CA: Housing Starts

Mon Feb 09 07:15:00 CST 2015

Consensus Actual Previous Revised
Level 179,000AR 187,276AR 180,560AR 179,637AR

Housing starts rose 4.3 percent on the month from a slightly softer revised 179,637 level in December to a stronger than expected 187,276 units (saar) in January.

The increase was wholly attributable to urban multiples which climbed from 102,384 units to 115,008 units. Singles fell 3.8 percent to a 57,314 annualised rate. Regionally Atlantic Canada and the Prairies posted relatively sizeable gains and Ontario a smaller rise but there were decreases in both British Columbia and Québec.

In addition, rural starts were estimated at 14,954 units, down from 17,697 units last time.

While highly erratic on a monthly basis, housing starts have been trending gradually lower since the middle of last year. Historically low interest rates have been a supportive factor for some time now but January's BoC cut should still help to ensure that the market at least broadly holds its own over coming months unless the fallout from the oil price slump is especially heavy.

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.