CA: Housing Starts

Mon Nov 09 07:15:00 CST 2015

Consensus Actual Previous Revised
Level 200,000AR 198,065AR 230,701AR 231,304AR

The housing market lost some traction in October as starts fell from September's slightly firmer revised seasonally adjusted annualised rate of 231,304 units to a marginally softer than expected 198,065 units.

The headline decline reflected a 16.0 percent monthly decrease in urban starts to 181,442 units within which multiples were fully 22.4 percent lower at 122,187 units and singles up 1.3 percent at 59,255 units. Regionally starts were stronger in British Columbia but fell elsewhere.

Rural starts were estimated at 16,623 units, up from 15,261 units last time.

Despite October's loss, the 6-month moving average puts overall starts at a solid 206,089 units, suggesting a still significant underlying trend in market activity. That said, the Canadian Mortgage and Housing Corporation (CHMC) expect to see the average level of starts decline to 178,150 units next year, a drop of nearly 5 percent versus the anticipated 2015 outturn.

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.