This week’s update is going to be a bit different, because I’m writing to you in between games at my son’s baseball tournament in Long Island ( at a place called Baseball Heaven). I don’t have access to the programs I use to prepare and publish the reports, so they will appear next week when I am home.
I did, however, look at the numbers, and it seems to be one of those ‘the more things change, the more they stay the same’ sort of situations. The number of available properties has decreased to 181, down from 195 a week ago. The number of properties sold has stayed at 21, and the number of expired listings is at 6.9%, or 14 listings. The average days to sell is actually, again, artificially high due to one listing that took more than a year to sell; the average days is 81. Remove the one anomaly, and the average days to sell drops down to 39. Remove the other couple of anomalies that are in the 5 to 9 month range, and the average days to sell drops down to 16 days.
45% of the sales this week were in the $300,000 to $325,000 range, which is a typical first-time buyer range, so that’s a good thing.
Here’s the charts for you . . .
First, the weekly Total Market Activity, as discussed above:
And next the Annual Summary:
And finally. the line chart of available properties and sale:
“THIS WEEK’S MORTGAGE NEWS HIGHLIGHTS”
Canadian interest rates to remain low; long-term bond yields to grind lower with USTs
Against the backdrop of burgeoning government deficits and commensurate increased bond supply and rising US Treasury yields, mid- and long-term interest rates rose in Canada in May. Inflation worries remain under wraps as the combination of growing economic slack, a stronger Canadian dollar (reducing imported goods prices) and lower commodity prices compared to a year ago sets up for the headline CPI rate to move lower. Still, the pressure from impending supply both in Canada and the United States is keeping yields up. The forecast is that U.S. yields will slip as the Fed’s quantitative easing program gains traction paves the way for Canadian yields to dip as well.
Canadian dollar’s strength presents clear and present danger to economic outlook
The recent fluctuations in currency markets reflect investors’ rising risk appetite and must acknowledge the impact of these shifts on the economic outlook. In the near-term, it is expected that the dynamic that supported the increase in risk appetite — with economic data reports generally outperforming weak expectations — will fade as forecasts are ratcheted up to align with the turnaround in the global economy’s momentum. This scenario raises the risk that the data won’t continue to exceed expectations, which will put riskier assets back under pressure and revive support for the U.S. dollar. In this environment, currencies like the Canadian dollar and the euro will give up some of their recent gains, although are unlikely to return to their cyclical lows. Longer-term, the pressures on the U.S. dollar are likely to re-emerge as the price of the proactive central bank and government policies take its toll. For the economy, the Canadian dollar’s rally means that the cost of imported machinery and equipment receded once again, giving Canadian companies relief as they invest in productivity-enhancing capital goods. On the downside, Canadian exporters, who are already struggling, face another obstacle to increasing demand for their products. On balance, the risks have grown that the trade account, which was one of the few supportive factors for the economy in the first quarter, will return to acting as a drag on output. The positive effects of the rally in commodity prices on incomes will mitigate some of the downward pressure on the economy. Oil prices are more than double their December lows and non-energy commodity prices have gained 4.2% from their early March lows. The rebound in commodity prices juiced the Canadian dollar’s rally, propelling the currency to levels that were slightly above those predicted by the Bank of Canada’s currency model
Inflation rate stays in positive territory
The headline inflation rate rose by 0.7% in May, but the annual inflation rate continued to moderate, coming in at 0.1% from 0.4% in April. The core measure, calculated by the Bank of Canada which excludes the eight most volatile components, increased by 0.4% and was 2% higher than a year earlier, up from 1.8% in April. The increase in the headline rate reflected an 8.3% jump in gasoline prices, rising passenger vehicle insurance premiums and higher costs for traveler accommodation. The unexpected rise in the year-over-year rate reflected the sharp increase in the cost of food, which was 6.4% higher than in May 2008. Food makes up 17.04% of Canada’s CPI basket. Vehicle insurance premiums were 4.3% higher than in May 2008. Mitigating these upward pressures were sharply lower gasoline prices relative to a year earlier (-25.1%) with other fuel prices following suit, falling vehicle prices (-6.8%) and lower homeowner’s replacement costs (-3.4%). Gyrations in energy prices continue to be a heavy influence on the direction of Canada’s inflation rate, which moderated to 0.1% from April’s 0.4% even in the face of a sharp monthly increase in May. Excluding the energy component, the inflation rate has been much more stable, trading between 1.5% and 2.5%, while the all-items inflation rate’s range was between 3.5% and 0.1%. The core measure, which aims to provide a read on underlying price pressures, rebounded back to the Bank of Canada’s official 2% target in May. While the headline inflation avoided falling into negative territory this month, it is still expected that negative prints in the months ahead. With the economy undergoing a relatively severe downturn and the U.S. economy on track for the worst recession in the post-war period, the central bank and economists expect that core prices will ease relative to a year earlier.
