Will the Market Crash?

Being a Real Estate Agent, I am hyper-aware of real estate headlines, and with the current market, I believe most of us are, especially if you are market curious!

As with any headline, reader beware is always good advice. Consider the source and read the entire article. We know headlines sell!

We have been asking and telling ourselves since this entire pandemic driven market began in late spring 2020, “when will this end” … “prices can only go so high” …“the bottom will fall out” … “the market will crash”. The reality is no one knows and most opinions are educated guesses.

Higher Rates Happening Faster.

In March of 2022, BoC increased its interest rate by .25 basis points, followed by an aggressive increase on April 20th by 50 basis points. According to an RBC article, Rising interest rates a game-changer for Canada’s housing market, it is their opinion that rates will increase to 2% in just over 6 months. In my opinion, it was bound to happen and necessary to curb inflation and stabilize the housing market.

Will it Cool the Muskoka Market?

I cannot see how it eventually won’t. An increase in rates will likely have people revisit what they can afford. Their buying power will decrease if they need lending. In terms of the Muskoka market, we are still experiencing a migration of people wanting to move from the city to a more rural lifestyle. During the month of April, we have continued to see strong activity with 71 off-water sales and a median sale price of $692,000, selling with an average of 107% sale to list price. For waterfront listings, there have been 9 sales to date with a median sale price of $1,100,000, selling with an average 110% sale to list price.

Buyers now have a greater challenge of not only facing higher prices but higher interest rates as well. This may have some buyers continue to wait it out or simply fall out. In my opinion, the only true solution to really cooling the real estate market is to provide more opportunities for generating a healthy amount of supply. It’s just that simple…right?

My Crystal Ball.

I believe the residential market will remain strong. This Muskoka migration is composed of people wanting to move here full time for lifestyle and work-life balance related reasons. As long as supply remains low (which it’s anticipated to be) then this segment should remain competitive with prices not as likely to see an obvious correction. 

The recreational market and investment market could see more of a correction. With travel opening up, people getting back to the workplace, and just what overall feels like a move towards some ‘normalcy’, the romantic idea of a cottage may pass for some. This is not to put despair into your mind if you are considering selling your waterfront property, I am just encouraging that expectations are tempered. We are likely to see the cottage market adjust itself back to pre-pandemic demand.