Sharp fall in housing starts

Housing starts in the Vancouver area in February plunged 71.3 per cent from a year earlier, Canada Mortgage and Housing Corp. said yesterday.

The sharpness of the decline reflects "unusually strong" starts in the area in February 2008, CMHC market analyst Richard Sam said.

"However, low starts data for the first two months of 2009 are an indication that developers are pulling back until some of the supply of new and resale homes on the market are absorbed," Sam said.

"In turn, home buyers will benefit from current buyers' conditions that exist in the resale market."

CMHC predicts that starts in the area will fall by more than a third this year.

Year-over-year starts in the Abbotsford area dropped 84.1 per cent in February, while Chilliwack's fell 79.6 per cent.

Urban starts across the province sank 12.8 per cent between January and February, compared with drops of 19.4 per cent in the Prairies, 14.4 per cent in Ontario and 19.6 per cent in Quebec.

Nationally, housing starts fell by a greater than expected 12.3 per cent between January and February, marking a sixth consecutive monthly decline and their lowest level since June 2000.

Groundbreakings on new homes dropped to a seasonally adjusted annualized rate of 134,600 units last month from 153,500 in January, with declines seen in the single- and multiple-dwelling sectors, CMHC said.

The number of starts in February was below analyst forecasts for 145,000 starts.

But there was a silver lining in the weak numbers. While it suggests builders are responding to weaker demand, which could have a short-term negative effect on economic activity, it also indicates there may not be a severe oversupply of homes.

"As an economist looking at this, it's good news that the markets are working. They're taking their cues from the price signals and those signals are telling them not to build right now," TD Bank economist Pascal Gauthier said.

Economists continue to describe the Canadian housing downturn as a correction that will last the better part of 2009. Few predict the sector is facing a U.S.-style meltdown.

Recent statistics show broad weakness within the housing sector as existing home-sales activity has slowed, home prices have eased and building permits have fallen.

(Source: Vancouver Province)