2020 Real Estate Market Predictions

By: Chris Cucoch

2020 Real Estate Market Predictions

Tags: Real Estate, Stats

Today I want to cover the state of the market for January 2020, but also give you six bold predictions for what's going to happen in 2020 in the real estate market here in Mississauga.

In December, we had about 4,400 sales across the Toronto Real Estate Board, which is up about 17% from last year. But the really interesting thing is that the number of listings on the market is down 35%. When you combine the 17% that we're up in sales with the 35% that we're down in listings, we've got a huge gap of about 52% - an absolutely insane divergence from last year. With a difference like that, it's no surprise that the average price across the GTA is up about 12% to $838,000 and we only have 1.7 months of inventory.

Here in Mississauga, we're looking at more of the same. We had about 400 sales in the month of December, which is up about 9% from December of last year, and the number of sales is down 30% from last year, which had sales of around 550 for the month. When you add the two together, you get another huge gap of approximately 39%, so that upward pressure on pricing has given us an 18.5% increase in the average price of a home sold in Mississauga - up to just shy of $800,000.

Alright, it's time for my six bold predictions for 2020. Before I get into them, I just want to reiterate that I don't have a crystal ball any more than you do. These are just predictions based on my years as a Realtor.

Prediction #6: Rental prices will go down or stay flat.

We're going to be delivering a lot of new construction units in the first quarter of 2020, so a lot more supply is going to come to the market. For those of you who have been out there trying to rent for the last little while, you may be able to breathe a sigh of relief soon. I suspect that the prices will go down or at least stay flat, but I think the steep increases that we've been seeing are going to stop.

Prediction #5: This is going to be a big year for move-up buyers.

Folks who have had their condos for four or five years have generated a lot of equity, and many will be looking to move up into townhomes and semis and detached homes. Here in Mississauga, the price of a condo has gone up 85% over the last five years, so people have gained a lot of equity in their condos. Now that the gap between a condo and other asset classes is so much smaller that it’s been in the past, I think a lot of folks are going to start making moves up into these more expensive asset classes.

Prediction #4: The prices of condos are going to level off in Mississauga.

Now, I don't mean they're not going to continue to appreciate, but they're going to appreciate in line with the market a little bit more. These years of 20% appreciation and hugely outpacing the market are over, in my opinion. And the reason for that is, as we just talked about, the gap between a condo and a townhouse is much smaller than it's been. If you could spend $5,000 or $10,000 more to get a backyard, there's a good chance you're going to do it. So, I think that's going to put a little bit of a ceiling over the price of condos.

Prediction #3: The Bank of Canada overnight rate will come down to 1.5%.

The rate's currently sitting at about 1.75%, but at the last several meetings, there has been pressure to lower it, and I think it's going to have to come down at some point in 2020. Generally speaking, when the overnight rate comes down, the bank rates will follow proportionally, which will give folks just a little bit more buying power when they're out getting a mortgage.

Prediction #2: The first quarter or two of 2020 will be very interesting.

If you look at the conditions that led up to the craziness we had in 2017, they look eerily similar to what's going on right now as we head into 2020. We're already seeing all sorts of multiple-offer situations across all asset classes and prices, although it’s a little more prevalent in the units that are under a million dollars. I suspect that we're going to see high single-digit to low double-digit increases over the first three to six months of 2020 and something will happen in the latter half of the year to level things out a little bit. It could have to do with the election in the States or maybe something will change globally, but I suspect we will slow down in the second half of 2020.

Prediction #1: Prices across the GTA will appreciate by about 7% across the board by the end of the year.

I'm including all asset classes and all markets that are included on the Toronto Real Estate Board in this prediction. I think we'll outpace that by a little bit here in Mississauga, maybe to the tune of 7.5 to 8%. If you look at the last 40 years or so, the average increase across a year has been about 6.5%. With the tight conditions going into the start of the year, I think we'll outpace that by a little bit, but not by a crazy amount.

Bonus Prediction: The market is not going to crash, at least not this year.

The three pillars that hold up our housing market are all looking very strong:

Now, with 50,000 households moving in, we've only been able to create 20,000 or so homes for them. The principles of supply and demand tell us that prices will keep going up.

Those are my predictions for 2020, and I'd love to hear what you think will happen over the course of the year. Leave your predictions in the comments or flip me an email and let's chat about it.