March 8, 2011
Canadian housing starts rose once again. In fact, they rose 6.5% from January (which is a pretty big jump).
The CMHC said the rise is largely attributable to increase activity in the multi-family starts in Ontario and the Prairies.
But, before you assume the housing market will continue to strengthen and take out another Homeowner’s Line of Credit, consider this…
According to the Globe and Mail:
“We continue to expect a softening in overall housing starts, particularly with the anticipated higher interest rates and a slower second half of the year keeping home prices under wraps,” said CIBC World Markets economist Krishen Rangasamy.
But then again, are interest rates going to rise? I remember this time last year analysts were projecting that interest rates would increase as well – and they did, by 75 basis points over three consecutive periods up to a whopping 1%**. I use “whopping” entirely sarcastically as the overnight rate tends to be much higher.
Now, the analysts are back to claim that interest rates will be on the rise once again. I’m not saying they definitely will not; I’m saying to take their projections with a grain of salt. After all, even economists, actually especially economists, can be very wrong. And you know the phrase about what assuming does to you and me, right?
**In case you don’t know, the overnight rate is the rate at which banks lend to each other when their accounts don’t balance at the end of the day. So don’t expect to walk into a branch and get a 1% mortgage rate. That’s why they call it a benchmark rate.