CA: Housing Starts

February 8, 2017 07:15 CST

Consensus Actual Previous
Level 198,000AR 207,408AR 207,041AR

January housing starts increased at a better than anticipated annualized pace of 207,408 units, up from 206,305 units in December. Analysts expected an annualized rate of 198,000. The SAAR of urban starts increased by 1.0 percent in January to 189,688 units. Multiple urban starts increased by 4.2 percent to 125,886 units in January and single-detached urban starts decreased by 4.6 percent, to 63,802 units. Rural starts were estimated at an annual rate of 17,720 units, down from 18,553 in December. The seasonally adjusted annual rate of urban starts increased in Ontario and Atlantic Canada but decreased in British Columbia, the Prairies and Quebec.

The trend measure of housing starts was 199,834 units compared to 197,881 in December. The trend is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts. The trend measure is a six month moving average aimed at smoothing the swings in monthly averages.

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.