CA: Housing Starts

Wed Aug 09 07:15:00 CDT 2017

Consensus Actual Previous Revised
Level 205,000AR 222,324AR 212,695AR 212,948AR

July housing starts were up a better than anticipated seasonally adjusted annualized rate of 222,324, up from 212,948 units in June. Expectations were for a SAAR rate of 205,000. The SAAR of urban starts increased 5.5 percent to 206,122 units. Multiple urban starts increased by 10.4 percent to 141,950 units while single-detached urban starts decreased by 3.9 percent, to 64,172 units. Rural starts were estimated at a seasonally adjusted annual rate of 16,202 units.

Using the CMHC trend measure, housing starts were 217,550 units in July 2017, compared to 215,175 units in June 2017. This trend measure is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts. This was the seventh month of increased construction levels.

Among the regions on a trend basis Toronto starts trended lower. In Vancouver, housing starts trended upward after an increase 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.