TSX-143.74 as the surging bond yields fueled concerns that consumers and businesses could face higher charges for mortgages and other loans.
DOW -173.47
Dollar -.13c to 89.33USD
Oil +$1.00 to $63.45US per barrel
Gold $.10 to $953.20USD per ounce
Canadian 5 yr bond yields +.21bps to 2.58- Four weeks ago it was 2.01 (that’s up .57). The spread, based on 5 yr rate of 3.89%, so is lower again at 1.31%.
http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us
Historically spreads have been 2.25%. With today’s spread of 1.31%, rate increases are imminent. Plus, this happened on a day when the TSX dropped (usually when the stock market goes down, bonds yields go down too). We expect other lenders will be increasing rates over 4% as early as today - Xceed and Laurentian have already moved up
The yield, rate of return on your bond, can be read through a yield curve, which is the pattern of yields on bonds. This increase in bond yield is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise
Thursday, May 28, 2009
Financial Update May 27, 2009
U.S. confidence data drives sharp loonie rally -TSX rallies as BMO tops estimates-Oil hits six-month high on consumer confidence
TSX+216.40 to 10,285.90 climbed to their highest closing level since October on a big jump in U.S. consumer confidence this month and a favourable start to second quarter bank earnings releases.
DOW +196.17 U.S. data showed that consumer confidence rose in May to its highest level in eight months.
Dollar +.45c to 89.46USD touched its loftiest level in more than 7 months, spurred by a rise in oil prices and by upbeat U.S. economic data that whetted investor appetite for risk.
Oil +$.78 to $62.45US per barrel hit a fresh 6-month high, bolstered by U.S. consumer confidence data and comments from OPEC kingpin Saudi Arabia that prices may continue to rise.
Gold -$5.60 to $953.30USD per ounce
Canadian 5 yr bond yields +.09bps to 2.37- Four weeks ago it was 1.93. The spread, based on 5 yr rate of 3.89%, so is now lower again at 1.52%.
http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us
Historically spreads have been closer to 2% or 2.25%. In January the spread was 3.30, however cost of funds had risen drastically with the “credit crunch” With today’s spread of 1.52%, half of January’s, rates are artificially low. Watch for fixed rate increases-two lenders increased yesterday already.
The yield, rate of return on your bond, can be read through a yield curve, which is the pattern of yields on bonds. This increase in bond yield is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise
Transmitted by CNW Group on : May 26, 2009 06:00
Affordability and job security most important factors for first-time homebuyers
New government incentives help but market fundamentals more important,Canadians say
TORONTO, May 26 /CNW/ - Canadians who are considering purchasing their
first home are primarily motivated by lower home prices and very low interest
rates, but some require confidence in the economy and their employment
prospects before they will enter the market, according to a report released
today by Royal LePage Real Estate Services. Eighty-six per cent of potential
first-time buyers say low interest rates make them more likely to purchase a
home; 81 per cent cite lower housing prices as a motivating factor; while 76
per cent cite job security and 64 per cent say a stable economy is an
important factor in their decision to buy.
Potential buyers were asked to rank their top incentives for purchasing a
first property. While home prices and interest rates took the number one and
two rankings, respectively, the third most popular incentive was the
First-Time Home Buyers' Tax Credit. The recently introduced Home Renovation
Tax Credit for 2009 was cited by 42 per cent of potential first-time buyers as
either 'very likely' or 'somewhat likely' to impact their purchasing decision.
"When first time buyers stepped out of the market in the fourth quarter
of 2008, at the height of the global recession, their absence was profoundly
felt. Without significant volumes of entry-level homes trading hands, the
entire market limped through the winter months. First time buyers are back in
force this spring, and with them the beginnings of a market recovery. While
these consumers appreciate government incentives such as tax credits, greater
RSP deduction limits and rebates on home renovations, it is markedly improved
affordability that is proving to be the powerful drawing card," said Phil
Soper, president and chief executive of Royal LePage Real Estate Services.
"Our survey demonstrates how important affordability factors such as interest
rates and house prices are in stimulating demand."
