Last Friday, Canada Mortgage and Housing Corp. released new data on housing construction across the country. In Alberta, the monthly number was a bit disappointing. However, a longer-term vantage point can offer a more encouraging perspective.
In January, home builders started construction on 29,366 houses across all areas of Alberta (seasonally adjusted and at an annualized rate). That’s the second month in a row in which housing starts had fallen, and one of the lowest totals over the last 18 months. There’s no question the pace of home construction has moderated. Indeed, starts could slow a bit more in the coming months given the economic headwinds the province is starting to experience.
Still, the January housing starts remain above the five-year average. And given the steady and moderate increase in the price of new homes, the market appears to be in relatively good balance.
During the boom years of 2006 and 2007, when housing starts were above 40,000 annually, there was actually a surplus of homes being built. That led to a glut of properties during the 2009-10 recession, and housing starts plummeted.
This time around, however, home builders appear to be more constrained; fewer homes are being built on the speculation of buyers (“spec” homes). That should leave the new home market in reasonably good shape if the economy continues to slow in 2013. Fewer excess homes on the market will help support prices and maintain balance.*
*Todd Hirsch, Senior Economist, ATB Financial