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Housing Starts Up for May

\"torontoMay showed a drastic rise in requests for housing starts, something that was a bit off the mark when looking at economic forecasts for the last year. Month over month building permits rose by about 5%, following a big jump in April of about 11%; this is the longest stretch of new housing starts seen in 10 years, which is a great thing. Many analysts say that people shouldn’t expect results just yet, as it can take years from getting the permit to start building and have a finished product. So while there may be a serious lag between starts and finishes, presales are beginning to pick up, especially in the condo market.

What are Housing Starts?

Housing starts are successful applications to build homes, condos or residences. They can be defined as small housing complexes or even businesses, but residential housing starts are of significant importance; the more people are able and willing to start construction on a property the better the economic outlook for a particular area is. For the last ten years housing sales have been booming (except for this last year), while new construction has lagged a bit for the last two. Many homes and condos fell into the presale stage but developers abandoned projects, unsure about the economic outlook.

Why Housing Starts Are Important

While it may take some time for new construction to get started and for the real impact to be seen, it’s a good start. The more homes that are entering the building stage now the more homes we’ll have in the future.

A good majority of the homes that have been sold in the last 5 years were built between 1970 and 1990, leaving a large glut of homebuyers searching for something newer in the dust. It’s been shown that newer homes actually save money on maintenance and are cheaper to finance in the long run, and with more and more new homes coming available it’s a big boost to the economy.

More people buying permits are buying materials, hiring labor, generating mortgages and it trickles down throughout the economy.

Numbers Could be Spurred By Pre-Sales From Months Ago

Another flipside to the equation is that these are just presale orders from months ago finally getting started in the building process. It’s not uncommon for builders to wait to get customers and cover their bases before they even start getting their permits. In the case of condos permits are specific to each custom build; with interest rates at all-time lows, more people are investing in condos and the like.

Multifamily dwellings (row houses, apartments, etc.) also saw a boost of 4%. Just looking at residential permits alone had large gains of almost 8%. Again, this doesn’t mean that more homes are being sold, but it could mean that some are and others are beginning to enter into the construction phase. Many Canada mortgage brokers remain optimistic about the numbers, saying that Canadians are still investing in new homes for sale.

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