Briefly:

Previous Brieflies this week: | MON | TUE | WED | THU |

(August 18, 2008) The U.S. housing market, already bearing the brunt of the economic slowdown, has yet to hit bottom, according to a report from Scotia Economics.

While there are sporadic reports of increasing sales activity in some regions, and the pace of the decline seems to have slowed, the market could take another hit if job losses mount. Higher unemployment will cut the legs out from under those who still have a job, as they try to negotiate better wages.

“Real wages have been falling on a year-over-year basis since last November, and consumer confidence is hovering around a 16-year low,” said Adrienne Warren, senior economist, Scotia Economics.

Inventories of unsold homes remain high, giving buyers more bargaining power and better selection. In June, the outstanding inventory of existing homes for sale stood at 4.5 million units in June. At the current sales pace, it would take 11 months to clear that backlog.

“The improvement in affordability will eventually underpin a revival in demand,” says Warren. “In the meantime, a continuing yawning supply imbalance, a weakening U.S. job market and tight lending conditions point to a prolonged period of housing market lethargy, with the risk of still lower home prices and construction, and relatively depressed sales volumes.”

In Canada, however, the market remains much tighter, with unsold listings low, by historical terms. But the market has begun to tilt in favour of buyers in some parts of the country.

“There are significant regional differences, however, with new-listings-to-sales ratios in several of Canada’s previously hottest markets like Saskatoon, Calgary and Vancouver now favouring home buyers, with greater inherent downside price risk,” says Warren.

• • •

Foreign investors shop Canadian

(August 18, 2008) Canada attracted increased foreign investment in securities for the seventh consecutive month in June, with bonds being the product of choice, according to StatsCan.

Non-resident investors bought $7.2 billion in securities, bringing the total for the second quarter to $27.6 billion. They poured $6.2 billion into bonds, with $3.8 billion going into federal government enterprise issues. Federal government bonds themselves attracted $2.7 billion, and investors bought $657 million worth of Canadian money market paper.

On the equity side, non-residents bought a net $362 million worth of Canadian stocks. New issues attracted $1.1 billion, while existing stocks saw a net sell-off of $763 million.

Canadians, on the other hand, sold off $9.5 billion in foreign securities, with $6.2 billion being yanked from foreign equities. That reverses a four-month trend of buying, which averaged $4 billion per month. The American markets made up 90% of that divestment, as U.S. stock prices fell 8.6% in June.

Canadians sold $2.9 billion worth of foreign bonds, mostly in U.S. government debt. Short-term paper saw a $475 million withdrawal.

(08/18/08)