December housing starts jumped to a seasonally adjusted annual rate of 207,041 units, up from 187,273 units in November. The SAAR of urban starts increased by 11.8 percent in December to 187,621 units. Multiple urban starts increased by 13.9 percent to 120,750 units in December and single-detached urban starts increased by 8.1 percent, to 66,871 units. Seasonally adjusted, urban starts increased in Ontario, Quebec and the Prairies, but declined in British Columbia and in Atlantic Canada. Rural starts were estimated at a seasonally adjusted annual rate of 19,420 units.
In 2016 home starts were higher than in 2015. Increased demand for single-detached homes more than offset the decline in multi-unit construction a decline that's in response to efforts to manage current inventories.
November permits slipped 0.1 percent. Residential permits dropped 1.6 percent while nonresidential permits increased 3.0 percent.
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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