Housing starts rose fully 25.4 percent on the month to a significantly higher than expected seasonally adjusted annualised rate of 189,708 units in March. However, the rebound came from a markedly weaker revised February rate of 151,238 units.
The recovery reflected a 28.1 percent gain in urban starts within which multiples dominated, climbing some 48.2 percent compared with an increase in singles of only 3.4 percent. Regionally there were gains in Ontario, British Columbia, Quebec and the Prairies. Only Atlantic recorded a decline.
Rural starts were estimated at 12,249 units, down from 12,689 units last time.
Following their surprisingly sharp drop in mid-quarter the March bounce in starts suggests that the housing market is back close to trend. Monthly data will continue volatile but the underlying performance looks to be broadly flat.
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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