CA: Housing Starts

Wed Sep 09 07:15:00 CDT 2015

Consensus Actual Previous Revised
Level 194,000AR 216,924AR 193,032AR 193,253AR

The housing market unexpectedly gained significant ground in August. Overall starts rose fully 12.2 percent on the month to a 216,924 seasonally adjusted annualised unit rate, their highest reading since September 2012, and that from from a higher revised 193,253 unit pace in July.

The overall monthly spurt reflected a 19.5 percent jump in multiples to a 142,927 unit rate and a much more modest 1.4 percent rise in singles to 58,385 units. Regionally the entire increase in urban starts was attributable to Ontario which posted an 89 percent surge to 92,422 units on the back of strong condominium activity. All other regions saw monthly declines.

Rural starts were estimated at 15,612 units, down from 16,104 units at the start of the quarter.

The 6-month moving average of total starts now stands at 196,565 units, a useful improvement over July's 185,642 unit outturn and indicative of a rising underlying trend. Today's data increase the likelihood of no change from the BoC at its interest rate announcement due later today.

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.