Housing starts drop sharply. From Red Deer Advocate

Housing starts drop sharply

By Harley Richards - Red Deer Advocate - March 11, 2008

The first two months of 2008 were probably a good time for tradespeople in Red Deer's residential construction sector to do some travelling.

The latest stats from Canada Mortgage and Housing Corp. suggest there may not have been much to keep them at home.

The national housing agency recorded just 58 housing starts in the city last month: 28 single-detached homes and 30 units in multi-family projects.

By comparison, work was started on 176 homes in Red Deer last February.

These consisted of 105 single-detached houses and 71 multi-family units.

January 2008 was also a quiet month for local builders. There were 32 single-detached and no multi-family starts.

That contrasts sharply with the first month of 2007, when there were 89 single-detached and 122 multi-family construction starts.

Regine Durand, a market analyst with CMHC, said local builders are responding to the surplus of homes. They're waiting to sell their existing inventory before building more.

There were 70 new, unoccupied, single-detached homes in Red Deer in January, she pointed out, well above the seven-year average of 39.

Meanwhile, 491 single-detached homes were under construction, as compared with an average of 418 from 2001-07.

It should take the local market about eight months to absorb the combined total of 561 single-detached homes, said Durand, adding that the 515 multi-family units under construction in Red Deer during January were also well above the city's seven-year average of 418.

Also playing a role is the city's resale market, said Durand. In January, there were about 1,950 homes listed. That translates into an eight-month inventory, about double the average over the previous seven years.

A slowdown in the migration of people into Alberta has taken a bite out of Red Deer's housing market, continued Durand.

And the escalation in house prices - which in 2007 rose 30 per cent in the case of new homes and 33 per cent on the resale market - has deterred many people from buying.

"It really makes it much more difficult for someone to make that jump from renting to buying."

However, Durand cautioned against reading too much into the 2007-2008 comparisons. She pointed out that last year's record numbers make the corresponding figures for 2008 look worse than they are.

"It's going to remain like the fourth or fifth best year on record," she said of CMHC's forecast for 2008.

With a 77 per cent decline, Red Deer's year-over-year drop in housing starts as of the end of February was the greatest among Alberta's seven largest communities.

But several others also experienced sharp downturns.

Grande Prairie was down 75 per cent, the Regional Municipality of Wood Buffalo fell 63 per cent, Medicine Hat declined 29 per cent and the Edmonton census metropolitan area was off 17 per cent.

Lethbridge's housing starts during the first two months of 2008 were up 14 per cent over 2007, and the Calgary census metropolitan area increased four per cent.