Home Construction Will Continue To Drop

Home foundations poured in Calgary slowed to a mere trickle last month, says data released yesterday by the Canada Mortgage and Housing Corporation.

Housing starts in the Calgary census metropolitan area, including single- and multiple-family homes, totalled 206 units in February, compared to 877 units one year ago.

That's a decrease of 76.5% and a drop to levels not seen since January 1991, when foundations for 170 units were poured.

Year to date, total housing starts in Calgary are trailing last year by nearly 72%.

Condominiums led last month's downturn, plunging an eye-popping 96.3% to 22 units.

Single-family home starts decreased 36.1% to 184 units during the same period.

At least two indicators suggest it'll get worse before it gets better: Unemployment in Calgary, as well as the rest of the province, is predicted to continue rising.

Statistics Canada will release the most recent employment statistics Friday.

Also, Bonnie Wegerich, president of the Calgary Real Estate Board, said MLS listings will rise this spring, which means that competition from the re-sale market won't abate any time soon.

But, Lai Sing Louie, senior market analyst for the CMHC, argues lower mortgage rates and home prices point toward stronger demand.

"The real estate market is re-pricing right now, and at some point in time, that will bring back in demand," he said.

Prices for new homes have been declining steadily since peaking at an average of about $647,000 last September.

The February average price was $619,211. Sing said the CMHC predicts prices will continue sliding this year.

Moreover, mortgages are getting cheaper as Canada's financial institutions follow the Bank of Canada by lowering their lending rates.

Given January's rates, which don't take into account the central bank's most recent rate cut, the mortgage payment on an average condominium, with 10% down and a 25-year amortization, came to $1,538, compared to $1,946 one year ago.

The combined housing starts of Alberta's seven largest cities totalled 574 units in February, nearly 70% lower than one year ago.