CANADA DATA: Housing Starts Rebound, But Activity And Sales Prospects Still Flat

Canadian housing starts bounced strongly in September to 279.2k (seasonally-adjusted annual rate), a 14.2% M/M rise after falling 16.6% in August. The outturn easily outpaced expectations for a rise to 257.5k (244.5k prior, rev down 1.3k).

• Looking through the volatility of the headline figure, starts have averaged 277k over the last 6 months, well up from the 235k over the prior 6 month  period. For context, September's starts were running at a level about 30% higher than seen pre-pandemic, so still robust.
• Gains were led by multi-unit construction which rebounded 19% after a 21% drop in August; single family starts picked up by 2.4% after -4.4% (but these are one-fifth the volume of multi-units).
• While the September figure offers some hope of improved growth impetus for the 3rd quarter as a whole, residential activity is not in the clear yet. We note that latest data show building permits fell more than expected in August when accounting for downward revisions, led by residential activity.
• Separately, existing home sales fell 1.7% in September, after a 1.0% rise in August (rev from 1.1%; no consensus ests). Despite the sequential pullback - the first since March - sales were up 1.2% Y/Y and it was the best September for sales since 2021.
• The MLS home price index hasn't risen Y/Y since March 2024, though, and was down 4.4% in Sept (marking a new drawdown of 17.7% from the Feb 2022 peak).
• Overall though sales activity has remained flat the last 3 years and recent supply-demand dynamics aren't really shifting. The sales-to-new listings ratio has remained in the low 50x-s the last 4 months (50.7 in September) while months of inventory have levelled off at 4.4 the last 3 months after rising close to 5 earlier in the year.