How the Rise and Fall of the U.S. Dollar Affects our Cottage Market



So, I have been telling the same story for so long now, to so many clients that walk in the door when looking to buy or sell a property that I thought it might make an interesting blog post. Please keep in mind that this is my opinion  and is indicative of our market area, specifically the cottage and residential market that we deal with in this area. Meaning the City market you may be in right now has absolutely no bearing on our smaller country market. We run to the beat of our own drum out here and if I hear one more story from a previous city client who is now looking to sell their country home in 2 days, I may just pull my hair out. But, I digress….

So back when I first started selling Real Estate in Westport in 2005, the cottage market was hot and high priced. Waterfront was the benchmark that set the pricing on all other properties including those residential homes off the water. Things continued their climb for a glorious 3 years until the U.S. housing market crash in 2008. Guess what that did to our market here in the Rideau Lakes and surrounding areas?! We lost a huge portion of our buyers. Most cottage markets like those in Muskoka's and the Kiawartha's do not see the sheer number of American buyers that have always been so prevalent in our market area. Anyone who is a resident of Rideau Lakes knows that summer time brings back our American friends who boat and cottage alongside us for the bulk of the summer months. Pre-2008 we were always used to our American neighbours coming up to spend their "doubled" money into our tourist economy and short of a few years here and there this has been the consistent story since the early 1950's when people from states like New York and Pennsylvania started their mass buying spree of cottages in this area. 


So, 2008 and the U.S. housing markets crashes and guess what? When they can't sell their own homes or they are so badly devalued there, they are not buying cottages in our market area either. So we notice a significant decline in U.S. buyers, but wait, is that the only effect? Nope! You'll never guess what happens! When we lose our US buyers and the Canadian dollar starts going up over the next few years, our cottage market takes a hit in another area. Our savvy Canadians soon realize that their dreams of owning that Florida retirement home can now be purchased at an all time low! Yay for the Canadian buyer as they take their empowered dollar and begin buying discounted homes everywhere from Myrtle Beach, south to Florida and west to Arizona. Canadian buyers are happy, happy, happy as they snap up condo's and homes and pour their recreational dollars into the US economy. The counter effect is that not only did we lose our U.S Buyers, but we now are suddenly losing our Canadian buyers as well as they take their hard earned dollars down south to purchase property. Cottage prices begin to level out - which was a good thing as the market needed a strong correction from where it was. Cottage sellers in our area experienced good sales up until about 2012 before realizing that the game had changed. We spoke frankly with our sellers about the need to price competitively and to look at all offers presented as competition was tough. There was a plethora of cottages up for sale and a limited number of qualified buyers. Buyers have been enjoying the pick of the litter for a few years now and we have had to deal with upset sellers who were not paying attention to what was happening in the market place over the past few years. It was a hard learning curve for sellers and on many occasions I sat explaining our market conditions and the "why's" and left listing presentations feeling like the Grim Reaper when I had to give market evaluations and report on conditions. Things were not pretty and properties were taking their sweet time to move.


So, thats the scoop up until this early fall. What happens when the Canadian dollars decline in value against the U.S. dollar rapidly? A small panic is heard from clients. "Oh My God! I have to sell my Florida home!", "I can't afford the condo fees with the dollar like it is now", and "I'm going to sell my home down south now and make double my money".  As the US economy begins it's ascent, homes go up in value and there are more buyers. Canadians are having good luck in selling off their homes and are making good money on the transaction. For those looking to sell, this is a great time and great year to do so. What I am looking forward to is the next step in the process of this cycle and that is when all our long lost Canadian and US buyers come back into our market, money in hand and begin their search again for recreational cottages and waterfront homes. The return of the baby boomer looking for a place to spend time with their family will once again bring the Canadian cottage back into favour as it will pay to stay at home with the dollar like it is. I'm sure you all know someone who has put off a trip to Florida or at the very least complained about the expense of travelling south this winter. You know the US tourist market is missing Canadians visiting and spending when Myrtle Beach is beginning to take Canadian money at par. That's how much money we poured into their economy over the past 10 years. We are good neighbours indeed! 


So, what does the future hold?! If I knew that I probably wouldn't be sitting at my desk typing this all out - I'd probably be out thinking of ways to buy well priced cottages/homes this year so I could hold onto them and sell them over the next few years for investment money. Performing the mirror to what was done in the US in the past few years. But here's a peek into what I think will happen…. my 2 cents for what it's worth….

2016 will be a great year to buy a cottage. Most agents will be pricing their listings according to sales over the past few years which have been low. I do believe Canadians will want to put their recreational dollars into something that can out perform volatile investments and most people selling their US homes will be experiencing the goodness that comes from making money from their real estate transactions and feel encouraged to do the same back home. So, those that have sold US property in 2016 and then purchase again in 2016 (whether it be an investment home, cottage property or future retirement home) will be experiencing a double dip of epic proportions. It will take a few years but our cottage market will slowly begin to climb as both Canadians and Americans come back into our area looking for well priced properties and that is a beautiful thing! 


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