Almost all the Alberta economic indicators were on the uptrend in 2011 with one of the few exceptions being housing starts. But while the number of homes being built remained subdued, it was at least moving in the right direction towards year end.
Contractors and developers started construction on 26,300 homes in December, down slightly from 27,500 in November and 30,400 in October. While starts in December slipped from the previous two months, Q4 as a whole was by far the strongest of the year averaging 28,100 starts compared to only 22,000 units Q1-Q3. Note all figures are reported at seasonally adjusted, annualized rates and only include cities with 10,000 people or more.
For 2011 as a whole, builders in this province started 23,300 housing units, down from 24,100 in 2010. By comparison, Alberta recorded a total of 40,900 urban dwelling starts in 2006 and starts never fell below 32,000 units per year between 2002 and 2007.
One reason starts have been slower to bounce back than other indicators is that it has taken a long time to get through the inventory of homes that were left when downturn of 2008 hit. As that excess inventory gets steadily eaten away, starts should gain some traction. Other reasons include lower net migration to Alberta and a lower household formation rate.
This year should definitely see housing starts push higher from last year, although a return to peak levels (i.e. over 40,000 units in 2006) isn’t anywhere on the radar screen.*
*Dan Sumner, Economist, ATB Financial