Alberta's New Home Market: Failure to Launch?

The housing market in Alberta is a bit of an enigma in 2011. Prices for existing homes are steady, suggesting an improving market. But new home builders are not feeling the love—at least not yet. Do April housing starts represent a “failure to launch”?

The number of new housing starts in April was 19,200, unchanged from March. This figure is adjusted for seasonality and reported at an annualized rate (that is, the number of homes that would be started over a 12-month period at the current pace). The figure also includes only housing starts in urban areas of more than 10,000 people. Nationally, housing starts in urban areas dipped to 160,100, down about 2% from March.

Alberta’s 19,200 housing starts in April remain well below the average rate of nearly 30,000 over the past six years—a period which includes both a boom and a spectacular bust. The lackluster figure is puzzling on a few levels.

The provincial economy has been picking up over the past several months, and weekly earnings are rising. While employment did drop a bit in both March and April, overall job creation over the past twelve months has been steady. Also, mortgage rates remain favourable. This should point towards a rebound in the residential construction market.

However, as Statistics Canada reported last week, the value of residential building permits issued in April shot up by about 25% month-over-month. This suggests that housing starts could still pick up, so hope remains for 2011.

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