The AEC Lens
Alex Carrick, Chief Economist at ConstructConnect
Alex Carrick is Chief Economist for ConstructConnect. He is a frequent contributor to the Daily Commercial News and the Journal of Commerce. He has delivered presentations throughout North America on the Canadian, United States and world construction outlooks. A trusted and often-quoted source for … More »
U.S. and Canadian City Long-term Home Start Trends – Proxy for Vitality Part 1
April 13th, 2016 by Alex Carrick, Chief Economist at ConstructConnect
Article source: CMDGroup
While practicing the ‘art’ of economics, sometimes the statistics just fall into your lap.
For example, heading into 2016, it was the consensus opinion among analysts that Ontario and British Columbia would have the best upcoming growth performances among Canada’s ten provinces.
Consequently, there were grins from ear to ear among my fraternity when March’s Labour Force Survey from Statistics Canada showed Ontario with the largest year-over-year increase in jobs at +86,000, with British Columbia not far behind, at +72,000.
No other province was even close. In fact, the sum of Ontario and B.C., at +152,000, was greater than for the country as a whole, +130,000.
The material in this current Economy at a Glance continues in a similar vein. I’ve graphed the relatively long-term history of housing starts, from 1980 to the present, for the major cities in the U.S. and Canada and allowed Microsoft’s Excel to add a trend line.
In most cases, the results are pretty much what one would expect. And that’s good, because it confirms what many of us have been saying, often based on other statistics such as retail sales, home prices, job creation and so forth.
There are some surprises, though, and those will be commented on in the text that follows. By the way, there are graphs for more cities in the web-site version of this story than can be laid out in this two-part EAAG. (Please insert link here.)
It might even be fair to say the long-term trend lines for home start in major cities serve as proxies for the vitality of those urban centers. The trend line generally slopes upward as jobs in the local area become more plentiful and workers and their families relocate to that region.
The trend line will fall off as employment and economic prospects dim, although those may not be the causes in every instance. For some well-established cities, starts diminish over time as the stock of housing becomes strong enough to support whatever new demand for accommodation may arise.
Let’s first focus on those cities where the long-term trend lines for new home starts have been clearly rising. In Canada, the standouts – fueled until a year or so ago by the high-octane energy sector − are Calgary (Chart 1) and Edmonton (Chart 2). (Although, please note that through the first quarter of this year, new home starts in Calgary are -51% versus Q1 2015 and in Edmonton, they are -62%.)
In the U.S., also largely on account of proximity to oil and gas reserves, it’s been two cities in Texas − Austin (Chart 3) and Houston (Chart 4) − that have recorded the sharpest upward-sloping foundation-digging trend lines. (Houston’s year-to-date ‘permits’ are -25% in units compared with January-to-February of last year; Austin’s comparable change is +6%.)
The huge drop in the world price of oil jeopardizes the direction of those trend lines, as the years continue to accumulate. But if the bottom has been reached in oil markets, with production cutbacks gradually reducing storage-tank inventories, then those cities will be well-positioned for ongoing success.
Two other U.S. cities with remarkable upward paths are Nashville (Chart 5) and Charlotte (Chart 6). The former, besides being the country music capital of the world, has also become home to the head offices of many corporations involved in providing Americans with health care (e.g., HMOs).
The latter is perhaps second only to New York as a banking and financial beehive, plus it boasts entertainment appeal through its famous Speedway, which has drawn all the major owners and players in the NASCAR circuit into Charlotte’s warm embrace.
Speaking of New York, I couldn’t leave Part 1 of this EAAG without including the results for that giant metropolis (Chart 7). Particularly note the surge in starts last year, when multi-unit groundbreakings more than doubled versus 2014.
Canada’s Labour Force Survey: http://www.statcan.gc.ca/daily-quotidien/160408/dq160408a-eng.pdf
Category: CMD Group