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Housing starts cool in September

Housing starts cool in September

Posted on: 10/9/2018 | Author: ATB Financial's Economics + Research Team


Weather watchers in Alberta remember how miserable and wet September was — and so far, October has been even colder. But it was more than just the weather that cooled last month.

Housing starts across the province dropped to 22,295 in September, the lowest so far this year and the third lowest over the last five years (see graph below). This figure is adjusted for seasonality and is reported at an annualized rate — that is, it’s the number of new homes that would be built in a year if this pace of building activity continued for 12 months.

The 12-month trend in housing starts is now slightly below (-0.2 per cent) the level of starts in the previous 12-month period. That may sound like bad news, but indeed there is a silver lining.

The fact that home builders are starting to slow the pace of new projects suggests that housing prices will stabilize and may even begin to rise a bit. The volume of inventory of homes on the market has been a concern. With so much supply of both new and existing properties, housing prices have been flat.

On top of this, rising mortgage rates and a tepid economy have held back demand. The Bank of Canada is expected to raise interest rates again later this month, and Alberta’s labour market slipped a bit in September — all of which is likely to slow demand. Given that backdrop, a slowing of supply may be just what’s needed to keep the housing market stable and balanced.

Housing Starts, graph

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