Alberta Housing Starts on the Decline – Is that Good Or Bad?

As some of you may have realized Alberta is in a bit of a slump. Today CMHC released the final results for 2015 and the without a doubt the numbers are down for construction starts in the entire province.

This means for many builder and building trades that it may be a long year in front of them for 2016, CMHC reported the following numbers this morning.

  • Over all building starts in 2015 were only down about 10% for the year.
  • Edmonton and Lethbridge actual showed an increase over 2014 fueled mostly by multifamily starts.
  • These types of projects usually run for 24 to 36 months depending on their size, the reason some would go ahead would be exactly that and construction money is at one of the lowest levels it has been in a long time.
  • Building at 3 or 4% is much better than building at 7 or 8%.

What is the good news in all of this -Will there be a silver lining here somewhere?

The fact that we will see less starts in 2016 means there will be less competition for resale homes and help reduce the possible glut that may happen in the spring market (if there is a spring market). Builders will become lean and mean again and many of the older companies who have been through this two or three times will know how and what to cut back on (less of them going to Vegas next week). Building quality will rise as only the best of the best of trades will survive.

The bad news I think is pretty obvious while oil and gas are huge employers the homebuilding industry is right up there as a top employer in Alberta. Many more trades people will be pushed out of employment and they will become a migrant work force again and go where the work is but that is how it works for them, the other bad news is getting them back when the province begins to recover. New Home prices will fall with the rest of the market and the builders who are caught with either standing inventory or with a land position that is weighing them down may be in trouble.

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