Canada housing starts rise...

Canadian housing claws back

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New-home construction rose for a second straight month in June in what analysts say is another sign that the worst may be over for the Canadian housing market.

Canada Mortgage and Housing Corp. said yesterday there were 140,700 homes built in June on a seasonally adjusted annualized basis. Construction was up almost 8% from the 130,300 units in May.

"There are some pretty good signs that we are starting to see in the housing market," said Bob Dugan, CMHC's chief economist. "We've seen it for quite a few months on the existing-homes side."

Existing-home sales rose 42% from January to May across the country and early indications are that June was the strongest month this year. Sales in Vancouver were up 76% last month from June a year ago and Calgary and Toronto both posted 27% increases during the same period.

Existing-home inventories have begun to shrink across the country, convincing builders to ramp up construction. CMHC said urban single-family homes -- considered the best barometer of the new-home market -- climbed 7.3% in May from a month earlier.

"It's well into sellers' market territory again with the May and April numbers," said Mr. Dugan.

The optimism about the Canadian market comes despite the fact new construction at 140,000 units is far off the 200,000-plus figure the market in Canada has seen for the past seven years.

"I can only speculate, but maybe a lot of people are relieved we are not seeing the decreases we have seen in the U. S.," said Mr. Dugan. "Peak-totrough, the decline in the U. S. was something like 80%. In Canada, that would mean we'd have to have 55,000 starts. Some people may have thought that's where the Canadian market was going."

The consensus among economists is that building won't return to pre-recession levels but will gradually improve in the coming months.

"This month's increase is an important confirmation that the Canadian housing sector is past the worst and in recovery mode," said Marco Lettieri, an economist with National Bank of Canada.

"The recovery seems to be broad-based, with gains observed in both multiple [which includes condominium construction] and single units." Mr. Lettieri said.

Robert Kavcic, an economist with Bank of Montreal, said there could be some room for modest growth in starts in the coming months.

"Higher affordability and improved consumer confidence brought buyers off the sidelines this spring," Mr. Kavcic said.

A report this week from RBC Economics says declining prices and lower interest rates led to one of the biggest quarterly improvements in affordability in history. The bank said monthly payments on a typical detached bungalow in Canada had decreased by almost 17% from a year earlier.

Royal LePage Real Estate Services was also forced this week to upgrade its forecast for 2009 because of the improved market conditions. It now expects 430,000 sales this year, an improvement from its previous call of 416,000, but still down 1% from a year ago.

"I think 2009 will go down as a moderate correction as opposed to the deep and sustained recession that we had first feared," said Phil Soper, chief executive of the real estate company.

Royal LePage expects prices this year will still fall but not by as much as previously feared. It expects the average sale price in 2009 to be $297,000, a 2% drop from last year. It had previously forecast a 3.5% decline.

Mr. Soper said a decline is still tough to swallow after years of compound growth of close to 10% in the housing market but it's proving to be a far cry from what has happened in the United States.

"We are long way from the 35% decline that a lot of regions in the United States are experiencing," Mr. Soper said. "It's a very different kind of correction."

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Canada housing starts rise 9.2 percent in May, 2009

Source: Reuters, Monday Jun 08, 2009

New home construction rose to a seasonally adjusted annual rate of 128,400 units in May from 117,600 units units in April, CMHC said.
The number of starts in May beat analysts' consensus expectations of 125,300 starts.

The seasonally adjusted annual rate of urban starts rose 11.1 percent to 107,800 units in May. Urban multiple starts rose to 60,900 units, while urban single starts climbed to 46,900 units in May.

The seasonally adjusted annual rate of urban starts in May rose 22 percent in Ontario, 16.8 percent in the Prairies, 7.3 percent in Atlantic Canada and 3.3 percent in Quebec.

Urban starts declined 5 percent in British Columbia.

Rural starts were estimated at a seasonally adjusted annual rate of 20,600 units in May.

CMHC said housing starts are expected to improve throughout 2009 and over the next several years to "become more closely aligned to demographic demand," which is currently estimated at about 175,000 units per year.