CA: Housing Starts

December 8, 2016 07:15 CST

Consensus Actual Previous
Level 190,000AR 183,989AR 192,928AR

November housing starts retreated to a seasonally adjusted annualized unit rate of183,989 from 192,928 in October and down from a revised 219,363 units in September. It was below market expectations of an annualized pace of 190,000.

Urban starts decreased by 5.0 percent in November to 166,828 units. Multiple urban starts declined 7.7 percent to 105,915 units, while single-detached urban starts held steady at 60,913 units. Urban starts were down in Ontario, Quebec and in Atlantic Canada but increased in British Columbia and in the Prairies. Rural starts were estimated at a seasonally adjusted annual rate of 17,161 units.

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.