PrefBlog

The Bank of Canada has released a working paper by David Dupuis and Yi Zheng titled A Model of Housing Stock for Canada:

Using an error-correction model (ECM) framework, the authors attempt to quantify the degree of disequilibrium in Canadian housing stock over the period 1961–2008 for the national aggregate and over 1981–2008 for the provinces. They find that, based on quarterly data, the level of housing stock in the long run is associated with population, real per capita disposable income, and real house prices. Population growth (net migration, particularly for the western provinces) is also an important determinant of the short-run dynamics of housing stock, after controlling for serial correlation in the dependent variable. Real mortgage rates, consumer confidence, and a number of other variables identified in the literature are found to play a small role in the short run. The authors’ model suggests that the Canadian housing stock was 2 per cent above its equilibrium level at the end of 2008. There was likely overbuilding, to varying degrees, in Saskatchewan, New Brunswick, British Columbia, Ontario, and Quebec.

The Bank of Canada also released the July 2010 Monetary Policy Report – good solid stuff, but nothing particularly noteworthy or interesting.

Volume was down a bit in the Canadian preferred share market, but still good, as PerpetualDiscounts came in with another solid gain of 15bp, while FixedResets gained 4bp, taking the yield on the latter class below 3.50%. This is the 12th-lowest yield on record for this index.

This entry was posted on Thursday, July 22nd, 2010 at 10:26 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.