One of the key questions for Canada’s real estate market is whether regulators’ efforts to curb demand successfully pricked the housing bubble without creating conditions that will eventually precipitate a crash.

Last July, Finance Minister Jim Flaherty tightened the rules governing the types of mortgages that could be insured by Canada Mortgage and Housing Corp (CMHC). The most significant change was the shortening of the amortization period to 25 years, down from 30 years.

Although that reduces the overall amount of interest borrowers would pay over the life of the loan, it also means that monthly mortgage payments rose an average of CAD200 to CAD300.

That move has clearly dampened demand from first-time homebuyers. Indeed, the latest evidence shows a formerly overheated market that’s cooling at a rapid pace. In April, housing starts dropped for the first time in three months, with work starting on 174,900 homes, slightly missing consensus forecasts of 175,000.

That figure, which is the standalone seasonally adjusted annual rate (SAAR), was down 3.5 percent month over month and 31 percent year over year. It’s also moderately below Canada’s monthly pace of household formation, which is around 185,000.

However, the six-month moving average of housing starts was trending at 182,800 units in April, which the CMHC says is closer to the long-term historical average as well as the rate of household formation.

Cities in Atlantic Canada were hardest hit, with starts down 40.8 percent from a year ago, while Ontario and British Columbia were down 14.9 percent and 5.6 percent, respectively.

And urban multifamily housing starts led the overall reading lower, declining 3.5 percent month over month and 42 percent year over year. By contrast, single-unit starts were down just 0.9 percent from March and 16 percent versus a year ago.

Although the fact that housing starts were below household formation levels in April suggests that a bottom could be forming, it could take much more to make home prices affordable to first-time buyers again.

In fact, demand from this demographic has simply been pushed to the rental market. In Toronto, for instance, condos now average CAD1,856 per month in rent. After a decade of tepid growth in rents, rates have climbed 10 percent the past two years, while listings of condos for lease have jumped 31 percent year over year.

Meanwhile, growth in housing prices is slowing. The Teranet-National Bank Composite House Price Index of sales prices for existing homes rose 0.2 percent in April from the prior month and 2 percent from a year ago. Of course, April typically marks the beginning of the spring selling season, so this result was the weakest gain for that month since the height of the global recession in 2009.

One explanation for the downward trend in data is a tough comparable period. After all, current activity is being compared to a period that preceded the aforementioned changes in mortgage rules last July. So the data from July onward should be especially instructive.

In the near term, tomorrow’s release of existing home sales should provide additional context for these figures. In Toronto, for example, real estate listings of existing homes for sale have started to head higher. If that trend persists, then a higher inventory of homes for sale will eventually force prices lower.

The Roundup

Thus far, at least, Atlantic Power Corp (TSX: ATP, NYSE: AT) appears to be meeting the criteria we laid out in early March for maintaining our “hold” rating.

The company has been aggressively deleveraging its debt and divesting its portfolio of underperforming projects, with the sales of its Path 15 transmission line in California (including the transfer to the buyer of that project’s $137.2 million in debt), as well as the three Florida plants. Those sales netted proceeds of $173 million in cash.

In fact, the Florida Project sale slightly exceeded the company’s initial estimate of proceeds, which was originally $111 million vs. the $117 million the company actually received at close. That along with the sale of the Path 15 transmission line fulfilled two of our five criteria for maintaining our “hold” rating.

Atlantic Power also syndicated its tax equity investment in its Canadian Hills wind project, which netted another $42 million in cash. That fulfills the third of our aforementioned five criteria.

From these sales, Atlantic Power received a total of $215 million in net proceeds, of which it used $64 million to pay off its credit revolver.

That leaves about $151 million in cash to redeploy toward new growth projects, which the company plans to begin investing in during the second half of the year. Additionally, the company has $210 million to $225 million available from its credit revolver.

Among the types of investments management is considering are natural gas and renewables projects already generating cash flows and renewables projects in late-stage development that will be accretive to cash flows once they commence commercial operation.

Additionally, the company has an agreement in place to sell its Gregory assets in Texas by the end of the third quarter, with expected net proceeds of $33 million. It also expects to receive $9 million in net proceeds from the sale of the Delta-Person generating station during the third quarter. So altogether, another $42 million in cash for growth investments should be forthcoming.

Equally important, these sales also significantly extended the average duration of Atlantic Power’s purchase power agreements to 11.5 years from 7.2 years, with just 17 percent of its portfolio slated for contract expirations over the next five years. That should increase the stability of the company’s cash flows and support the dividend.

Management also reaffirmed its forecast for full-year 2013 project adjusted EBITDA of $250 million to $275 million, as well as its payout ratio range of 65 percent to 75 percent.

For the first quarter, the payout ratio was actually 38 percent, though almost 40 percent of the $66 million in cash available for distribution included contributions from operations that have since been discontinued.

Still, the latter fulfilled the fourth of our five criteria. However, one concern is that the payout ratio is projected to rise to 75 percent to 85 percent in 2014 once cash flow from discontinued operations falls off.

And absent the contributions from discontinued operations, the company’s payout ratio for 2013 is projected to be 100 percent, which mirrors the payout ratio in 2012. That means management really needs to get rolling on finding new projects that are immediately accretive to cash flow, while continuing to make progress getting existing projects up and running.

