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U.S. housing market most affordable since 1965


Surging production of shale gas has helped boost the outlook for the natural gas industry in the United States. But it is also putting the squeeze on Canadian natural gas companies, says Allan Stepa of Desjardins Capital Markets.

The trend line for Canadian natural gas exports to the U.S. is pointing downwards, Mr. Stepa points out in a recent report.

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"Given that the U.S. continues to develop its natural gas resources, we expect to see pressure persist on Canadian natural gas exports to the U.S.," he writes.

One development that might help offset slumping exports is the call for stronger environmental standards.

"We expect that in the future, new environmental standards would favour natural gas over more carbon-intensive sources of energy, and could potentially provide a future source of demand for Canadian natural gas," he says.

It's also possible that U.S. regulators may clamp down on the use of the controversial hydraulic fracturing technique, which could slow future shale gas developments, he adds.


No sticker shock here. Led by China's powerhouse economy, car sales in emerging markets are set to outpace purchases in the developed world for the first time.

Auto sales in developing nations will expand by 7 per cent in 2012, reaching 31 million units and exceeding volumes in the mature markets of Western Europe, North America and Japan, according to Carlos Gomes of Bank of Nova Scotia.

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Chalk it up to robust economic growth in emerging economies as compared with more modest gains in advanced nations.

"Global volumes will continue to be bolstered by strong employment growth and declining interest rates in emerging markets," Mr. Gomes says in an outlook on global vehicle sales.

In China, reduced exports to troubled Western Europe and the credit-tightening initiatives of the past year should not have that big of an impact on the still-humming economy, he adds, noting that Western Europe accounts for only 4 per cent of China's overall economic activity.

Meanwhile, the U.S. is projected to put in its best performance on the auto-purchasing front since 2007, with Canada posting its best showing since 2008.


Those doubting that the U.S. real estate market is on the cusp of a sustainable recovery may want to consider this: Americans have not seen a more affordable housing market since 1965.

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The household income required to qualify for purchasing an existing home reached $30,000 last month, the lowest level since the early 1990s, notes National Bank Financial analyst Stéfane Marion.

To put that into perspective, look at the wages the average American brings home. Mr. Marion divided the qualifying income by the average hourly earnings of employees on payrolls, which stood at $19.54 in December. His conclusion: an average household must work 1,600 hours a year to afford a home, far below the historical average of 2,700 hours.

One surprising aspect of this is that two incomes are no longer essential to afford a home. Assuming a 35-hour work week, one person works 1,850 hours a year, well above the 1,600-hours minimum needed to enter the home market.

"For the first time since the mid 1960s, even households composed of a single full-time wage earner can thus afford homeownership – provided a financial institution is willing to lend them," Mr. Marion said.

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About the Authors
Quebec Business Correspondent

Bertrand has been covering Quebec business and finance since 2000. Before joining The Globe and Mail in 2000, he was the Toronto-based national business correspondent for Southam News. He has a B.A. from McGill University and a Bachelor of Applied Arts from Ryerson. More

Investment Editor

Darcy Keith is The Globe and Mail's Investment Editor. He has been a business journalist since 1992 and joined the Report on Business in 2010 from Yahoo! Canada, where he was the senior editor of finance. More

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