housing starts

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While Canadian housing starts faltered in January due to a particularly nasty cold snap, the CMHC recently reported on stronger February numbers. Nation-wide, starts were trending at 192,236 units last month, up from 191,513 in January. The trend is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts.

TD Economics called the new tally “robust” and BMO Capital Markets suggested the uptick was “rebound from weather weakness.” Both banks, as well as RBC, attributed the spike to an increase in multi-unit housing construction.

TD framed the news as positive: “After three months of consecutive declines, housing starts are building a little momentum – a welcome addition after last week’s somewhat disappointing employment and international trade data.”

However, the robust starts didn’t stop each of the banks from bringing up the possibility of a drop in construction. Benjamin Reitzes, Senior Economist at BMO, suggested that though the rebound brought starts up modestly above household formation, they were still anticipating an “easing in starts through the course of 2014, consistent with a cooling housing market.”

While a recent report by TD Economics sounded the alarm on GTA condo construction and predicted prices drops in the future, their national outlook was slightly less pessimistic. Due to the likely increase in interest rates in the next few years, the bank “suspects the pace of housing starts will gradually trek downward toward the demographically-supported level of 165,000 to 175,000 units through 2015.”

RBC Economics echoed the belief, though their numbers were a bit different from those put forward by TD Bank. RBC predicted starts will decline to 182,000 annualized units in 2014 and moderate further to 174,000 annualized units by 2015, thanks to overall housing affordability pressures cutting into resale activity.

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