Across the country, potential first-time homebuyers agreed that
affordability was their top consideration, however the survey also revealed
differences amongst buyers in various regions of Canada. In provinces such as
British Columbia where high housing prices have kept some buyers out of the
market in recent years, 92 per cent of potential first-time buyers are now
motivated by low interest rates and 96 per cent say lower home prices are
likely to prompt them to buy.
In Atlantic Canada, where local economies have been resilient in the face
of a worldwide recession and housing markets remain stable, 43 per cent of
first-time buyers say they that job security is a factor in their decision to
buy, while 84 per cent of buyers in British Columbia and Alberta said job
security will influence them.
Atlantic Canadians were less motivated than other Canadians by declining
interest rates, with only 72 per cent saying it will likely prompt a buying
decision, compared to 86 per cent of Canadians overall. Buyers in Ontario and
Quebec rated the Home Renovation Tax Credit as a bigger factor in their buying
decision, compared to the Canadian average.
Mr Soper continued, "The significant response differences from region to
region show how closely the residential real estate market is tied to broader
economic trends and consumer confidence. Buying your first home is a major
life decision, and people are more likely to purchase a home if they feel
comfortable about the state of the economy and confident that they will have a
job to support their new mortgage obligation."
Top Incentives for First-Time Buyers Across Canada
Potential first-time buyers were asked to choose their number one
incentive for purchasing a first property. The table shows the percentage
of respondents who selected each factor as their top incentive.
-------------------------------------------------------------------------
BC &
Overall Territories Alberta Prairies Ontario Quebec Atlantic
-------------------------------------------------------------------------
Lower Housing
Prices 33% 49% 48% 55% 32% 13% 26%
-------------------------------------------------------------------------
Low Interest
Rates 27% 32% 29% 4% 23% 41% 17%
-------------------------------------------------------------------------
First-Time Home
Buyers' Tax
Credit 12% 3% 10% 22% 15% 11% 10%
-------------------------------------------------------------------------
Job Security 10% 6% 5% 2% 10% 16% 15%
-------------------------------------------------------------------------
Additional
Government
Actions to
Stabilize
Housing less less
Markets 3% 3% than 1% 10% 3% 4% than 1%
-------------------------------------------------------------------------
Home Renovation less
Tax Credit 2% 1% than 1% 1% 1% 3% 11%
-------------------------------------------------------------------------
Stable less less less
Economy 2% 2% than 1% than 1% 3% 2% than 1%
-------------------------------------------------------------------------
Greater RSP
Deduction less less less
Limits 1% than 1% 1% than 1% 1% 1% than 1%
-------------------------------------------------------------------------
Stable
Financial less less less less less less
Markets than 1% than 1% than 1% than 1% 1% than 1% than 1%
-------------------------------------------------------------------------
REGIONAL SUMMARIES
Atlantic
Overall activity in the housing market has remained steady in the
Atlantic region with first-time homebuyers continuing to enter the market. Low
interest rates and recent government incentives, such as the Home Renovation
Tax Credit, greater RSP deduction limits and the First-Time Homebuyer's Tax
Credit speak to affordability. Buyers in this area are entering the market
that would not have a few years ago, due to these influencing factors.
Entry-level buyers in Newfoundland, Prince Edward Island, New Brunswick and
Nova Scotia continue to search for detached bungalows, with the average price
ranging from $157,000 in Charlottetown to $215,667 in Halifax during the first
quarter of 2009.
Quebec
First-time buyers continue to pursue the dream of home ownership in
Montreal, as the number of entrants to the housing market has remained
relatively stable. Low interest rates are contributing to increased market
entry with 41 per cent of first-time buyers suggesting this is the key
incentive driving the purchase of their first property, followed by 13 per
cent who suggest lower housing prices might influence their buying decision.
With 47 per cent of new buyers in Quebec planning to settle in urban areas,
buyers are planning to invest and live in their first home for ten or more
years. Fifty-six per cent of first-time buyers hope to purchase a property in
the $150,000 to $300,000 price range.
