Canada Housing Starts Top Expectations; Canada Housing Starts Came in at 198,185 Annual Rate In June 2014. This article appeared on the Wall Street Journal and was written by Don Curren.
Canadian housing starts advanced 0.6% in June from May to an annualized rate of 198,185 units, Canada Mortgage and Housing Corp. said Wednesday.
The results exceeded economists’ expectations, which were for annualized starts of about 190,000 units, according to CIBC World Markets. It said June marked the third straight month of housing starts close to 200,000 units, going “against the conventional reasoning that 2014 would bring with it the expected slowdown in the Canadian housing boom.”
Some analysts are still worried Canada’s housing market could suffer a sharp correction. Sustained strength in housing starts isn’t all positive from that point of view, because it suggests the market is not yet cooling down.
“The resiliency of the Canadian housing market has surprised expectations for a transition to lower, more sustainable levels and the latest monthly reading is no exception,” said a report from Royal Bank of Canada.
It said the recent outperformance of Canadian building permits and the persistence of low mortgage rates provide upside risk for new housing demand to remain elevated in the near term.
The recovery from earlier harsh weather distortions is expected to give way to levels of home-building activity that are closer in line with household formation in the coming months, RBC said.
“We remain of the view that recent robust levels of housing starts are unlikely to be maintained over the second half of the year and into 2015,” it added.
Last month’s results brought the six-month trend in housing starts to almost 186,000 units from slightly more than 184,000 units in May, CMHC said in Wednesday’s release.
In June, urban starts rose to 181,979 units, reflecting a decline in multiple starts but an increase in single-detached starts. Urban starts were up in Atlantic Canada and the Prairies but down in Quebec, Ontario and British Columbia, CMHC said.
National Bank Financial said the fact that June housing starts were tilted towards single-detached homes is encouraging news because it suggests a stabilization in the multiple sector–mainly condominiums– after earlier overbuilding in that category.
National Bank said single-detached units contribute more to economic growth than multiples, which bodes well for housing’s contribution to economic growth in the second quarter.