Housing construction continues at strong pace

THINK OUTSIDE THE BOX: There is little to suggest that builders are creating a real estate bubble by putting too many homes onto the market. 
 
Home builders in Alberta ended the summer of 2014 on a high note when construction started on a near record number of new homes.

The Canada Mortgage and Housing Corporation reported yesterday that housing starts in Alberta totaled 47,105 in September. This figure is adjusted for seasonality, and represents starts on an annualized basis—that is, the number of new homes that would be started if the pace set in September was maintained for twelve months.

Housing starts in Alberta are up 6.6 per cent from August. Over the last twelve months, they’ve risen by an astounding 17 per cent compared to the previous twelve month total. It’s also the second highest month for housing starts since the end of the last big construction boom hit the province in 2006-2008. The only other month that has seen higher numbers was June of this year.

The surge in housing starts is in response to strong demand, much of it driven by in-migration to the province. It is also consistent with the strong demand for existing housing, which is reflected by the sales and prices of homes on the market over the past year.

For now, Alberta’s economy is creating enough new jobs—and keeping wages high enough—to sustain this pace of home construction. There is little to suggest that builders are creating a real estate bubble by putting too many homes onto the market.

 
Todd Hirsch • Chief Economist         October 9, 2014 

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