2011 Predictions Mississauga and GTA Real Estate Market

My current market thoughts and observations :

I've begun the task of assimilating what I read, what I hear about and what market data I see and try to predict the future.

A crystal ball with some thinking inside it, not an easy task. On most predictions, one can be 50/50, either right or wrong. When people who predict things are wrong, people forget about that prediction. When they are right about the prediction, especially if it's a major prediction, then they are immediately raised to the level often reserved for the clergy.

I like to assess what has happened, what is happening and what people are saying will happen and then come up with a prediction. The latter is quite important because my experience shows that what people believe will happen often happens. This is why my credo is "whatever the mind can conceive and believe, it will achieve" The thoughts of one are no different than the thoughts of many. If the majority think something will happen in the future, it will, with almost absolute certainty.

I'm referring to the local real estate market, the GTA in my analysis. The real estate market has increased in value for the past 15 years. Every year since 1985 the average price has increased compared to the previous year. Not only that, but the market has increased every year in the spring, down a little in the summer, but up again in the fall to a price that was higher than the high price of the spring. Then in the winter the price drops again and the cycle repeats itself every single year for the past 15 years, except 2008. The cycle broke in the late spring and summer of 2008 See the graph here: http://www.mississauga4sale.com/TREBavg1995date.htm Note that the late spring and summer through to fall of 2008 for the most part prices kept falling. The market was soft for about 8 months. Many agents and the public were very concerned that the market had reached it zenith and that the end was near. The actual bottom of that long pause in the market was January of 2009. That was the 'best' buying opportunity in many years as average prices almost instantly slipped back to prices of about '06 and '07 The problem was that there was very little inventory on the market in the late fall of 2008 and January of 2009. There was much doom and gloom in the marketplace. The purpose of this analysis is to show how sensitive our marketplace can be and how quickly prices can drop. It also shows that people have very short memories. Ask almost anyone and hardly anyone will remember this dip in the market. It's the only blip in the market since January of 1995.

Thus, the past 15 years we've seen unprecedented growth.

Currently, our real estate market in Mississauga and the GTA is humming along at a very strong pace. Sales volumes are great, not record, but houses continue to sell at a very high rate. Prices continue to climb and follow the cycle of the past 15 years. October 2010 will undoubtedly show another increase in average price. Currently, the average price for this month is $453.422 and the average price for September was $427,329.

Mark Carney from the Bank of Canada is downgrading growth forecasts. He specifically commented on our real estate market here in Canada and said "" weight of the current debt load http://www.bnn.ca/News/2010/10/26/Canada-at-risk-from-currency-tensions-Carney.aspx

Of course Garth Turner continues to predict a drop in the real estate market. His 'doom and gloom' predictions are almost continuous, if not mind numbing. http://www.greaterfool.ca/2010/10/03/count-on-it/

the buy to rent ratio, the cost to pay for monthly mortgage payments compared to renting the same property. If this ratio gets too high, many feel that the market cannot sustain itself and prices must fall. The current buy/rent ratio at an average price of $450k in Toronto is about 1.5/1 meaning it's almost twice as expensive to own an 'average' house in Toronto as it is to rent the same house. If the average mortgage is $400,000 at 4% then the payment is about $2400 per month and you can rent the same property for about $1600. If you factor in taxes the ratio becomes about 1.75 If the interest rate was to increase to 5% then this ratio becomes 1.9. You can see how sensitive the ratio is to interest rates. When the ratio gets up to the 2.5 to 3.5 level, that's when we've seen a large adjustment in housing prices. Read more here: http://vancouvercondo.info/2010/10/dont-worry-about-buyrent-ratio.html

The US economy is still near the bottom but shows signs of recovering. It will take many months, many quarters in fact, to sell the gigantic inventory of homes and foreclosures currently for sale on the US market. It may take another 1.5 to 3 years before the US is completely out of the mess they are currently in and on the road to full recovery. But, we in the GTA don't seem to be affected by the US economy the way we were in the 1980's. Take another look at the graph of prices in the GTA for the last 15 years and the only other 'glitch' was the fall of 2001, just after 911, but that softening in our market was very short and small and our market continued to increase from that point onward. The US real estate market on the other hand suffered for many quarters after 911. I'm certainly not an economist and I do hear of jobs being lost in the GTA due to the US and global recession, but if there's a recession in Mississauga and/or the GTA it certainly is not showing in the real estate market.

