Canadian housing starts plunged 17 percent to a seasonally adjusted annual rate of 232,765 in October from 279,174 in September, revised from 279,234. The consensus in an Econoday survey of forecasters was 265,000.

The six-month trend fell 3 percent to an annual rate of 268,907.

There are persistent and significant regional contrasts in housing construction trends across the country, CMHC Deputy Chief Economist Tania Bourassa-Ochoa said. The report noted"significantly lower" monthly housing starts in Ontario and British Columbia, while higher starts in areas like Montréal, Calgary, and Edmonton continue to keep national year-to-date elevated vs. the same period a year ago.

The Bank of Canada projects a weak activity in the second half of this year, with an annualized growth rate of 0.5 percent in the third quarter and 1.0 percent in the fourth quarter. Housing contribution is expected to be 0.3 percentage points for both quarters.

Housing affordability remains an important issue in Canada. A poll conducted in September by Abacus Data in partnership with the Canadian Real Estate Association (CREA) shows that 9 in 10 (87 percent) Canadians are concerned about the state of housing. The lack of affordable housing supply is the number one reason, followed by the cost to build new homes.

CPI data released Monday point to ongoing housing price pressures. In October, the main upward contributor to the 2.2 percent 12-month CPI increase was rent, up 5.2 percent. Mortgage interest cost was still among the top five contributors at 2.9 percent. Other home-related price gains included homeowners' home and mortgage insurance, up 6.8 percent, for a 38.9 percent jump since October 2020.

In its Fall Housing Supply Report released in September, CMHC warned that construction slowdowns in select markets pose risks to future housing supply, workforce retention and affordability. It expects only a gradual recovery of housing starts, with only modest improvement by 2027.

Starts expected to ease to a 265K rate in October from 279K in September.

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.