Since early 2010, housing starts have been driven by the multi-unit sector, with single detached housing starts remaining broadly unchanged. The problem is that housing construction has been running well above household formation, leading to a surge in unsold condo inventories. Unfortunately, these excesses are likely to grow now that new condo sales are slumping. We expect investor pessimism and tighter credit conditions to hurt future sales, throwing a spanner in the works of the domestic economy. Overall, after averaging 217,000 units this year, we expect housing starts to average only 150,000 next year.
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