Housing starts end 2016 on positive note

THINK OUTSIDE THE BOX:  Looking into 2017, housing starts may pick up some speed.

Housing construction is one of The Owl’s favourite indicators of the health of the economy—it gives both a gauge of consumer confidence and a forward-looking indication of retail spending on things like new furniture, appliances and home décor.

In December, home builders started work on close to 27,000 homes, the third-highest month in the year. (This figure is seasonally adjusted, and reported at annualized rates—that is, the number of homes that would be built over the course of a full year if the same pace of activity were maintained for 12 months).

For the year as a whole, a total of 24,606 homes were built in 2016 (based on the average of the 12 months), down from 37,500 the year before. But for some context, last year’s pace of building came very close to matching that in 2011—and it was 20 per cent higher than 2009, the last recession year to hit Alberta.

Looking into 2017, housing starts may pick up some speed, but they’re unlikely to return to the white-hot pace of construction witnessed between 2012 and 2015. With the economy only gradually recovering—and probably a few more quarters of modest net interprovincial out-migration—Albertans are unlikely to push new housing demand back up to record highs. As well, some of the recent changes to new mortgage lending introduced by the federal government may keep a lid on new home purchasing.

ATB Financial’s Economics & Research Team       January 10, 2017

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