Canadian Housing Starts Moderate Further in September

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Highlights:

  • September housing starts slipped to 188.7k in September from 198.8k in August
  • Single-unit starts rose 2.0% but multiple-unit starts declined 8.9%.

Our Take:

The dip in new housing starts to a 188.7k level in September from 198.8k in August marked a third straight slowing after a spike to (an unsustainably strong) 247k in June. Single-unit starts ticked 2.0% higher in the month but multiple-unit starts fell 8.9%. Both are down sharply from a year ago — singles by 22% and multiples by about 7%. The data is volatile and stronger housing permit issuance argues there could still be stronger near-term building activity in the pipeline. Permit issuance has averaged 244k per month over the last three months ending in July with August data set to be reported tomorrow. Home resales also eased significantly, and price growth moderated, over the first half of the year, though, in response to rising interest rates and a number of new policy changes designed to slow the market. The slowing in home building in recent months is broadly consistent with our view that those headwinds in the resale home market will ultimately spill over into slower homebuilding activity as well. We expect housing starts will average ~195k next year. Earlier housing market activity was probably too strong to be sustained. The slowing to a more manageable pace of activity should be welcomed by the Bank of Canada and isn’t expected to prevent further gradual interest rate hikes.
 
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