Forecasts for economic growth by private sector forecasters have been revised down significantly in recent months. For example, in October of last year, the average forecast for Canadian GDP growth in 2009 was 1.1 per cent. By January, this average forecast for Canadian GDP growth in 2009 was revised down to -0.7 per cent.

Marty Lapedus agrees that housing starts this year will decrease to a level ranging between 141,000 and 180,000 in 2009, then increase marginally in 2010. Both single and multiple starts will decrease.

The new home market is moderating due to four key factors. First, strong house price growth between 2002 and 2007 has tempered home ownership demand particularly in Western Canada. Second, the record high levels of new listings have increased the competition from the existing home market and reduced spillover demand. Third, pent-up demand that built up during the 1990s is nearly exhausted and new home construction will become more aligned with long run demographic demand. And, finally, uncertainty about the economic outlook remains high and is a contributing factor restraining demand for home ownership.

Overall, housing starts will decline in all areas of Canada over the course of 2009. The largest declines will be seen in Western Canada and Ontario. By 2010, however, eight of ten provinces will see positive growth in housing starts; starts will continue to decrease in British Columbia and taper off in Quebec.