Housing starts fell more than expected in January, when they decreased 10.2 percent to a seasonally adjusted annual rate of 223,589 from a downwardly revised 248,968 in December.

The six-month trend was down 2.0 percent to 244,827 units.

Despite the monthly decline, housing starts in centres of 10,000 population and over rose 13 percent year-over-year, driven by multi-unit starts. Starts in Toronto were up 49 percent from a year earlier, while they dropped 44 percent in Vancouver and 6 percent in Montreal."In fact, from a historical perspective, we observed the second highest number of housing starts for the month of January going back to 1990," said CMHC Chief Economist Bob Dugan.

Housing starts are expected to slow to 235,000 in January versus December's higher-than-expected 249,255.

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.