Downward trend in housing starts reverses with uptick in activity in June: CMHC

The declining trend in housing starts observed over the last several months reversed slightly due to a significant increase in actual housing starts in June. The trend was 234,974 units in June, up 2.4 per cent from 229,520 units in May, according to Canada Mortgage and Housing Corporation (CMHC). The trend measure is a six-month moving average of the monthly SAAR of total housing starts for all areas in Canada.

Bob Dugan

“We observed a large increase in the SAAR of housing starts in June which pushed the trend of housing starts upward after consecutive monthly declines since November 2022,” said Bob Dugan, CMHC’s Chief Economist. “Despite this, total year-to-date housing starts for the first half of the year were eight per cent lower than they were over the same period in 2022 as the high interest rate environment continues to challenge housing starts through increasing borrowing costs.”

The CMHC said the standalone monthly seasonally adjusted annual rate (SAAR) of total housing starts for all areas in Canada increased 41 per cent in June (281,373 units) compared to May (200,018 units), which represents the largest month to month SAAR change in the last 10 years. This is mostly due to multi-unit starts which accounted for about 82 per cent of total starts.

The monthly SAAR of total urban starts (centres 10,000 population and over) increased 46 per cent, with 262,815 units recorded in June. Multi-unit urban starts increased 59 per cent to 219,914 units, while single-detached urban starts increased three per cent to 42,901 units.

“The Vancouver and Toronto CMAs recorded significant increases in total SAAR housing starts in June, with Vancouver up 71 per cent, and Toronto up 100 per cent. Toronto and Vancouver’s total housing starts combined accounted for 47 per cent of total housing starts in Canada’s urban centres for the month of June. Montreal CMA also recorded an increase in total SAAR housing starts, however, it was less pronounced at eight per cent. All three recorded increases in both single-detached and multi-unit starts,” said the report.

The rural starts monthly SAAR estimate was 18,558 units.

Marc Ercolao

Marc Ercolao, Economist with TD Economics, said June represented a strong month for housing starts, but one month is not enough to turn around the long-running downward trend in the sector.

“This is in line with our expectations, as past declines in home sales continue to feed into falling construction activity. This is also consistent with permit issuance, which has dropped to 2019 levels, before the pandemic-induced runup in demand and construction,” he said.

“It’s important to remember that housing starts are volatile and not every data point will move in a straight line downwards. Thanks to large pops in April and June, second quarter average starts jumped 10% from first quarter levels. This, alongside what will likely be a super-sized gain in home sales should generate a positive second quarter growth print for residential investment, supporting the overall economy. However, this burst should be short-lived and, as high interest rates continue to work through the economy, homebuilding will be a drag on residential investment in the coming quarters.”

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Mario Toneguzzi

Mario Toneguzzi is Managing Editor of Canada’s Podcast. He has more than 40 years of experience as a daily newspaper writer, columnist, and editor. He was named in 2021 as one of the Top 10 Business Journalists in the World by PR News – the only Canadian to make the list)