Canada's got a housing supply shortage, and it’s getting worse: The latest data from the Canada Mortgage and Housing Corporation (CMHC) showed that housing starts for March declined 11% from February.
Housing starts measure new residential construction projects. As soon as the ground is broken on development, whether a single-family home or multi-residence unit, it gets added to the housing start count.
- It is a leading indicator since the housing market's health is correlated with mortgage rates. Higher mortgage rates reduce the number of qualified buyers.
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Even though demand is high, developers might look at high borrowing costs and delay projects out of fear that they won't have enough buyers.
- But without more supply (or a steep crash in demand), there’s only one way for housing prices to go and that’s upwards.
The CMHC's chief economist said high-interest rates have made it challenging for developers and homebuilders to break ground on new projects, which has caused housing starts to decline.
The bottom line: Falling housing starts means we aren’t building our way out of our housing shortage.