The Canadian real estate market is starting to see sellers return, especially in post-lockdown regions. Canadian Real Estate Association (CREA) data shows the sales to new listings ratio (SNLR) fell across Canada in May. The entire drop was due to inventory rising much faster than sales, in regions where the lockdown has been mostly lifted.
Sales To New Listings Ratio (SNLR)
Analyzing sales or listings by itself gives important macroeconomic information. It doesn’t tell anyone a lot about how hot or cold the market is. Instead, you need to compare the number of new listings hitting the market, in contrast to the number of units sold. That’s what the sales to new listings ratio (SNLR) is – the ratio of sales, in contrast to listings.
By using the SNLR, we can get an idea of how quickly inventory is being replenished. The higher the ratio, the more pressure on prices to rise. The lower the ratio, the more pressure on prices to fall. The general rule is between 40 and 60 percent, the market is considered balanced. Above that, prices are expected to rise, and below that they’re expected to fall.
An important exception to this rule is when the ratio is moving quickly. Fast rising ratios tend to push prices higher, even if they’re in a buyer’s market. Fast falling ratios can push prices lower, even in a seller’s market. Where a market is, is equally as important as where a market is heading. At least when you filter for enthusiasm.
The Economy Is Reopening, And Pressure Is Being Relieved Across Canada
Economists expected more inventory as lockdowns lifted, and they were correct. The seasonally adjusted SNLR for Canada fell to 58.8% in May, down 4.5% from the previous month. Generally speaking, economies locked down are seeing more buyers than sellers. Regions with lockdowns lifted, are seeing new listings surge faster than buyers.
Sales To New Listings Ratio
The seasonally adjusted sales to new listings ratio in select Canadian residential real estate markets.
Source: CREA, Better Dwelling.
Southern Ontario Real Estate Leads The Tightening of Inventory
Southern Ontario leads the country in sales accelerating faster than new inventory. Hamilton saw the biggest jump to 81.3% in May, up 20.8% from a month before. Kitchener follows with a SNLR of 76.2%, up 19.4% from the month before. Quebec City is in third with 80.4%, up 17.1% from last year. Worth a mention is Southern Ontario remains one of the most locked down economic regions in Canada.
Sales To New Listings Ratio Change
The monthly percent change in the seasonally adjusted sales to new listings ratio selected Canadian residential real estate markets.
Source: CREA, Better Dwelling.
Real Estate Markets With Looser Restrictions See Inventory Jump
Markets with the most restrictive measures lifted in May are seeing inventory rise. The SNLR for Halifax is the fastest falling at 64.7% in May, down 39.8% from the month before. Montreal’s ratio fell to 62.4%, down 36.4% from a month before. Fraser Valley was in third with 38.8%, down 14.5% from a month before.
Notably absent from either extremes are Toronto and Vancouver, which land in the middle. Toronto’s SNLR increased to 57.9% in May, up 6.5% from a month before. Vancouver’s fell to 40.1%, down 9.6% from a month before. It’s worth a note that Toronto is one of the last economies to reopen, and Vancouver was one of those least impacted.
When the lockdown was across Canada, the SNLRs jumped – even hitting over 100% in some markets. Economists, including four bank economists, are expecting inventory to outstrip buyers as markets reopen. One bank is forecasting the rise in Montreal, is the path major markets will follow. Pre-pandemic, it was arguably the hottest market in Canada, with soaring sales. After the lockdown was lifted, new inventory was almost 3x the amount seen during the lockdown.
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TORONTO – One expert predicts Ottawa‘s changes to mortgage rules will help spur demand among potential homebuyers but says policies aimed at driving new supply are needed to address the “core issues” facing the market.
The federal government’s changes, set to come into force mid-December, include a higher price cap for insured mortgages to allow more people to qualify for a mortgage with less than a 20 per cent down payment.
The government will also expand its 30-year mortgage amortization to include first-time homebuyers buying any type of home, as well as anybody buying a newly built home.
CIBC Capital Markets deputy chief economist Benjamin Tal calls it a “significant” move likely to accelerate the recovery of the housing market, a process already underway as interest rates have begun to fall.
However, he says in a note that policymakers should aim to “prevent that from becoming too much of a good thing” through policies geared toward the supply side.
Tal says the main issue is the lack of supply available to respond to Canada’s rapidly increasing population, particularly in major cities.
This report by The Canadian Press was first published Sept. 17,2024.
OTTAWA – The Canadian Real Estate Association says the number of homes sold in August fell compared with a year ago as the market remained largely stuck in a holding pattern despite borrowing costs beginning to come down.
The association says the number of homes sold in August fell 2.1 per cent compared with the same month last year.
On a seasonally adjusted month-over-month basis, national home sales edged up 1.3 per cent from July.
CREA senior economist Shaun Cathcart says that with forecasts of lower interest rates throughout the rest of this year and into 2025, “it makes sense that prospective buyers might continue to hold off for improved affordability, especially since prices are still well behaved in most of the country.”
The national average sale price for August amounted to $649,100, a 0.1 per cent increase compared with a year earlier.
The number of newly listed properties was up 1.1 per cent month-over-month.
This report by The Canadian Press was first published Sept. 16, 2024.
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
