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Housing market heats up
2010-02-12
The market for new homes is beginning to show the same bounce that led to the remarkable recovery in resales after the slump. Canada Mortgage and Housing Corp. said this morning that housing starts in January jumped 5.8 per cent to a seasonally adjust annual rate of 186,300, with gains in both single homes and condominiums. The jump was led by a surge of almost 20 per cent, month over month, in British Columbia, which analysts said may have been related to construction for the Winter Olympics. Overall, it marked the fourth increase in a row.
"It appears that the new homes market is slowly coming back to life and may finally be benefiting from the resurgence in overall Canadian housing market activity," said TD Securities economics strategist Millan Mulraine. "However, with part of the uptick in starts likely to be coming as a result of temporary factors, namely the surge in Olympic-related housing in B.C., we believe that this report overstates the true strength of the recovery in residential construction and expect to see a modest pullback next month."
Added BMO Nesbitt Burns economist Robert Kavcic: "New home sales should taper off in July as buyers are jumping the HST gun in B.C. and Ontario, and those same buyers are also likely pulling forward some purchases given well-ingrained expectations of rate hikes in the second half of the year. Given that supply still has some catching up to do, housing starts should hold up around current levels through the remainder of 2010."
Separately today, the Canadian Real Estate Association project resale house prices would rise 5.4 per cent this year to a record average $337,500, as sales increase more than 13 per cent from last year to also hit a record, at 527,300.
This morning's numbers are more fodder for those who have been warning about a housing bubble. Some economists have flagged the issue, and the chiefs of the major banks have also warned Ottawa it needs to dampen the mortgage market as prices surge. At the G7's weekend meeting in Iqaluit, however, Finance Minister Jim Flaherty said he saw no evidence of a bubble.
Source: The Globe and Mail
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