CA: Housing Starts


Mon May 08 07:15:00 CDT 2017

Consensus Actual Previous
Level 220,000AR 214,098AR 253,720AR

Highlights
April monthly housing starts (seasonally adjusted annual rate) was 214,098 units, down from 252,305 units in March and below analysts' expectations. Urban starts decreased by 15.3 percent in April to 199,485 units. Multiple urban starts were down 16.7 percent to 134,314 units in April and single-detached urban starts declined 12.1 percent to 65,171 units. Rural starts were estimated at a seasonally adjusted annual rate of 14,613 units.

Using the CMHC six month moving average, housing starts are trending higher at 213,768 units in April 2017, compared to 210,702 units in March 2017. The increase in the trend was mainly due to apartment construction in British Columbia and Québec, which was partly offset by a decline in Ontario's multiple starts.

Definition
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.

Description
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.