Housing starts rebounded to a seasonally adjusted annualized unit rate of 220,617 units or an increase of 19.8 percent above August's 184,201 rate. It was comfortably above market expectations of an annualized pace of 190,000. However, from a year ago, starts were down 3.1 percent.
The SAAR of urban starts increased by 19.7 percent in September to 201,848 units. Multiple urban starts increased by 22.3 percent to 137,803 units in September and single-detached urban starts increased by 14.5 percent to 64,045 units. Rural starts were up 20.4 percent.
The seasonally adjusted annual rate of urban starts increased in British Columbia, Quebec, the Prairies, and in Atlantic Canada, but decreased in Ontario.
Released by the Canada Mortgage and Housing Corporation (CMHC), the monthly housing starts data capture the annualised number of new residential buildings that began construction during the previous month. Statistics are provided for urban and rural areas, the former with a population of at least 10,000. CMHC estimates the level of starts in centres with a population of less than 10,000 for each of the three months of the quarter, at the beginning of each quarter. During the last month of the quarter, a survey of these centres is conducted and the estimate revised.
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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