’ll hit like a supply tsunami. 

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