CA: Housing Starts

March 8, 2017 07:15 CST

Consensus Actual Previous Revised
Level 200,000AR 210,207AR 207,408AR 208,934AR

February housing starts increased at a better than anticipated annualized pace of 210,207, up from a revised 208,934 units in January. Analysts expected an annualized rate of 200,000. Urban starts increased 0.9 percent to 193,035. Multiple urban starts however, were down 4.7 percent to 121,164 units while single detached urban starts jumped 12.1 percent to 71,871. Rural starts were estimated at a seasonally adjusted annual rate of 17,172 units.

On a trend basis (a six month moving average), housing starts are now on pace to hit 204,669 units, up from January's 200,255 units. New single-detached home construction in Ontario is reaching levels not seen since July 2008 - offsetting recent slowdowns in British Columbia."

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.