Fall real estate market outlook: More inventory, but sellers are still expecting a lot

Now that we’re over a year removed from the pandemic’s real estate boom, experts at Re/Max are seeing Ontario’s cottage country return to a more normal sales cycle. “We started to see that, early on in the year, it was pretty slow for the winter months and then we had good activity in the spring,” says Christopher Alexander, the president of Re/Max Canada. The market is expected to slow again as we head into the cooler months. But what does this mean for buyers and sellers?

What are fall cottage prices doing?

In 2020, 2021, and even 2022, the cottage real estate market was in a frenzy. Low interest rates combined with a desire to get out of the city during the pandemic made cottages a hot commodity. With limited inventory, the market was heavily weighted towards sellers, driving up cottage prices to all-time highs.

The remnants of those prices remain, with the average waterfront sales tag in areas such as Muskoka, the Kawarthas, and Georgian Bay still hovering around $1 million. Inventory is starting to increase across the province, but not enough to see a significant decrease in cottage prices, Alexander explains. This means that cottage prices should hold throughout the fall.

“Some are expecting negative two per cent. Some are expecting positive two per cent. So, it’s pretty flat overall,” he says. “There are certain pockets that are still experiencing some price appreciation, albeit modest.”

Who’s buying cottages?

Previously, Baby Boomers dominated the cottage market, but that’s shifted. Fuelled by intergenerational wealth, Gen X now leads the cottage market in terms of transactions.

“They’re buying properties with the intention of keeping them in the family,” Alexander says. In a Re/Max report, 51 per cent of cottage owners said passing down the cottage to family was a key motivator when buying. That means these properties are staying off the market for longer. According to Alexander, cottage owners hold onto their properties for about double the length of time of a homeowner.

Younger generations, such as Millennials and Gen Z, who want to get into the cottage market are having to get creative with their buying strategies. In many cases friends or families are partnering to purchase properties together.

“You can see that people really believe in the long-term value of being a property owner and acquiring real estate.” Alexander says.

Sam Ghany, a Re/Max agent in the Kawarthas, has noticed some post-COVID effects on the demographic buying in his area. “At one point over COVID, we were seeing more younger families move up,” he says. “But you’re not seeing that family of four moving up here anymore, mainly because the parents have to go back into an office environment or work environment. It’s not a work-from-home type of idea anymore.” Instead, he’s seeing a slightly older buyer looking to retire in cottage country and make the property their full-time residence.

Is fall a good time to buy?

You may want to take a moment before pulling the trigger on that new cottage. As Alexander mentioned, cottage prices aren’t expected to drop by much in the near future. Plus, current interest rates are making cottage mortgages tough to afford.

“A mortgage based on rates of two years ago, even a year and a half ago, prior to the increase, you were paying $2,500 a month on a property. Today, that same property is $4,500 a month,” Ghany says. “So, people just aren’t going out of the way to buy recreational properties like they were doing in 2020 and 2021.”

In April, Re/Max predicted that the number of units sold in most of Ontario’s cottage areas in 2023 would be down, with Muskoka at minus five per cent, Haliburton at minus 10 per cent, and the Kawarthas at minus 15 per cent.

This remains mostly true, despite the fact that increased interest rates are convincing more owners to sell their cottages as mortgages become unaffordable. This is being exacerbated by the fact that during the pandemic, a lot of people bought what they could, even if it meant properties on weedy lakes, small lots, or with poor sun. As interest rates go up, these properties seem less worth it, convincing owners to sell.

As a result, Ghany says more inventory is coming onto the market, but buyers aren’t biting. “August of last year in the Kawarthas, there were 116 properties listed and 33 sold. Fast forward to this year, and there are 179 listings on the market, 36 of them sold. So, roughly the same amount of sold properties, just a lot more inventory,” Ghany says.

Prices and interest rates are keeping buyers at bay, but as more inventory becomes available, power will shift away from the seller, making it a more balanced market. “Right now, sellers aren’t in line with what’s going on, and it’s going to take some time,” Ghany says. “Its always worked like this. Real estate is up and down. When prices go down, it takes a while for sellers to match what buyers are willing to pay.”

Keeping that in mind, it may be worth holding off on the cottage dream a little longer to see whether prices drop and interest rates decrease.