One of the reasons we hear that Canada did not suffer the financial crisis like the US and the world is that our banking system is different. It appears to me that what everyone is referring to is the fact that we've had to put at least 5% downpayment for mortgages, almost forever, and that our approval process is far more rigid compared to other countries. Certainly, CMHC has a large impact on anyone with less than 25% downpayment (now it's 20%) and this too has helped keep our market from overheating too much.

From an investor point of view, the number of investors currently purchasing real estate is nowhere near the levels of the recession of the late 80's so this is good news for our local marketplace.

It appears that the huge glut of condos and the fall in the condo market that many were predicting would happen by 2010 did not happen. People seem to have embraced condo living and demand for condos as well as condo prices continue to rise.

The opening up of the MLS system in Canada could have some impact on the markets in the next few years, but I believe that it offers another choice for the consumer, I don't see the bottom falling out of our MLS system and the way we currently do business. If it does take off and more than 1% of people try to sell their home with low commission, then prices will have to adjust downward to take this into consideration. Seller's can't just expect that buyers will pay the same price for a home at 5% commission as they would for one at $100 commission, it's just not logical.

I am well past the big "50" at 51 years old as of now. I've expressed my thoughts on the current and future real estate market on my blog in the past at this post and did I ever take heat over this one. Even Garth Turner commented that I was wrong, the nerve of him!, but of course, I was right and Garth Turner was wrong! The real estate market in Canada did not crash in 2009 or 2010 and I don't think it will crash in 2011 either.

Conclusions that I draw from this and other sources and my predictions for 2011

Mark's Crystal Ball for 2011

This is what I predict for 2011 in real estate, interest rates and more!

So here we are again, at the end of another year, actually the end of a decade and the beginning of a new year. Every year at this time we can look back and reflect on what has happened in the past year with certainty. Also at this time of year this is the time that we try and peer into the future and predict what will happen with far less certainty. In real estate it's very critical to try and predict the future because so much is relying on it.

It takes quite a bit of time to condense my thoughts and observations into this section of predictions for 2011. Part of the reason is that I want to be as accurate as possible. As well, I know that many people will read this page and rely on some of the predictions contained herein. Therefore, I want to give as good advice as possible, advice that is realistic and yet insightful.

Real estate is one of the few things in our lives that tends to increase in value year after year after year. There is no certainty with this increase, but it sure has seemed certain over the past 15 years. Our year over year average single family residential price has increased every year since 1985, except the fall of 2008, including this year. Don't believe me, see the graph here:

http://www.mississauga4sale.com/TREBavg1995date.htm

There are some, many in fact that are predicting that we in the GTA and especially BC are sitting at the peak and prices are about to crash. Garth Turner is one person who is predicting that prices are almost guaranteed to fall in 2011 I don't agree with him and don't feel that our area, Mississauga and the GTA will fall in the next year.

What do we know with certainty for the future? We know the following is almost guaranteed to happen in the Mississauga and GTA real estate marketplace:

Interest rates will increase in 2011, the Bank of Canada is currently stating rates will increase in mid 2011 - this will put downward pressure on prices after rates increase, but will cause many buyers to buy before the rates increase and anticipation of the increase in rates
there will be a shortage of listings for at least January and maybe into February, this is a near certainty based upon the past 22 years for January and early February, not many people list their homes at these times - this will cause upward pressure on prices in the fist quarter of 2011

This is what we know with less certainty:

the US real estate recovery seems to be chugging along, not quick, slow but sure
the US and global economy will improve in 2011

Due to the fall in late 2008, the average price in 2009 compared to 2008 is up about 12%. We are up about the same percentage comparing 2007 to 2009 This is what I predicted in January for 2009 http://www.mississauga4sale.com/Toronto-GTA-Real-Estate-Market-Predictions-2009.htm#2009 When I read the predictions I made back in January for 2009 it makes me think that maybe I should go into the prediction business, more than 3/4 of the things I predicted came true! I was wrong on Gold and wrong on Gasoline prices, otherwise my predictions were quite close.

