News & Events

EDMONTON — Builders started three times the number of Edmonton-area homes in February as they did a year earlier -- showing just how far the housing market had fallen last year.

But now there are worries that possible higher interest rates and tighter lending restrictions could dampen the rebound's bounce.

Total housing starts in the Edmonton census metropolitan area reached 642 in February, compared with 213 in February 2009, Canada Mortgage and Housing Corp. said Monday.

Last month's building activity approached February 2008 levels, when housing starts totalled 692.

It was also was the eighth consecutive month of year-over-year increases in housing starts, said the federal agency.

In the single-detached sector, builders poured foundations for 484 starts in February, more than three times the 149 houses started in the Edmonton region the same month last year.

So far this year, housing starts have totaled 1,219, up from 626 in the first two months of 2009 when builders downed tools in a weak economy and what observers called an overbuilt housing market -- which was also competing with large inventories of existing homes.

Guy St. Germain, Edmonton-region president of the Canadian Homebuilders' Association, said his group's members are confident the current strong market has staying power.

"There is optimism that the market is showing stability for 2010," St. Germain said. "Single-family homes are selling well and multi-inventory continues to decline."

The resale market is near balanced and there is upward pressure on prices in both single and multi-family sectors, he said.

"Certainly, our builders are as optimistic as they have ever been since probably early 2007. Let us hope that a jump in interest rates and further constraints in CMHC and other mortgage insurers in eligibility criteria does not dampen demand."

Also released Monday was a national survey showing Albertans are the most likely, at 13 per cent, among Canadians to say they are very likely to buy a home within the next two years.

The RBC Home Ownership Survey also showed that among those looking to buy, Albertans were most likely to say they will buy within the next year, at 40 per cent.

The rebound in Alberta's home-building this year is especially evident in the single-home market, where builders started 881 units, compared with only 296 during January and February of last year.

"With inventories down considerably from a year prior, builders are strengthening production in preparation for the important spring selling season," said Richard Goatcher, CMHC's senior market analyst in Edmonton.

Multiple-dwelling starts also increased year-over-year in February to 158 units, compared with only 64 a year earlier. After two months, multifamily starts are up 2.4 per cent to 338 units, compared with 330 started in the comparable 2009 period.

Gains in semi-detached and row housing are offset by continued weakness in new apartment construction. Goatcher said high new apartment inventories in parts of Edmonton will curtail activity in the sector for much of the year.

The February recovery is also seen across Alberta. Housing starts in the seven largest centres totalled 1,562 homes in February, compared to 574 starts a year earlier -- despite lower activity in Wood Buffalo and Grande Prairie.

Todd Hirsch, a senior economist at ATB Financial, said the province's housing market is supported by low interest rates, better afford-ability compared with 2008 and an improving economy.

Hirsch predicted housing starts will remain near their February levels for the rest of the year -- better than last year, but still soft compared to the 10-year average.

"While 2010 will probably see improved labour market conditions, interest rates are almost certain to start rising in the second half of the year," Hirsch said.

"That will bump up the cost of mortgages, which could take some of the steam out of the market. As well, changes introduced by Ottawa to tighten lending conditions and speculative activity in real estate could also put a bit of a damper on things."