Supply Chain Issues Affecting Residential Construction, Though Overall Sentiment Still Reasonably Strong: Results from Q3 of CHBA Housing Market Index

 

OTTAWA – OCTOBER 26, 2021 High demand for housing continues to command relatively strong builder confidence, though supply chain challenges have resulted in a lower sentiment indicated for the 2021 Q3 results of the Canadian Home Builders’ Association (CHBA) Housing Market Index (HMI). Launched earlier this year, CHBA’s HMI is a residential construction industry sentiments indicator for both the single-family and multi-family markets in Canada, providing a leading market indicator before permits and starts. It is released on a quarterly basis.

The 2021 Q3 HMI for single-family builders is 77.8 and the multi-family HMI is 77.6. The HMI uses a 100-point scale, so this is a reasonably high sentiment number. However, it is a 7% decline from Q2. A variety of factors are reflected in the quarter-to-quarter sentiment decline, including changes to the stress test, but the predominant influence was the impact of the pandemic on the supply chain and labour.

These supply chain issues are directly impacting industry and in turn home buyers. More than 55% of panelists said that supply chain issues are delaying some pre-sales and/or development due to price volatility. Furthermore, continued high lumber costs combined with overall construction cost increases are adding over $57,000 on a 2,374 sq ft home. Due to supply and labour challenges, new home closings are delayed nationally by an average of 7 weeks, an increase of 1 week since Q2.

Difficulty in finding skilled trades professionals is contributing to delays, and the cost to employ those workers has risen on average 19% since before the pandemic according HMI panelists, which is also contributing to overall construction cost increases. Canada is experiencing a skilled trades shortage that is predicted to get worse; BuildForce Canada calculates that an additional 131,000 professionals will retire from the residential construction industry over the next decade, creating even more demand.  

Recent numbers from CMHC show that starts are down month-over-month, and the sales conditions are reflected in CHBA’s HMI, which indicates that traffic of prospective homebuyers is down 21% since Q1 of the survey. But while growth in investment in building construction, housing starts, building permits, home sales and home prices has been slowing in the past few months, since all of these activities recently reached all-time highs, a return to more typical levels can be expected.

For more information on CHBA’s HMI, including the detailed methodology and key takeaways, please visit the official CHBA HMI webpage.

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MEDIA INQUIRIES
Journalists wishing to interview Kevin Lee, Chief Executive Officer of the Canadian Home Builders’ Association are encouraged to submit their request by email to [email protected].

ABOUT THE HMI
CHBA’s Housing Market Indicator (HMI) provides a much-needed leading indicator about the current and future health of the residential construction industry in Canada. It is the only sentiments indicator for the sector in the country and has been modelled on the very successful and influential American version delivered by the National Association of Home Builders’, which is used regularly by financial analysts, the Federal Reserve, policymakers, economic analysts, and the news media. Through the CHBA Housing Market Index, CHBA is looking to do the same for Canada. The CHBA HMI is released on a quarterly basis, providing a regular litmus test for the residential construction industry, which is one of Canada’s largest employers and whose health is critical to the overall Canadian economy.  

To deliver the HMI, CHBA surveys an exclusive expert panel made up of over 300 single-family and multi-family builders from across Canada that reflect market conditions across the country. Panel participants are asked to rate market conditions for the sale of new homes at the present time and in the next six months as well as the traffic of prospective buyers of new homes. HMI numbers are not seasonally adjusted. Over time as more data is collected, the HMI will indicate trends in the market and will likely be able to predict housing starts six months in the future.

ABOUT THE CANADIAN HOME BUILDERS' ASSOCIATION
Since 1943, the Canadian Home Builders' Association (CHBA) has been "the voice of Canada's residential construction industry." Representing one of the largest industry sectors in Canada, our membership is made up of some 9,000 companies – including home builders, renovators, land developers, trade contractors, product and material manufacturers, building product suppliers, lending institutions, insurance providers, and service professionals.