Housing starts fell back nearly 23 percent in May to an annual rate of 202,494 units from a downwardly revised 261,357 in April.

Urban starts dropped 24 percent and multi-unit starts fell 30 percent. Single-detached urban starts, by contrast, rose 6 percent.

Regionally, starts decreased in the three largest metropolitan areas: Vancouver, Toronto and Montreal, to the tune of 45 percent, 28 percent and 35 percent, respectively, led by multi-unit starts, while single-detached starts increased.

The six-month trend for housing starts was down another 4.2 percent to 230,205, continuing a downward trend since November 2022.

In its June 7 monetary policy statement supporting its interest rate hike, the Bank of Canada pointed out the recent increase in spending on interest-sensitive goods and housing market activity. Today's data should bring some relief to the central bank.

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.