Housing starts dropped 11.2 percent to an annual rate of 213,865 units in March from a downwardly revised 240,927 in February, below Econoday's consensus of 243,000.

Urban starts contracted roughly 12 percent, led by a 16 percent fall in single-detached homes that was partly offset by an 11 percent increase in multi-unit starts.

Among the big urban centers, Montreal and Toronto recorded declines of 12 percent and 26 percent, respectively, while Vancouver saw a 98 percent surge as mullti-unit starts doubled from February.

The six-month trend for housing starts was down 6 percent to 240,669 in March.

"With interest rates remaining high, it continues to be challenging for developers and homebuilders to get projects started," the report said, stressing the need to innovate to increase housing supply.

The Bank of Canada expects housing activity to stabilize around mid-2023, with residential investment resuming in the second half of the year and support from immigration-related demand over the coming years. It projects housing to trim GDP by 0.8 percentage points in 2023 before contributing a positive 0.4 points in 2024.

Housing starts are expected to hold steady at 243,500 in March versus 243,959 in February.

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.