Ontario
Encouraged by recent government initiatives, home ownership in Ontario is
becoming a reality for an increasing number of younger purchasers. Across
Ontario, 36 per cent of potential first-time buyers are most likely to
purchase property in an urban setting. Condominiums continue to attract
first-time buyers in the Greater Toronto Area with urban communities at
accessible price points appealing most to market newcomers. In addition to
affordability, location is a leading factor dictating condominium appeal.
Neighbourhoods in Toronto's east and west downtown core are popular with
first-time buyers. In Ottawa, affordability continues to drive activity and
most first-time buyers are opting to purchase in suburban areas where
properties typically cost $50,000 to $75,000 less than in the city centre.
Active first-time buyer markets include Orleans, Barrhaven and Kanata.
Manitoba & Saskatchewan
Thirty per cent of Prairie buyers planning on purchasing their first home
in the next three years will choose a detached bungalow. The second-most
popular choice for first-time buyers is condominiums at 21 per cent, followed
by detached two-story homes at 15 per cent. In Winnipeg, up-and-coming
neighbourhoods for first-time buyers include River Heights - which has
traditionally been attractive for people entering the market - Fraser's Grove
and East / North Caldonin. With a good selection of older bungalows and two
story homes, Broders Annex is the hottest neighbourhood for first-time buyers
in Regina.
Alberta
Alberta's urban centres continue to be popular with first-time buyers,
who make up nearly a third of home sales in both Calgary and Edmonton.
Condominiums and detached bungalows are the most popular choices for
first-time buyers in Edmonton, where lower housing prices and low interest
rates are the biggest incentives for buyers entering the market for the first
time. Popular areas for new buyers include the suburbs, where a new
condominium may be within budget, the university area, where many parents are
buying for their kids, Allendale and McKernan. In Calgary, new buyers are most
interested in inner city condominiums and detached houses in the suburbs, with
many seeking new or renovated homes.
British Columbia
With home prices either flat or declining in many communities in British
Columbia and with interest rates at record lows, first-time buyers are taking
advantage of greater affordability, with female buyers leading the trend.
Sixty per cent of the buyers getting into BC's housing market for the first
time are women. In British Columbia, 40 per cent of prospective first-time
buyers intend to purchase a 'fixer-upper' while 80 per cent would take
advantage of the Federal Government's Home Renovation Tax Credit in making
upgrades to a home. First-time buyers in Vancouver are favouring condominiums
and townhomes, however an increasing number of entry-level buyers are finding
affordable detached homes outside the city in the Fraser Valley suburbs.
TSX+216.40 to 10,285.90 climbed to their highest closing level since October on a big jump in U.S. consumer confidence this month and a favourable start to second quarter bank earnings releases.
DOW +196.17 U.S. data showed that consumer confidence rose in May to its highest level in eight months.
Dollar +.45c to 89.46USD touched its loftiest level in more than 7 months, spurred by a rise in oil prices and by upbeat U.S. economic data that whetted investor appetite for risk.
Oil +$.78 to $62.45US per barrel hit a fresh 6-month high, bolstered by U.S. consumer confidence data and comments from OPEC kingpin Saudi Arabia that prices may continue to rise.
Gold -$5.60 to $953.30USD per ounce
Canadian 5 yr bond yields +.09bps to 2.37- Four weeks ago it was 1.93. The spread, based on 5 yr rate of 3.89%, so is now lower again at 1.52%.
http://www.financialpost.com/markets/market-data/money-yields-can_us.html?tmp=yields-can_us
Historically spreads have been closer to 2% or 2.25%. In January the spread was 3.30, however cost of funds had risen drastically with the “credit crunch” With today’s spread of 1.52%, half of January’s, rates are artificially low. Watch for fixed rate increases-two lenders increased yesterday already.
