07/21/2016 02:48 EDT | Updated 07/21/2016 02:59 EDT

Fort McMurray's Recovery Could Lead To A Record Number Of New Homes

Home construction had dropped to a 20-year low before the fire.

Bloomberg via Getty Images
Houses and vehicles destroyed by wildfire are seen in the Timberlea neighborhood of Fort McMurray, Alberta, Canada, on Sunday, June 5, 2016. Residents began returning home Wednesday and companies are resuming operations after Alberta wildfires forced the evacuation of more than 80,000 people from Fort McMurray and knocked more than 1 million barrels of production a day offline this month. Photographer: Darryl Dyck/Bloomberg via Getty Images

CALGARY — Canada Mortgage and Housing Corporation is predicting a house-building boom in wildfire-ravaged Fort McMurray, Alta., later this year and continuing into 2017.

The national agency says if all the homes destroyed by the fire in May were rebuilt in one year, along with the usual number of new homes, it would result in about 2,500 housing starts — greater than the previous record of 2,200 starts in 2007.

However, it stated in a report it's unlikely all the homes can be rebuilt this year because of the extensive cleanup that must take place first.

Slow housing construction

CMHC said an economic downturn linked to low oil prices had dropped home construction to a near 20-year low before the fire erupted in early May. Only 74 combined single- and multi-family units started construction in 2015, the lowest level since 1997. The pace in 2016 was equally weak at only 13 starts.

Additionally, CMHC noted that only 155 sales of existing homes took place in the first quarter of 2016, continuing a declining trend that began in 2014. The average home price fell to $504,000, compared with an average of about $609,000 two years ago.

In its report, the agency forecasts housing prices will halt their declines but didn't make a price prediction. It said it's unclear how many listed homes for resale will return to the market after repairs are made, noting many listings expired because the owners had been evacuated. Prices will be supported, however, as some displaced residents opt to purchase existing homes, driving up demand.

Rental vacancy rates that hit 29 per cent in October are expected to decline rapidly, helping stabilize rents which had been falling, CMHC said.

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