Highlights:
- Housing starts jumped to 252k annualized units in November from 223k in October. November’s reading matches the strongest monthly pace in five years.
- Even looking through monthly volatility, the six month trend in housing starts hit a cycle high of 226k.
- The increase in November reflected a jump in multi-unit construction to a record high. Single unit starts also increased but only partially retraced last month’s decline.
- A sharp increase in multi-unit construction in Ontario accounted for much of November’s gain. The increase was broadly-based across the province, not just in Toronto.
Our Take:
Housing starts were well ahead of expectations in November, rising above the 250k mark for just the third time this cycle. That pace won’t be sustained – with permits running at 222k over the last six months, starts should come back down to earth in the months ahead. But clearly the trend is quite strong. Homes are being built at the fastest pace in a decade despite resales cooling off at the national level following a brisk first quarter. There is some evidence of that slowdown influencing homebuilding activity – single unit starts in Ontario, where the dip in resales has been most significant, have trended lower in recent months. But builders continue to respond to demand for multi-unit housing in the province, a fact that was clearly evident in today’s report. Elsewhere in the country, starts are picking up alongside resales in Quebec and BC, also largely in the multi-unit segment. And new construction in the Prairies continues to increase, albeit from a low base, as Alberta and Saskatchewan’s economies recover. With these dynamics swamping a modest slowdown in Ontario’s single unit segment, starts will likely continue to run above their longer-run demographic trend. We still think moderation in home sales next year, amid tightening mortgage regulations and rising interest rates, will translate into slower homebuilding activity. But given resilience in the sector this year, we have revised up our 2018 starts forecast to 195k from 185k previously.