These are my predictions for 2011 below and also online at this link: http://www.mississauga4sale.com/Toronto-GTA-Real-Estate-Market-Predictions-2011.htm#2011
I predict that our prices will increase about 4 to 6% in 2011 with some softening in our market when the Bank of Canada increases rates in the middle of 2011
Mortgage rates will increase beginning about July of this year, the bank prime rate as of February 18, 2011 is 1.00% and I predict by year end it will be at 1.50% to 1.75% This means that current mortgage interest rates will increase by about .050% to 1% over what they currently are. This may sound excessive, but I firmly believe that our economy will bustle this year and increased rates will be necessary to calm things down a little, plus the banks will want to gouge a little in light of increasing prime rates. They often do this when rates are increasing as they can get away with it with little backlash.
I still believe you should go short term on your mortgage, read more here about why I feel this way: http://www.mississauga4sale.com/Lock-In-Short-Term-Long-Term-Mortgage.htm
We live in a very vibrant, growth oriented area of North America with a very diverse economy and culture. People seem to want to work hard and improve upon their personal and financial situation and almost everyone I meet is employed and optimistic about the future. This is good for the local economy and our future.
No matter what happens, as long as you continue to work hard, save 10% of your gross income, watch what you spend, don't get into too much debt that you can't handle it should you find yourself with a a job for a few months, then you should be able to slowly and surely achieve financial independence.
The condo market will continue to surge, it's affordable and desirable
Bungalow style homes will become more desirable, (they currently are very desirable), as our population age increases
Barrel of oil will be $100 at end of year and gasoline will be $1.10 and gold will be $1325 per ounce and silver will be $23 per ounce at end of 2011
Once again, beware the emotions of the marketplace and stick to your long range goals , currently I believe we are in the optimism/excitement phase so things may get really hot this spring in the market.
I still subscribe to all the values and principles that I've written about in the past on this page below.
I am a very optimistic person and always believe that I can do better by reading and doing things every day that contributes to my long term goals. I always set high but attainable goals and often come close to reaching my goals and even if I fall short, I've surpassed what I have done in the past. I subscribe to many newsletters that preach optimism and growth and these help me stay sharp and continue to learn. Every day I seem to learn something new, so at least I'm growing. You can read some of the ideas that I subscribe to and believe at this page: http://www.mississauga4sale.com/Motivation-Success-Ten-Scrolls.htm

That's about it for now, keep to your plan invest in real estate for the long term, you cannot go wrong.

I wish you a very Happy New Year and all the best to you and your family in 2011

Mark

My predictions for 2009

So, if you are thinking of selling and buying a homes this year, should you buy or sell first? I've had many clients purchase before they sell. I just want you to have all the information so you can make the best decision for yourself and your family. You may read more about buying or selling first here

If you would like to discuss issues like this or other questions you may have, please email me at anytime .

I hope this helps a little to answer your questions and give you a little insight into my thoughts on 2008. I will post this on my blog for others to see. Any comments from you are always welcome and would be appreciated.

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Toronto, Mississauga and GTA Real Estate market observations and predictions for 2011
Go straight to my 2011 Predictions

This page will give you some of my insights and predictions for the upcoming year. The advice contained herein is not guarnateed, but will give you an idea of my personal thoughts from my 22 years experience in real estate.

Conclusions that I draw from this and other sources and my predictions for 2011

Mark's Crystal Ball for 2011

My predictions for 2009

Real Estate Market Watch Newsletter

Toronto, Mississauga and GTA Real Estate market observations and predictions for 2011 Go straight to my 2011 Predictions

This page will give you some of my insights and predictions for the upcoming year. The advice contained herein is not guarnateed, but will give you an idea of my personal thoughts from my 22 years experience in real estate.

Conclusions that I draw from this and other sources and my predictions for 2011

Mark's Crystal Ball for 2011

My predictions for 2009

Real Estate Market Watch Newsletter

Toronto, Mississauga and GTA Real Estate market observations and predictions for 2011
Go straight to my 2011 Predictions