CA: Housing Starts

Fri Apr 08 07:15:00 CDT 2016

Consensus Actual Previous Revised
Level 190,000AR 204,251AR 212,594AR 219,077AR

Housing starts outperformed expectations in March. At a 204,251 saar unit rate the end of quarter level was down on the month but only after a sharp upward revision to February which now stands at 219,077 units.

March's headline drop reflected a 7.0 percent slide in urban starts to 185,022 units within which multiples decreased 9.7 percent to 123,207 units while singles dipped 1.1 percent to 61,815 units. Regionally there were falls in British Columbia, Quebec, Atlantic Canada and the Prairies but an increase in Ontario.

Rural starts were estimated at 19,299 units, down from 20.072 units last time.

Despite March's setback, housing starts are still very robust and at 196,783 units, the 6-month moving average remains historically firm. This provides additional reason for expecting a pickup in real GDP growth last quarter.

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.