The yield, rate of return on your bond, can be read through a yield curve, which is the pattern of yields on bonds. This increase in bond yield is something to watch. If the bond yield continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise
Transmitted by CNW Group on : May 26, 2009 06:00
Affordability and job security most important factors for first-time homebuyers
New government incentives help but market fundamentals more important,Canadians say
TORONTO, May 26 /CNW/ - Canadians who are considering purchasing their
first home are primarily motivated by lower home prices and very low interest
rates, but some require confidence in the economy and their employment
prospects before they will enter the market, according to a report released
today by Royal LePage Real Estate Services. Eighty-six per cent of potential
first-time buyers say low interest rates make them more likely to purchase a
home; 81 per cent cite lower housing prices as a motivating factor; while 76
per cent cite job security and 64 per cent say a stable economy is an
important factor in their decision to buy.
Potential buyers were asked to rank their top incentives for purchasing a
first property. While home prices and interest rates took the number one and
two rankings, respectively, the third most popular incentive was the
First-Time Home Buyers' Tax Credit. The recently introduced Home Renovation
Tax Credit for 2009 was cited by 42 per cent of potential first-time buyers as
either 'very likely' or 'somewhat likely' to impact their purchasing decision.
"When first time buyers stepped out of the market in the fourth quarter
of 2008, at the height of the global recession, their absence was profoundly
felt. Without significant volumes of entry-level homes trading hands, the
entire market limped through the winter months. First time buyers are back in
force this spring, and with them the beginnings of a market recovery. While
these consumers appreciate government incentives such as tax credits, greater
RSP deduction limits and rebates on home renovations, it is markedly improved
affordability that is proving to be the powerful drawing card," said Phil
Soper, president and chief executive of Royal LePage Real Estate Services.
"Our survey demonstrates how important affordability factors such as interest
rates and house prices are in stimulating demand."
Across the country, potential first-time homebuyers agreed that
affordability was their top consideration, however the survey also revealed
differences amongst buyers in various regions of Canada. In provinces such as
British Columbia where high housing prices have kept some buyers out of the
market in recent years, 92 per cent of potential first-time buyers are now
motivated by low interest rates and 96 per cent say lower home prices are
likely to prompt them to buy.
In Atlantic Canada, where local economies have been resilient in the face
of a worldwide recession and housing markets remain stable, 43 per cent of
first-time buyers say they that job security is a factor in their decision to
buy, while 84 per cent of buyers in British Columbia and Alberta said job
security will influence them.
Atlantic Canadians were less motivated than other Canadians by declining
interest rates, with only 72 per cent saying it will likely prompt a buying
decision, compared to 86 per cent of Canadians overall. Buyers in Ontario and
Quebec rated the Home Renovation Tax Credit as a bigger factor in their buying
decision, compared to the Canadian average.
Mr Soper continued, "The significant response differences from region to
region show how closely the residential real estate market is tied to broader
economic trends and consumer confidence. Buying your first home is a major
life decision, and people are more likely to purchase a home if they feel
comfortable about the state of the economy and confident that they will have a
job to support their new mortgage obligation."
Top Incentives for First-Time Buyers Across Canada
Potential first-time buyers were asked to choose their number one
incentive for purchasing a first property. The table shows the percentage
of respondents who selected each factor as their top incentive.
-------------------------------------------------------------------------
BC &
Overall Territories Alberta Prairies Ontario Quebec Atlantic
-------------------------------------------------------------------------
Lower Housing
Prices 33% 49% 48% 55% 32% 13% 26%
-------------------------------------------------------------------------
Low Interest
Rates 27% 32% 29% 4% 23% 41% 17%
-------------------------------------------------------------------------
First-Time Home
Buyers' Tax
Credit 12% 3% 10% 22% 15% 11% 10%
-------------------------------------------------------------------------
Job Security 10% 6% 5% 2% 10% 16% 15%
-------------------------------------------------------------------------
Additional
Government
Actions to
Stabilize
Housing less less
Markets 3% 3% than 1% 10% 3% 4% than 1%
-------------------------------------------------------------------------
Home Renovation less
Tax Credit 2% 1% than 1% 1% 1% 3% 11%
-------------------------------------------------------------------------
Stable less less less
Economy 2% 2% than 1% than 1% 3% 2% than 1%
-------------------------------------------------------------------------
Greater RSP
Deduction less less less
Limits 1% than 1% 1% than 1% 1% 1% than 1%
-------------------------------------------------------------------------
Stable
Financial less less less less less less
Markets than 1% than 1% than 1% than 1% 1% than 1% than 1%
-------------------------------------------------------------------------
REGIONAL SUMMARIES
Atlantic
Overall activity in the housing market has remained steady in the
Atlantic region with first-time homebuyers continuing to enter the market. Low
interest rates and recent government incentives, such as the Home Renovation
Tax Credit, greater RSP deduction limits and the First-Time Homebuyer's Tax
Credit speak to affordability. Buyers in this area are entering the market
that would not have a few years ago, due to these influencing factors.
