CA: Housing Starts

Tue Oct 10 07:15:00 CDT 2017

Consensus Actual Previous
Level 210,000AR 217,118AR 223,232AR

September seasonally adjusted housing starts were a seasonally adjusted pace of 217,118 units in September, down from 225,918 units in August. Urban starts decreased by 5.1 percent to 198,910 units. Multiple urban starts decreased by 10.7 percent to 131,388 units in September. Single-detached urban starts increased by 8.2 percent, to 67,522 units. Rural starts were estimated at a seasonally adjusted annual rate of 18,208 units.

Third quarter housing starts bounced to an annualized pace of 222,513 after adding 205,345 in the second quarter and 222,476 in the first quarter.

The trend in housing starts declined to 214,821 units compared to 220,573 units in August 2017. This trend measure is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing 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.