2008 A Year of Change

2008 reminded us that real estate is cyclical and that the Muskoka market, despite steady healthy growth over the past decade is not immune to realities of market forces.  Overall we saw unit sales drop by 22%, this was marked by a reduction of 34% in recreational and a more modest dip of 15% in the residential sector.

Recreational – A wet, cold spring

A prolonged winter, followed by one of the wettest springs in recent memory hampered sales. In fact it was not unusual for some cottage roads to be virtually impassable well into late April.  The usually brisk spring selling stalled out, inventory increased and prices were slow to adapt to the reality. 

Once prices began to adjust, downbeat economic news began trickling in and then the world was hit with the devastating subprime driven equity collapse in September.

On a macro level prices fell by 13%.  However, in a sector where there is such a diversity of properties this figure is difficult to apply across the board. However, we can’t dispute that it was a year of change in the cottage market and that prices for 2009 need to reflect this new shift.    

Further adding to downward pressure on sales was the increasing inventory relative to sales.  Comparing month end inventory levels of October 2006, 2007 and 2008 we saw huge increases in months of inventory:

• October 06 - 10 months
• October 07 - 10 months
• October 08 - 26 months

More listings and fewer sales = more months of inventory and downward pressure on prices

To illustrate this point we plotted monthly sales over month end inventory levels. By using two separate axis (one for listings, one for sales) we begin to see a visual representation of what transpired in the recreational market in 2008.

Residential - Sales down, price up?

The residential sector fared significantly better in 2008 than the cottage market.  Unit sales dropped by a more modest 15% and prices actually rose by 5%. However, a quick look at the numbers offers an explanation to these seemingly conflicting numbers.

Sales in the under $150,000 range fell by 42% in 2008 compared to 2007 - this alone would help explain why prices appeared to remain steady.

Statistically 2008 saw a slight increase of inventory, days on the market and a drop in unit sales. Anecdotally speaking 2008 was marked by fewer multiple offers, more price reductions and general feeling that buyers were digging their heels in more so than recent years.

Next week we'll break down the waterfront market.