As we enter 2020, it’s important to look back on important trends in the housing market from 2019 to see how the coming year might shape up.
Let’s take a look at the top 5 lessons learned from 2019 and the market outlook for 2020 to ensure you are best positioned to support homebuyers in the coming year.
1. Housing activity expected to recover in 2020
According to CMHC’s latest Housing Market Outlook, housing sales, starts and price growth declined in 2018 – 2019 after reaching elevated levels in 2017. We are expecting to see a recovery of housing activity in 2020 because of overall economic and demographic conditions and income growth.
Three areas where the market will recover:
- Housing sales will start recovering in 2020, offsetting recent declines.
- Positive price growth to resume in 2020, driving the average price above its 2017 level.
- Housing starts will stabilize in 2020.
2. Renovations and refinancing in a low-interest rate environment
According to CMHC’s 2019 Mortgage Consumer Survey, many homebuyers plan to renovate their home in the near future. More than 6-in-10 homebuyers (63%) plan to renovate within 5 years.
Many Canadians refinance their homes in order to renovate. Sixty-one per cent of refinancers were currently renovating their home in 2019, compared to only 23% in 2018. Refinancing a home for renovations was the 2nd highest reason for refinancing.
This information is very relevant when we consider that mortgage rates are expected to remain at low levels and an increasing numbers of buyers are betting that interest rates won’t rise again anytime soon.
Keep this in mind when assisting clients looking to renovate their homes.
3. Homebuyers focused on price and affordability
As we move into 2020 and we expect to see an increase in housing sales, it’s important for you to know what homebuyers are looking for. If the trends continue, then homebuyers in 2020 will prioritize price and affordability over a number of other factors when looking for their new home.
We asked Canadians what they felt were their “wants” and “needs” when it came to buying a home. The top three “must-haves” were:
- Number of rooms
- Proximity to public transit
A newly-built home ranked at the bottom of the “needs” of 2019 homebuyers and a “move-in-ready” home also dropped significantly compared to previous years.
4. Consumer habits going into 2020
There was a significant decrease in buyers paying the maximum amount they could afford in 2019. Sixty percent of homebuyers bought the highest priced home they could afford, down from 78% in 2018.
Sixty one percent of homebuyers impacted by the new mortgage rules (or “stress test”) reacted by purchasing a smaller or less expensive home compared to 47% in 2018.
Heading into 2020, you can prepare for a market where more and more Canadians are stretching their dollar and making financial changes to afford their home.
5. Homes sales will increase, and so will the need for good advice
An important trend from 2019 was the clear uncertainty about the home buying process amongst homebuyers. Forty two percent of 2019 buyers said they felt concerned or were uncertain about the process of buying a home, a jump from 37% in 2018.
Additionally, 2019 saw a strong increase in buyers’ perception of the value of working with a real estate agent, rising from 28% of buyers in 2018 to 35% in 2019.
If this trend continues into 2020, then the importance of mortgage and real estate professionals, particularly in an environment of increasing sales and rising prices, will be even more important.