Canadian housing starts are unlikely to be sustained near the 200k pace

Data released on Tuesday showed that Canada's housing starts spiked in February, up to 213k annualized, beating expectations and January's 165k. Growth of 46% m/m in urban multi-family starts mainly drove this rebound, whereas singles increased a moderated 6.1% m/m.

An unusually warm winter may have boosted data. The six month moving average remained near the 200k mark, but we are skeptical if Canadian housing starts can be sustained near the 200k pace.

"While housing continues to surpass our expectations over and over again, conditions in Toronto and Vancouver continue to look increasingly frothy," TD economics said in a note to clients.

The surge in home construction is stirring new worries about Canada's hottest housing markets and prompting concern among economists, with BMO and TD sounding the alarm on red-hot conditions.

"We've long been defenders of the Canadian housing market against the rabid bears, but activity in Vancouver at least is making that case a lot tougher to make," BMO Capital Markets senior economist Robert Kavcic said in a note to clients.