Housing starts fell heavily in February. A 16.4 percent monthly decline from a slightly softer revised January reading left starts at a seasonally adjusted annualised rate of just 156,276 units, their lowest level in nearly six years.
The mid-quarter slump was the steepest since March 2014 and led by urban multiples which were off fully 25.1 percent on the month at 86,214 units. Single starts slipped from 56,827 units to 54,508 units. Moreover, all of the principal urban centres registered marked falls, notable in Ontario (27.5 percent).
However, rural starts bucked the trend in rising from 15,075 units to 15,554 units.
The monthly data are highly erratic and March will probably see some kind of a rebound. Nonetheless, the trend in starts has now been declining for five months and further weakness here could begin to have significant ramifications for the rest of the Canadian economy.
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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