CA: Housing Starts

Tue Jan 09 07:15:00 CST 2018

Consensus Actual Previous
Level 215,000AR 216,980AR 252,184AR

December housing starts for all areas in Canada was a greater than expected SAAR 216,980 units. However starts were down from 251,675 units in November. The SAAR of urban starts decreased 15.1 percent to 198,132 units. Multiple urban starts decreased 22 percent to 135,176 units. Single-detached urban starts increased 4.7 percent to 62,956 units. Rural starts were estimated at a seasonally adjusted annual rate of 18,848 units.

Using a trend measure, starts were 226,777 units in December 2017 compared to 226,178 units in November. The trend measure is a six-month moving average of the monthly seasonally adjusted annual rates (SAAR) of housing starts. Total urban housing starts in 2017 were up 6.2 percent compared to 2016 mainly due to the rise in apartment construction.

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.