Entry-level buyers in Newfoundland, Prince Edward Island, New Brunswick and
Nova Scotia continue to search for detached bungalows, with the average price
ranging from $157,000 in Charlottetown to $215,667 in Halifax during the first
quarter of 2009.
Quebec
First-time buyers continue to pursue the dream of home ownership in
Montreal, as the number of entrants to the housing market has remained
relatively stable. Low interest rates are contributing to increased market
entry with 41 per cent of first-time buyers suggesting this is the key
incentive driving the purchase of their first property, followed by 13 per
cent who suggest lower housing prices might influence their buying decision.
With 47 per cent of new buyers in Quebec planning to settle in urban areas,
buyers are planning to invest and live in their first home for ten or more
years. Fifty-six per cent of first-time buyers hope to purchase a property in
the $150,000 to $300,000 price range.
Ontario
Encouraged by recent government initiatives, home ownership in Ontario is
becoming a reality for an increasing number of younger purchasers. Across
Ontario, 36 per cent of potential first-time buyers are most likely to
purchase property in an urban setting. Condominiums continue to attract
first-time buyers in the Greater Toronto Area with urban communities at
accessible price points appealing most to market newcomers. In addition to
affordability, location is a leading factor dictating condominium appeal.
Neighbourhoods in Toronto's east and west downtown core are popular with
first-time buyers. In Ottawa, affordability continues to drive activity and
most first-time buyers are opting to purchase in suburban areas where
properties typically cost $50,000 to $75,000 less than in the city centre.
Active first-time buyer markets include Orleans, Barrhaven and Kanata.
Manitoba & Saskatchewan
Thirty per cent of Prairie buyers planning on purchasing their first home
in the next three years will choose a detached bungalow. The second-most
popular choice for first-time buyers is condominiums at 21 per cent, followed
by detached two-story homes at 15 per cent. In Winnipeg, up-and-coming
neighbourhoods for first-time buyers include River Heights - which has
traditionally been attractive for people entering the market - Fraser's Grove
and East / North Caldonin. With a good selection of older bungalows and two
story homes, Broders Annex is the hottest neighbourhood for first-time buyers
in Regina.
Alberta
Alberta's urban centres continue to be popular with first-time buyers,
who make up nearly a third of home sales in both Calgary and Edmonton.
Condominiums and detached bungalows are the most popular choices for
first-time buyers in Edmonton, where lower housing prices and low interest
rates are the biggest incentives for buyers entering the market for the first
time. Popular areas for new buyers include the suburbs, where a new
condominium may be within budget, the university area, where many parents are
buying for their kids, Allendale and McKernan. In Calgary, new buyers are most
interested in inner city condominiums and detached houses in the suburbs, with
many seeking new or renovated homes.
British Columbia
With home prices either flat or declining in many communities in British
Columbia and with interest rates at record lows, first-time buyers are taking
advantage of greater affordability, with female buyers leading the trend.
Sixty per cent of the buyers getting into BC's housing market for the first
time are women. In British Columbia, 40 per cent of prospective first-time
buyers intend to purchase a 'fixer-upper' while 80 per cent would take
advantage of the Federal Government's Home Renovation Tax Credit in making
upgrades to a home. First-time buyers in Vancouver are favouring condominiums
and townhomes, however an increasing number of entry-level buyers are finding
affordable detached homes outside the city in the Fraser Valley suburbs.
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