CREA raises projections for house sales but warns of oil-price ‘wildcard’

“It’s not clear how far oil prices may drop or for how long they’ll stay down,” says CREA economist Gregory Klump. “How that plays out may affect the outlook for interest rates, job growth, consumer confidence, and sentiment about making major purchases.”

The Canadian Real Estate Association has increased its projections for total house sales slightly in 2015, based on a strong surge in sales and prices through the latter part of this year driven largely by the Greater Golden Horseshoe and Vancouver areas.

“With mortgage rates remaining at historic lows since the summer, activity has remained stronger for longer than previously expected and has yet to show clear signs of fading,” the national association for Canada’s more than 109,000 realtors said in a release Monday.

However, its chief economist warned that the potential impact of slumping oil prices on housing markets remains “something of a wildcard at the moment.”

“It’s not clear how far oil prices may drop or for how long they’ll stay down,” said Gregory Klump in a statement. “How that plays out may affect the outlook for interest rates, job growth, consumer confidence, and sentiment about making major purchases.”

The national average house price is expected to hit $405,500 by the end of 2014, up 6 per cent over 2013. But price growth is expected to largely flatline in 2015. Average sale prices are expected to be up on a national basis just 0.9 per cent by the end of 2015, to $409,300, according to revised projections from CREA.

About 481,300 properties are expected to have changed hands by the end of this year, up 5.1 per cent from 2013, but still 8 per cent below the national sales record set in 2007 before the Great Recession.

CREA predicts that some 485,200 properties could change hands throughout 2015.

CREA notes that there are a number of “upside and downside risks” to its projections, notably that “eroding affordability” could put a damper on an increase in sales next year, just as oil prices could have a similar impact in the west.

Saskatchewan and Manitoba are already seeing higher levels of listings at the same time that sales are slowing, CREA notes.