Inventories High, Housing Starts Low

The Canada Mortgage and Housing Corporation (CMHC) announced that national housing starts were trending at 189,837 units in August 2014, which is practically unchanged from July’s 189,596 starts.

The trending figure is a six-month moving average of monthly seasonally adjusted annual rates (SAAR). The figures are based on numbers that have been modified to remove seasonal variation. The figures are then multiplied by 12 to represent an annual average.

Even though August’s trending figure was slightly higher than July’s, the standalone SAAR figures mostly saw decreases. The standalone SAAR for August was 192,368 units, down from 199,813 in July. The SAAR of urban starts also experienced a decrease, going from 182,524 in July to 175,668 in August. Multiple urban starts decreased to 110,842 units, and single-detached starts also saw a drop to 64,826.

The only regions of Canada to see increases in urban starts were British Columbia and the Prairies. Atlantic Canada and Ontario saw decreases, while Quebec remained unchanged. CMHC estimates that the SAAR of rural starts was approximately 16,700.

“The currently elevated level of inventory of newly completed and unoccupied condominiums, and units under construction, supports CMHC’s view that condominium starts will likely see a declining trend over the coming months as developers and builders seek to limit risks of over-building,” said Bob Dugan, CMHC’s Chief Economist. “However, there may still be some variability from month to month as the number of presales for some planned condominium projects reaches sufficient levels to trigger project start.”

As we head into one of the busiest times of the year for the new home industry, we have confidence that developers and homebuilders will manage their inventories appropriately, keeping Canada’s housing market on track for the soft landing that CMHC has been predicting for months.