I may be a little dense, but one point about housing prices has just struck me:
If you had to earn a living predicting home prices and could use just one indicator to do it, which would you choose?
I asked two top economists that question. Their answer was the same: housing affordability.
…
Affordability – a type of debt service ratio – gauges the average percentage of income needed to carry a mortgage. This is closely linked to how much homeowners can borrow.It’s a rather paradoxical statistic. You would think, for instance, that with home prices doubling in the last 10 years, affordability would be getting worse.
Actually, national affordability is almost the same or better than 20 years ago, according to measures by the Bank of Canada and major economists.
For that, we can thank both falling interest rates and rising incomes. Discounted mortgage rates, for example, have dropped more than five percentage points in the last 20 years.
So, to the extent that affordability, as defined, is an accurate gauge of housing value, then once you strip out the relatively volatile interest rate denominator, you’re left with a linear dependence upon nominal incomes. Which will not only capture inflation but also capture productivity gains. And, what’s more, those aren’t just the productivity gains of the average person, but (in Toronto and Vancouver, anyway) are the productivity gains of professionals. Which have been awesome in the last twenty years and which I would expect will continue to be awesome.
Would anybody happen to have any data that tests this idea?
There are some interesting polls from Greece:
A Greek opinion poll showed the Syriza party, which is opposed to implementing Greece’s international financial rescue, building on its lead in voter support ahead of elections to be held on June 17.
Syriza got 30 percent support, compared with the 28 percent in a previous reading a week earlier, according to a Public Issue poll presented on Athens-based Skai TV today. That was ahead of pro-bailout party New Democracy which polled 26 percent compared to 24 percent a week earlier, according to the survey.
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The poll showed 85 percent of Greeks wanted to keep the euro, compared with 12 percent who were opposed to keeping the currency.
There could be some bare-knuckle diplomacy coming if Syriza has the twin objectives of renegotiating the bail-out while staying in the Euro!
It was a negative day for the Canadian preferred share market, with PerpetualPremiums off 2bp, FixedResets down 7bp and DeemedRetractibles losing 24bp. There was a good amount of volatility with no clear pattern – although optimists might wish to assert that the IAG new issue prompted a revaluation of that issuer’s extant issues. Volume was quite low.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.2235 % | 2,466.2 |
| FixedFloater | 4.44 % | 3.81 % | 29,855 | 17.70 | 1 | 0.6585 % | 3,551.2 |
| Floater | 2.93 % | 2.96 % | 65,950 | 19.79 | 3 | 0.2235 % | 2,662.9 |
| OpRet | 4.80 % | 2.83 % | 45,257 | 1.06 | 5 | 0.1625 % | 2,501.2 |
| SplitShare | 5.29 % | -2.35 % | 51,938 | 0.56 | 4 | -0.3827 % | 2,699.4 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.1625 % | 2,287.1 |
| Perpetual-Premium | 5.46 % | 1.85 % | 73,087 | 0.63 | 25 | -0.0211 % | 2,227.1 |
| Perpetual-Discount | 5.10 % | 5.16 % | 85,910 | 15.12 | 8 | 0.0673 % | 2,432.7 |
| FixedReset | 5.06 % | 3.22 % | 188,247 | 2.19 | 69 | -0.0669 % | 2,390.4 |
| Deemed-Retractible | 4.99 % | 3.67 % | 170,712 | 1.91 | 45 | -0.2361 % | 2,313.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| IAG.PR.A | Deemed-Retractible | -4.34 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.25 Bid-YTW : 6.09 % |
| BNA.PR.E | SplitShare | -1.41 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2017-12-10 Maturity Price : 25.00 Evaluated at bid price : 24.55 Bid-YTW : 5.22 % |
| IAG.PR.C | FixedReset | -1.33 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2013-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.90 Bid-YTW : 3.49 % |
| SLF.PR.D | Deemed-Retractible | -1.14 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 22.61 Bid-YTW : 5.88 % |
| BAM.PR.R | FixedReset | 1.16 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2042-05-24 Maturity Price : 23.57 Evaluated at bid price : 26.15 Bid-YTW : 3.78 % |
| IAG.PR.F | Deemed-Retractible | 1.36 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.00 Bid-YTW : 5.33 % |
| SLF.PR.I | FixedReset | 1.65 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-12-31 Maturity Price : 25.00 Evaluated at bid price : 25.21 Bid-YTW : 4.20 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| MFC.PR.I | FixedReset | 263,530 | New issue settled today. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.76 Bid-YTW : 4.51 % |
| BNS.PR.T | FixedReset | 218,208 | National sold 25,000 to RBC at 26.61, then crossed 187,400 at 26.57. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-25 Maturity Price : 25.00 Evaluated at bid price : 26.58 Bid-YTW : 3.09 % |
| TD.PR.E | FixedReset | 212,301 | National crossed 170,700 at 26.55. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-04-30 Maturity Price : 25.00 Evaluated at bid price : 26.64 Bid-YTW : 2.97 % |
| RY.PR.X | FixedReset | 67,424 | National crossed 23,200 at 26.65; RBC crossed 16,900 at 26.75. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-08-24 Maturity Price : 25.00 Evaluated at bid price : 26.73 Bid-YTW : 3.07 % |
| RY.PR.Y | FixedReset | 56,275 | RBC crossed 50,000 at 26.80. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-11-24 Maturity Price : 25.00 Evaluated at bid price : 26.82 Bid-YTW : 3.08 % |
| GWO.PR.H | Deemed-Retractible | 51,748 | TD crossed 50,000 at 24.45. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.35 Bid-YTW : 5.33 % |
| There were 17 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| IAG.PR.A | Deemed-Retractible | Quote: 22.25 – 23.50 Spot Rate : 1.2500 Average : 0.6881 YTW SCENARIO |
| IAG.PR.E | Deemed-Retractible | Quote: 25.87 – 26.30 Spot Rate : 0.4300 Average : 0.2996 YTW SCENARIO |
| BAM.PR.N | Perpetual-Discount | Quote: 23.22 – 23.65 Spot Rate : 0.4300 Average : 0.3095 YTW SCENARIO |
| BNA.PR.E | SplitShare | Quote: 24.55 – 24.89 Spot Rate : 0.3400 Average : 0.2245 YTW SCENARIO |
| HSB.PR.D | Deemed-Retractible | Quote: 25.65 – 26.00 Spot Rate : 0.3500 Average : 0.2351 YTW SCENARIO |
| BAM.PR.B | Floater | Quote: 18.00 – 18.34 Spot Rate : 0.3400 Average : 0.2451 YTW SCENARIO |