Housing starts up modestly: CMHC

“Urban starts saw little change as the increase in Ontario’s multiples segment was off-set by a decrease in British Columbia’s multiples and a decrease in single housing starts in the Prairies,” said Bob Dugan, chief economist at CMHC’s Market Analysis Centre. “Housing starts moved higher in March mostly because of increases in rural starts.”
 
The seasonally-adjusted annual rate of urban starts increased by 0.4% to 163,500 units in March. Urban multiple starts were up by 6.6% in March to 101,400 units, while single urban starts decreased by 8.3% to 62,100 units.
 
Rural starts were estimated at a seasonally adjusted annual rate of 25,300 units in March.
 
The overall gain runs counter to what most economists and, indeed, the stock market, were predicting. They largely forecasted a decline in March to 180,000 units.
 
Still, not all markets saw gains.
 
In British Columbia, March’s seasonally adjusted annual rate of urban starts decreased by 23.4%. For the Prairies, the drop was less dramatic at 19.3%. The story in Ontario was different: Urban starts increased by 13.6%, followed by an 11.5-% increase in the Atlantic region and 8.6% in Québec.
 
March’s buoyancy may be hard to duplicate, according to CIBC, which points to the significant decline in residential building permit for the first two months of 2011.
 
According to StatsCan, February’s residential permits were down 15.6% from the same month last year – their lowest level since July 2009. Non-residential permits were actually up 47.3%.
 
“It’s unclear that March’s gains can be sustained given the steep dive we saw in residential building permit applications,” Krishen Rangasamy, an economist at CIBC World Markets, said Friday. “We continue to expect a further softening in overall housing starts, particularly with the anticipated tighter monetary policy and a slower second half of the year keeping a lid on house prices.”
 
National Bank Financial Group economist Matthieu Arseneau predicted activity of around 170,000 on average in 2011, saying not to expect the level of activity to remain at the actural level over the coming montsh.
 
“We must not overlook the termination of offering a 35 year mortgage amortization which occurred in March,” he said. “This could have caused a front-loading in activity. Although monthly data can be volatile, building permits reached in March their lowest level since July 2009 indicating a potential decrease of activity in the coming months. Mortgage rates are actually trending up and should continue to rise considering that the central bank could resume its rate normalization process as early as this summer.”

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