As far as growth goes, the results for the quarter were promising. Atlantic Power beat analysts’ top-line estimate by almost 15 percent, and the stock jumped 14.2 percent in response. Operating cash flow rose 11.4 percent year over year, primarily due to new projects such as the Canadian Hills and Meadow Creek wind projects.

Although progress was made with recent projects, such as the commencement of commercial operation for the company’s 53.5 megawatt Piedmont Green Power biomass project in Georgia, no new projects were announced, which was our fifth criterion. As mentioned earlier, these investments will likely take place during the second half of the year.

There was some reassuring activity on the insider front. Three insiders, including the chairman of the board, bought just over $143,000 worth of shares in the open market from March 18 through April 10. These were the only such purchases since August 2011. Though insider purchases are occasionally done for public relations purposes, that sum is substantial enough to suggest that they believe the stock has bottomed and the company is poised for growth.

Bay Street’s response was relatively muted. So far, six of the eight analysts covering the company have reiterated their “hold” ratings, with some moderately lowering their price target. The overall ratings mix now stands at seven “holds” and one “sell,” with the consensus 12-month price target at CAD5.80, which is 10.8 percent higher than today’s close.

Atlantic Power remains a “hold,” while we wait to see how it deploys its investment capital in the quarters ahead.

Here’s when Portfolio Holdings will report numbers for the first quarter of 2013. Those that have revealed firm dates for announcements are noted as “confirmed,” while we provide an “estimate” for those yet to make specific commitments. Follow the links to read our analysis of those companies that have already reported.

Conservative Holdings

• AltaGas Ltd (TSX: ALA, OTC: ATGFF)–May Portfolio Update
• Artis REIT (TSX: AX-U, OTC: ARESF)–May 7, after the market’s close (confirmed)
• Bird Construction Inc (TSX: BDT, OTC: BIRDF)–May 14 (estimate)
• Brookfield Real Estate Services Inc (TSX: BRE, OTC: BREUF)–May 7 Maple Leaf Memo
• Brookfield Renewable Energy Partners LP (TSX: BEP-U, OTC: BRPFF)–May 8 (confirmed)
• Canadian Apartment Properties REIT (TSX: CAR, OTC: CDPYF)–May 7, after the market’s close (confirmed)
• Cineplex Inc (TSX: CGX, OTC: CPXGF)–May 9 (confirmed)
• Davis + Henderson Income Corp (TSX: DH, OTC: DHIFF)–May 7, after the market’s close (confirmed)
• Dundee REIT (TSX: D-U, OTC: DRETF)–May 8 (confirmed)
• EnerCare Inc (TSX: ECI, OTC: CSUWF)–May 14 (confirmed)
• Innergex Renewable Energy Inc (TSX: INE, OTC: INGXF)–May 14 (confirmed)
• Keyera Corp (TSX: KEY, OTC: KEYUF)–May 7, after the market’s close (confirmed)
• Northern Property REIT (TSX: NPR, OTC: NPRUF)–May 8 (confirmed)
• Pembina Pipeline Corp (TSX: PPL, NYSE: PBA)–May 9 (confirmed)
• RioCan REIT (TSX: REI, OTC: RIOCF)–May 7 Maple Leaf Memo
• Shaw Communications Inc (TSX: SJR/A, NYSE: SJR)–May Portfolio Update
• Student Transportation Inc (TSX: STB, NSDQ: STB)–May 10 (confirmed)
• TransForce Inc (TSX: TFI, OTC: TFIFF)–May Portfolio Update

Aggressive Holdings

• Acadian Timber Corp (TSX: ADN OTC: ACAZF)–May 9 (confirmed)
• Ag Growth International Inc (TSX: AFN, OTC: AGGZF)–May 15 (confirmed)
• ARC Resources Ltd (TSX: ARX, OTC: AETUF)–May Portfolio Update
• Atlantic Power Corp (TSX: ATP, NYSE: AT)–May 14 Maple Leaf Memo
• Chemtrade Logistics Income Fund (TSX: CHE-U, OTC: CGIFF)–May 15 (confirmed)
• Colabor Group Inc (TSX: GCL, OTC: COLFF)–May Portfolio Update
• Crescent Point Energy Corp (TSX: CPG, OTC: CSCTF)–May 9 (confirmed)
• Enerplus Corp (TSX: ERF, NYSE: ERF)–May 10 (confirmed)
• Extendicare Inc (TSX: EXE, OTC: EXETF)–May 9 (confirmed)
• IBI Group Inc (TSX: IBG, OTC: IBIBF)–May 9 (confirmed)
• Just Energy Group Inc (TSX: JE, NYSE: JE)–May 16 (confirmed)
• Newalta Corp (TSX: NAL, OTC: NWLTF)–May 7 Maple Leaf Memo
• Noranda Income Fund (TSX: NIF-U, OTC: NNDIF)–May 15 (confirmed)
• Parkland Fuel Corp (TSX: PKI, OTC: PKIUF)–May 7, after the market’s close (confirmed)
• PetroBakken Energy Ltd (TSX: PBN, OTC: PBKEF)–May Portfolio Update
• Peyto Exploration & Development Corp (TSX: PEY, OTC: PEYUF)–May 8 (confirmed)
• Vermilion Energy Inc (TSX: VET, OTC: VEMTF)–May Portfolio Update
• Wajax Corp (TSX: WJX, OTC: WJXFF)–May 10 (confirmed)