Housing starts point to sharp rebound

Home builders in Red Deer can boast that their output in September exceeded that of an entire province — albeit a small one in Prince Edward Island.

Home builders in Red Deer can boast that their output in September exceeded that of an entire province — albeit a small one in Prince Edward Island.

The city’s 79 housing starts during the month helped persuade Canada Mortgage and Housing Corp. that the local residential construction sector is on a sharp rebound.

In its housing market outlook released this week, CMHC boosted its prediction of housing starts in Red Deer for 2009 to 475 — up from 430 just a few months ago. The national housing agency is now also projecting that the city’s 2010 total will reach 600, as compared with a prediction of 490 in early September.

“We’ve seen things picking up faster than we thought,” said Regine Durand, a market analyst with CMHC.

Red Deer’s September housing starts were more than double the total for the same month in 2008, she pointed out.

“In Prince Edward Island they only had like 75 starts, so we had more starts in Red Deer than all of P.E.I.”

The population of Prince Edward Island is about 140,000.

CMHC had already revised its 2009 forecast upward, after predicting in May that local housing starts would number only 425. It projected 2010 starts at 515.

If the agency’s current numbers prove correct, they will translate into a year-over-year housing start increase of 26 per cent.

Durand attributed the construction jump to a growing demand for housing, which in turn is being stimulated by an improvement in the economy. Also at play is a dwindling inventory of new homes in the city, and stable prices.

In September, said Durand, the supply of unsold new, single-detached homes in the city stood at 223 — down 34 per cent from a year earlier. This could sustain the market for about five months, she said, and is spurring builders to action.

The strengthening residential construction sector is evident elsewhere in Alberta, she said, with newcomers to the province also expected to fuel demand for housing.

“The migration numbers are really high,” said Durand. “We’re expecting more than something like 56,000 people to move to the province.”

CMHC’s most recent forecasts related to the resale market are largely unchanged from the beginning of September. It expects MLS sales in the Red Deer region to number 3,700 by year-end, with an these having an average price of $269,000; and sales next year to reach 3,900, with an average price of $280,000.

In 2008, there were 4,214 sales in the city and area, with an average price of $278,040.

Although the anticipated 4.1 per cent growth in average prices here from 2009 to 2010 will be comparable to Canada’s, the projected 5.4 per jump in MLS sales in the Red Deer region will be well above the expected national increase of one per cent, said Durand.

“For Red Deer, the growth in MLS sales will be way higher than across Canada.”

Durand said continuing low carrying costs on existing homes should help stimulate MLS sales in Central Alberta this year and next. A steady decline in resale inventories, combined with strengthening demand for housing, should spur price growth in 2010, she added.