CA: Housing Starts

Tue Jul 11 07:15:00 CDT 2017

Consensus Actual Previous
Level 200,000AR 212,695AR 194,663AR

June housing starts were up a greater than expected seasonally adjusted rate to 212,695 units, up from 194,955 units in May. Expectations were for an annualized rate of 200,000. Urban starts increased by 9.6 percent to an annualized rate 194,773 units. Multiple urban starts increased by 9.4 percent to 127,944 units and single-detached urban starts increased by 10.1 percent, to 66,829 units. Rural starts were estimated at a seasonally adjusted annual rate of 17,922 units.

Using the CMHC trend measure, starts were 215,459 units compared to 214,570 units in May 2017. This trend measure is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts. The trend in starts reached its highest level in almost five years with all regions on pace to surpass construction levels from 2016 except for British Columbia, where starts have declined on the year after reaching near-record levels last summer.

Among the regions on a trend basis Prince Edwards Island and Québec trended higher, however in Toronto the trend remained virtually unchanged. In Vancouver, housing starts trended downwards in June, driven by a decrease in apartment starts.

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.