Canadian home prices drop for first time in 16 months

Consumers upbeat, but still holding onto wallets

• TSX +102.84 (Reuters) as robust energy prices and strong U.S. economic data overshadowed worries that Ireland's debt crisis could spread to other European economies. New U.S. claims for jobless benefits dropped last week to their lowest level in more than two years, while consumer spending rose in October.
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• Canadian 5 yr bond yields markets +.10bps to 2.47. The spread (based on  the 5 yr rate published rate of 3.79%)  is out of the comfort zone at 1.32  http://www.tmxmoney.com/HttpController?GetPage=BondsAndRates&Language=en     Bond yields need to reverse direction for fixed rates to remain where they are

The rate of return on your bond, can be read through a yield curve, If the increase in bond yield  continues to go up, the spread will continue to shrink and this could be a trigger for interest rates to rise. Currently lenders are looking for a spread between 1.35 and 1.55

Ireland unveiled the harshest budget measures in its history Wednesday, a four-year plan to claw back euro15 billion (US$20 billion) using spending cuts and extra taxes. Some 24,000 state employees could lose their jobs and the sales tax could soar to 23 per cent.

Canadian home prices drop in September

Financial Post · Tuesday, Nov. 23, 2010

OTTAWA — Canadian home prices declined in September, ending a string of 16 consecutive increases in the Teranet-National Bank House Price Index.

Housing prices dropped 1.1% in September, which also marked the first time since February 2009 that prices declined in all of the metropolitan areas covered by the index.

The index tracks repeat sales of houses in six metropolitan areas using information from public land registries.

Year-over-year price growth also slowed to 7.9% in September, the third consecutive month of deceleration, the report notes, “leaving the 12-month rise the smallest since last January,” the Wednesday report said.

However, home prices are still 5.5% higher than their pre-recession peak, says National Bank senior economist Marc Pinsonneault, a far cry from the situation south of the border, where prices are still 28% from their peak.

“September’s drop notwithstanding, we do not think that a significant price correction looms in housing,” says Mr. Pinsonneault, pointing to a balanced new-listings-to-sales ratio and the continuing health of the Canadian economy.

“This being said, the high indebtedness of Canadian households and record home ownership rate argues for a much slower pace of home price appreciation in the coming years.”

Shahrzad Mobasher Fard, an economist with TD Economics, said there is “very limited scope” for prices to increased, “given the relatively weak prospects for employment and income growth, along with increases in interest rates.

“Some disparities at the regional level will continue to prevail, however, with cities having lagged the recovery in home prices such as, most notably, Calgary, presenting more potential for an upside if the local economy continues to improve.”

Prices fell in September by 2.4% in Halifax, 2.2% in Calgary, 1.6% in Toronto, 0.5% in Ottawa and 0.3% in Montreal and Vancouver, according to the report.

On a year-over-year basis, prices are up 9.2% in Vancouver and Ottawa, nine per cent in Toronto, 7.6% in Montreal, 3.6% in Halifax and 1.7% in Calgary. http://www.financialpost.com/news/Canadian+home+prices+drop+first+time+months/3877708/story.html#ixzz16FTisHni