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Market Update

As expected, New Home sales were terrible yesterday.  Once again - this housing bear market is FAR from over.  Inventories are still in stratospheric territory, home builders are offering incentives galore and still not managing to sell homes.  Quite simply, the average homeowner is now underwater on their house.  Whether they would have to sell at a loss or even worse their mortgage is bigger than the closest bid on their house doesn't matter.  Owners in general don't like to sell at a loss (I'm sure we've all been through that before!) and just aren't moving any more.  They should keep paying their mortgages as long as they are employed, even if it's at a loss, as filing for bankruptcy isn't easy anymore, but don't expect a lot of moves to be made.

 

Lots of other data out this morning.  Canadian GDP for July was flat month over month at 0.2%, industrial and raw materials prices continue their decline, mostly thanks to a soaring CAD$.

 

Is the US PCE came in line with expectations, much to the Fed's relief.  Now that they are on an easing cycle, the last thing they want to see is their preferred inflation indicator ticking up.  I'll leave it to you to decide if the inflation indicators reflect real life or not...

 

 

The data hasn't been able to shake the bond market, however.  We are ticking higher both in Canada and the US after yesterday drop.  Volatility has disappeared this week though.  It seems bond traders are content with current levels until the facts change



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