Thursday, August 22, 2013

Make or break time

The graph above is the Canadian five year bond yield. As you can see it started it's parabolic ascent early May. The rush to use up the low-rate pre-approvals SHOULD be almost over. Unless we are really headed for the stratosphere I actually expect things to settle here for a while. The US economy (which is what started the super low rates and now the rebound) is not strong enough to absorb much higher rates.

Throw in the CMHC changes, tepid jobs and wages situation and we should see some real weakness in the low and mid market starting right now! As I have said before the higher end has it's own dynamics.

5 comments:

  1. I have a strange feeling we are in for a back to the future moment, where prices drop back to 2005 or earlier levels. Anyone who bought within the last 7 or eight years won't make any money and will have lost all their equity gains. In 2005 I had a rate of 4.3% and at the time that was great, but at the time the house I bought was only 4x my gross income. We are getting ever so close to those rates again, and home owners better be scared.

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  2. Retail sales drop 0.6% MOM. More than expected. Households will cut back to afford their expensive homes with higher rates for loans and credit cards too. It will also keep new buyers away. The RE cycle of providing demand in the rest of the economy is about to reverse.

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  3. House reduced in West Van 3.1M to 2.9M. Owner listed as HSBC

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  4. No end to the buying frenzy yet

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