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Tag Archives: Canadian Real Estate Association

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.”

Susan Pigg – Toronto Star

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.

Comment: Activity remains strong and shows no signs of fading. Sounds a lot like the BoC bosss saying that the housing market is not in a bubble and there is no crash coming.

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

Comment: Only in Calgary and Edmonton. The price of oil has nothing to do with Toronto house prices. It might even push the market higher, if it stays down long enough. Lower gas and fuel oil bills will put more money in people’s pockets. That means they can spend on other things, improving the economy, or help offset the remote chance of a rate increase.

“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.”

Comment: It is saving me $25/tank in my one car, about $15 in the other. That is $40/week. If that keeps up, I now have $2,000 over the course of a year that I did not have before. That is significant. Spread a similar amount across 90,000-odd real estate buyers in the GTA in a year and that is $180,000,000 in extra dollars floating around out there. Just as a for instance…

The national average house price is expected to hit $405,500 by the end of 2014, up 6% 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% by the end of 2015, to $409,300, according to revised projections from CREA.

Comment: People thought prices were going to flatline this year. And last year. Why would price increases drop from 6% this year to 1% next year? There is no reason given for this change.

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

Comment: Everyone forgets that 2007 was a time of 0% down and 40-year amortizations. It was also the year supply started to contract and bidding wars began to be common. Comparing that year with this year is hard to do, especially without context. In real estate, 7 years is a lifetime ago! The average Toronto property was $376,236 and interest rates were just under 6%, amortizations were 40 years and there were 0% down mortgages with cash back options. The Toronto land transfer tax was set to begin Feb 1, 2008 so there was a rush to buy before that came into effect. Late 2008 was also when the government dropped amortizations to 35 years and eliminated 0% down mortgages. They also changed credit score and TDS requirements. All of those circumstance conspired to create the perfect storm of buying in 2007.

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.

Contact Laurin Jeffrey for more information – 416-388-1960

Laurin Jeffrey is a Toronto real estate agent with Century 21 Regal Realty.
He did not write these articles, he just reproduces them here for people who
are interested in Toronto real estate. He does not work for any builders.