Housing starts weighed in at seasonally adjusted annualised 180,560 units in December, down sharply from a weaker revised 193,199 unit rate in November and comfortably short of market expectations.
The 6.5 percent decline in overall starts was attributable to a 6.2 percent monthly fall in the urban sector to 162,915 units within which multiples were down 7.0 and singles off 4.8 percent. Regionally the headline drop reflected sizeable decreases in Atlantic Canada, Quebec and the Prairies only partially offset by modest gains in Ontario and British Columbia.
Rural starts were estimated at 17,645 units following a 19,572 unit rate in mid-quarter.
In recent months the housing market has held up better than generally expected but today's update warns that residential construction, at least near-term, could become more of a drag on economic growth.
Housing starts is the annualized number of new residential buildings that began construction during the previous month.
Housing starts are a leading indicator of economic health because building construction produces a wide-reaching ripple effect. This narrow piece of data has a powerful multiplier effect through the economy, and therefore across the markets and your investments. Home builders usually don't start a house unless they are fairly confident it will sell upon or before its completion. Changes in the rate of housing starts tell us a lot about demand for homes and the outlook for the construction industry. Furthermore, each time a new home is started, construction employment rises, and income will be pumped back into the economy.
Once the home is sold, it generates revenues for the home builder and a myriad of consumption opportunities for the buyer. Refrigerators, washers and dryers, furniture, and landscaping are just a few things new home buyers might spend money on, so the economic "ripple effect" can be substantial. Since the economic backdrop is the most pervasive influence on financial markets, housing starts have a direct bearing on stocks, bonds and commodities. In a more specific sense, trends in the housing starts data carry valuable clues for the stocks of home builders, mortgage lenders, and home furnishings companies. Commodity prices such as lumber are also very sensitive to housing industry trends.
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