Invest in Canada

1) Housing starts are expected to rise

While the seasonally adjusted annual rate of housing starts decreased to 132,000 units in July from 137,000 units in June, Canada Mortgage and Housing Corp. says starts statistics – which mark the actual, shovel-in-the-ground beginning of construction – are expected to improve throughout 2009.

The reason?

“Over the next several years, housing starts will gradually become more closely aligned to demographic demand, which is currently estimated at about 175,000 units per year,” CMHC said.

How solid is this foundation? Economists’ opinions are mixed.

BMO economist Robert Kavcic said July results indicate a rain delay, rather than a reversal. Unseasonably soggy weather caused “a puddle in the road to recovery,” he said.

However, Toronto-Dominion Bank economist Pascal Gauthier noted that the July results, which were dragged down by fewer starts in the condominium sector, were below expectations.

“The latest data for July is yet another warning that extrapolating the bounce back from [the earlier] extreme lows further out can be overly optimistic,” Mr. Gauthier wrote.

2) Building permits have bounced higher

This indicator of builder confidence and construction plans has made steady gains.

“Building permits not only held on to the big bounce in May, they were revised higher (to 15.5 per cent) and they rose again in June (up 1 per cent) in another sign that construction is recovering from the extreme lows earlier this year,” the Bank of Montreal said in a research note.

3) Existing home sales soar

Nowhere has the turnaround been more apparent than in July sales of existing homes in Canada’s biggest cities, BMO reports.

4) It’s still a buyers’ market, but prices are firming up

Economists expect that when CREA reports on the national picture Friday, the statistics will show that the prices are up about 4 per cent year over year – skewed upwards by sales in the higher-priced markets.

5) Affordable mortgages

“Nowhere is the benefit of record-low [interest] rates more apparent than in the housing market, where results have jumped 57 per cent in the past five months and look solid again in July,” BMO economist Sal Guatieri said this week.

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