The Homebuilding Juggernaut Keeps on Rolling in U.S. and Canada

U.S. Housing Starts Stay Elevated

Construction activity in the United States is currently being sustained almost exclusively by residential work. Year to date through August, the put-in-place capital spending figures from the Census Bureau show the residential dollar volume to be +25.8% compared with Jan-Aug 2020 and nonresidential to be -6.7%. The grand total is +7.0%.

The usual proportions of residential to nonresidential in the total PIP numbers are 40% to 60%. Presently, residential has increased its prominence to claim an almost equal share, at 49.5%, to nonresidential construction’s 50.5%.

Among nonresidential construction’s 16 type-of-structure subcategories, only one has managed a year-to-date increase in spending, ‘sewage and waste disposal,’ +3.6%. Furthermore, that gain is tied to the burst of new single-family homebuilding that is taking place.

Housing starts in the U.S., as the average of the monthly seasonally adjusted and annualized (SAAR) figures through August of this year, have been ahead by one-fifth (+20.3%) versus the first eight months of last year.

The monthly average of single-family starts (in units) has been +23.9%, setting a pace nearly twice as fast as multi-family starts, +12.6%.

Year to date, singles have been 70.5% of total starts in units; multis, at 29.5%, have been less than a third.

U.S. new home starts have been maintaining their strength. Nor are there indications of a letup. ‘Permits’ are a leading indicator for starts and in August, the former clocked in at 1.728 million units to the latter’s 1.615 million units.

The demand for new housing is being partly spurred on by the significant increases in prices occurring among existing homes.

The S&P CoreLogic Case-Shiller resale housing price index in July was +19.7% year over year nationally. The 10-city composite index was +19.1% y/y and the 20-city composite index, +19.9%. The three cities with the largest sales price advances were Phoenix, +32.4% y/y; San Diego, +27.8%; and Seattle, +25.5%.

Before leaving the U.S. to move on to Canada, there’s a development that warrants mention. Cities in Texas hold positions one, two, and four in the ranking of residential ‘permits’ issued year to date in America’s 36 most populous urban centers. Dallas-Ft Worth is the frontrunner, followed by Houston, with Austin in the fourth spot.

At the city level, the number of residential building permits issued serves as a proxy for housing starts.

Canada’s Housing Starts are Tailing Off Somewhat

Canada’s housing starts in August (260,000 units SAAR) were high compared with any month prior to this year. But within 2021, they were the weakest monthly result to date. Unlike the U.S., Canadian new home groundbreakings do appear to be tailing off.

Earlier this year, the monthly average of Canadian housing starts was ahead by one-half versus the long-term average of 200,000 units. Presently, the eight-month average of 286,000 units is up by one-third (+34.6%) compared with 2020’s Jan-Aug average of 212,500 units.

Among Canadian cities, Toronto is still leading in terms of ‘level’ of starts in ‘singles’, ‘multis’ and total. But Toronto’s total starts are -4% year to date. Cities in Toronto’s periphery, however, are having an excellent year for starts pickups. Guelph is +125%; Barrie, +122%; Oshawa, +84%; and Hamilton, +48%. A little further afield, Kitchener is +69%; and London, +110%.

In terms of year-to-date percentage changes, and for Canada’s six cities with populations greater than a million, Calgary is in the vanguard singles, +72% vs Jan-Aug 2020; multiples, +74%; and total, +73%.

As for home resale prices north of the border, the Canadian Real Estate Association (CREA)’s MLS® Home Price Index (HPI) is +21.3% year over year nationally.

Prices are advancing more quickly in smaller population centers than in the super-sized metros.

According to CREA, among Canada’s three biggest (by resident count) cities, average home resale prices are +21.7% y/y in Montreal; +17.4% in Greater Toronto; +13.2% in Greater Vancouver. In the smaller communities of Okanagan Mainline (Kelowna), B.C. near the West Coast and in Saint John, New Brunswick on the East Coast, though, they are +29.1% y/y and +22.5% respectively.