CA: Housing Starts

Fri Dec 08 07:15:00 CST 2017

Consensus Actual Previous
Level 215,000AR 252,184AR 222,771AR

New home construction remained very strong as the seasonally adjusted number of starts has been above 200,000 units in 10 of 11 months so far this year. November housing starts increased to an annualized pace of 252,184, up from 222,771 in October and above the expected 215,000. Urban starts increased by 14.4 percent to an annualized 235,412 units while multiple urban starts increased 16.9 percent to 175,016 units. Single-detached urban starts increased by 7.5 per cent, to 60,396 units. Rural starts were estimated at a seasonally adjusted annual rate of 16,772 units.

The trend in housing starts was 216,770 units in October, compared to 215,153 units the month before. This trend measure is a six-month moving average of the monthly seasonally adjusted annual rates 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.