Housing starts picked up sharply in May. A seasonally adjusted annualised rate of 201,705 units was a good deal stronger than expected and some 10 percent above April's upwardly revised 183,329 unit pace.
May's increase reflected a 16.9 percent spurt in urban multiples to 126,367 units and masked a 0.3 percent dip in singles to 58,868 units. Regionally there were advances in Atlantic Canada, Ontario and Quebec and declines in British Columbia and the Prairies.
Rural starts were estimated at 16,470 units, little changed from 16,222 units last time.
Amidst the usual monthly volatility, housing starts had been trending sideways around the 180,000 mark since late last 2014. Today's data suggest that the profile could now be rising but until June figures corroborate or not, it is too early to say. Nonetheless, the housing market in general seems to be holding up pretty well.
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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