Canadian dollar, housing starts surpass economists’ expectations

Housing startsMagnifying glass

In wonderful news of the month, the Canadian dollar is up and recently closed at a 13-month high. Way to go, loonie! Although this may be for several reasons, experts suggest it was caused by expectations that the U.S. Federal Reserve is planning a stimulus for the U.S. economy. Recent closing numbers reflected an increase of 0.45 of a cent to the U.S. $1.0275, according to The Globe and Mail.

The value of the U.S. dollar continued to suffer leading up to a two-day meeting that may result in the U.S. government printing more money as a means to keep interest rates low and encourage lending.

However, in more positive news of the month that only strengthened the Canadian dollar's value, economists were pleasantly surprised at the increase of housing starts as reported by the Canada Mortgage and Housing Corporation (CMHC). Instead of its prediction – a decline to 200,000 home starts in August – coming true, housing starts came in at an annual rate of 224,900 during the month.

"Clearly low-interest rates continue to support home construction activity, although signs of deceleration in the secondary market could dampen that momentum," an economist was quoted as saying in the Globe article. "Today's data suggest residential construction in the third quarter may not be as measurable a drag to activity as previously thought."

Based on information straight from the positive news-bearing CMHC press release, the standalone monthly seasonally adjusted annual rates (SAAR) of housing starts increased 16,900 in August from July. This can primarily be attributed to several substantial multi-unit housing starts in metropolitan Toronto, which is a hot market thanks to pre-sales of the units in late 2010 and early 2011. Those pre-sales, according to the release, are directly in line with an influx of jobs during the same time period.

However, not all areas are boasting frenzied and strong housing starts. Although August urban starts SAAR increased by 47.5 percent in Atlantic Canada, 20.4 percent in Ontario, 18.2 percent in British Columbia and 1.3 percent in the Prairies, urban starts actually decreased in Quebec by almost 10 percent.

There has been rural development action in the last month as well, with rural starts estimated SAAR of approximately 19,000.

Although now may be the perfect time for some potential homeowners to stop searching for their non-existent dream home and build it instead, they may want to first discuss the market projections and industry trends with mortgage brokers, financial experts, and lenders. The CMHC anticipates housing starts to grow and thrive well into 2013, but an individual's credit and employment history may indicate more viable options for some hopeful builders.

One thought on “Canadian dollar, housing starts surpass economists’ expectations

  1. The almighty Canadian Dollar is poised to rise above to unparalleled highs against the US Dollar. The Canadian economy is chugging past any other country. Our unemployment rate is the best of the industrialized nations. Our standard of living is better than any other democratic country. Many Europeans rave how they would be fortunate to be Canadian in that our infrastructure is the best on the globe. Our housing market, although sales have slowed, our average is well above $400,000, we are all meeting our financial responsibilities better than any other country in the world. Given all this – we should have a Canadian Dollar that is 25% better than that of the US dollar. Sure the US dollar will eventually be 10% better than that of the Canadian – but don’t hold your breath for another ten years until the US puts their economy in order. The only hope the US has is to vote in Mitt Romney and hire our Band of Canada Governor Food for thought – and the honest truth in economics. Canada will never be in the same economic woes as Europe is (Less Germany) The US may trek in those uncharted course as the Euro Zone did.