Housing starts had a decent July. A 9.1 percent monthly fall to a 198,395 seasonally adjusted annualised unit rate left the level of starts a little firmer than expected and still high enough to suggest decent underlying momentum.
The monthly headline decline was dominated by a 9.9 percent slide in urban starts to 182,260 units. Within this, multiples were off 13.3 percent to 123,630 units while singles were down just 1.8 percent at 58,990 units. Regionally, there were falls in Quebec, British Columbia, Ontario and Atlantic Canada but the Prairies registered a rise.
Rural starts were estimated at 15,775 units, up marginally from June's 15,568.
The July report puts the 6-month moving average of overall starts at 201,936 units, a respectable 2.1 percent increase versus the 197,847 unit rate recorded at the end of the second quarter. Despite the sharp slowdown in economic activity in April-June, the housing market 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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