Mississauga, Ontario vs California Real Estate

An analysis of the real estate market trends in Mississauga, Ontario, shows that home prices rise much faster than in California. Many factors contribute to this – the massive income growth over the past decades and decades of underinvestment in the housing supply. The latter is not as evident as it seems at first glance. Some people may wonder why there is such a lack of low-cost housing.

While some cities like Calgary or Toronto suffer from growing economic inequality, many people cannot afford to purchase homes anymore due to the high home prices. A standard solution offered by economists is simple: build more houses! A solution that doesn’t seem to work out so well since constructing new houses takes time, and if you neglect any other market force, the price growth of single-family homes will continue.

So, let’s see how real estate developed in Mississauga and California over the past few years:

Mississauga has seen a continuous increase in home prices since 2010, with a 43% gain. A promising market for anyone looking to invest in real estate! A significant downside is that many people cannot afford such high housing prices anymore because their income hasn’t been rising at this rate. A very relevant question arises from that fact: How do younger generations afford houses if their incomes haven’t been increasing by much? The solution may lie not in just building more houses but also rethinking our current system so that homes are affordable again without taking on an extra job. A nationwide problem that needs a nationwide solution.

In California, the situation looks much different. Home prices here have been declining since 2008 and only managed to recover recently in 2015 and 2016 – still, home prices remain 17% lower than they were in 2008. A significant difference between California and Mississauga: The average household’s income hasn’t declined by much, so people can take on more debt if they need to buy a house.

An interesting phenomenon for sure! A potential false positive could turn into a disaster, though, if mishandled. Many economists already consider a high ratio of household debt vs. income as one of the main problems for Canada’s economy. The same can be said about California; their income didn’t go down, and their debt ratio went up. A potential bubble that needs to be corrected even though this correction won’t come without consequences of its own – a direct result is, of course, the increased number of foreclosures in California.

The same scenario could happen here in Canada if mismanaged, but if handled well, it could benefit young people who are struggling to afford housing at this point. A lot will depend on how politicians react after the next election cycle! Any proper solution should consider both sides, supply and demand for affordable housing. A lot can be done to improve the current situation by implementing new policies that encourage companies to invest in more houses or allow denser neighborhoods with smaller home sizes. A win-win situation for everyone.