Thursday, September 9, 2010

Developers Temper Activity

Dan Sumner
Economist, ATB Financial
September 9, 2010

New home construction is one sector of the Alberta economy that bucked the general economic slowdown over the last few months. However, according to data released this morning by The Canada Mortgage and Housing Corporation, housing starts started to show signs of cooling in August.
Contractors and builders started construction on 20,900 new homes in August 2010 (seasonally adjusted, annualized rate), a sharp decline from 26,200 units in July. The pace of home construction in August was the slowest since August 2009 and is consistent with a broader
slowdown observed in Alberta’s economy over the late spring and summer months.
Activity in the new home construction market is often driven by what’s happening in the resale housing market. Thus, given the dive in sales in Calgary and Edmonton housing markets during the summer, a cooling in Alberta home construction is somewhat unsurprising.
Nationally, the pace of new home construction dipped slightly in August, from 188,900 units in July to 183,300 in August. The fact that starts are holding up fairly well nationally underpins that while the Canadian economy is slowing, relative to our trading partners we are in fairly healthy shape. The slowdown in Alberta starts in August is really only the first weak reading on new home construction for the recent cycle; hence, it is far too early to say a trend has formed. However, considering resale markets have shown more prolonged signs of cooling, it is possible that starts will be somewhat softer over the balance of 2010.

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