Canada

Canadian Real Estate Demand Slips Further In February

Canadian real estate is cooling down even further from last year. Canadian Real Estate Association (CREA) numbers show the sales to new listings ratio (SNLR) declined further in February. The ratio, a relative measure of demand, showed more inventory and fewer sales are a broad trend. Markets taking the biggest hit are located in Greater Vancouver, and Toronto’s suburbs.

Sales To New Listings Ratio (SNLR)

The sales to new listings ratio (SNLR) is one of the ways CREA determines demand for a real estate market. The indicator measures the ratio of home sales to the number of new listings on the MLS. By measuring same month absorption, we get a read on demand  relative to supply. This is how the national trade group determines if a market is “balanced” or not.

Boooring, you just want to know how to read it – we know. When the ratio is above 60%, the market is a seller’s market – meaning prices should rise. If the ratio falls below 40%, the market is a buyer’s market – prices should drop. Between 40% and 60% is when the market is balanced. This is just a guideline, so there are quite a few guidelines. The most notable is fast moving ratios, which may act as the market it’s heading towards. These numbers are a starting point for reading the market, not a comprehensive look. Piece it together with other indicators before making up your mind.

Canadian Real Estate Demand Cools Further

Relative demand for Canadian real estate slipped across the country. The Canada’s SNLR fell to 46.2% in February, down 14.91% from the month before. This represents a 2,4% decline from last year. The country is technically balanced, but sales aren’t growing as quickly as inventory.

Ottawa, Quebec City, and Montreal Real Estate See Ratios Rise

The biggest climbs in SNLR were observed in Ottawa, Quebec City, and Montreal. Ottawa made the biggest jump to 61.5% in February, up 8.8% from last year. Quebec City followed with a ratio of 47.7%, up 5.5% from last year. Montreal came in third with a ratio of 55.1%, up 5.1% from last year. Only four major markets showed increases, and they didn’t push the ratio very high to be honest. Two of the top three markets were still in balanced territory at this time.

Sales To New Listings Ratio – February 2019

The sales to new listings ratio in Canada’s largest residential real estate markets.

Source: CREA, Better Dwelling.

Vancouver and Toronto Real Estate Suburbs Are The Biggest Losers

The biggest SNLR drops were observed in Lower Mainland, BC and a Toronto suburb. Fraser Valley experienced the biggest drop with the ratio hitting 38.7% in February, down 24.6% from last year. Vancouver fell to 29.4%, down 20% from last year. Hamilton came in third with a drop to 54.7%, down 8% from last year. All three of these markets have seen massive price growth since 2015, so a drop here wouldn’t be surprising.

Sales To New Listings Ratio Change – February 2019

The percent change in sales to new listings ratio in Canada’s largest residential real estate markets.

Source: CREA, Better Dwelling.

Toronto real estate was absent from the top and bottom of the list, once again. The ratio in the city fell to 46.8%, down 1.3% from last year. The market is technically “balanced,” but slipping from last year. That said, the ratio did slip less than the national average, with has gotta be worth something.

Canadian real estate markets aren’t making substantial moves in either direction. Typically a stagnant market, not moving in either direction, is waiting for a change in the macro environment. That is, either an economic boom or recession is likely to decide where the market goes from here.

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34 Comments

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  • Smaug 7 months ago

    Ottawa is absolutely nuts right now. A colleague has been looking for a house and he’s ready to throw in the towel. Bidding wars everywhere, and sometimes a bully bid will come through to take a house off the market before the realtor’s scheduled time for offers arrives. All sales are no-conditions, meaning no inspections. It also means you lose your deposit if you make the “winning” bid and then find out the bank won’t lend you the money because they appraise the property at less than you paid. All the stories from Toronto two years ago, you can hear them here now. I assume it will last until the current government spending and hiring spree ends, or a recession tips things over. I’ve never seen it like this.

    • sean.is 7 months ago

      Is this the synopsis for the next, very overdue, Back to the Future movie? 😀

      • Jason Chau 7 months ago

        Canadian would pay through the nose for that movie until the end of this spring. Then they won’t want to talk about real estate until 2030 again.

    • Michael 7 months ago

      😂 prices are 50% below the national average, but you know – it’s really booming!

      • Smaug 7 months ago

        Ottawa prices are slightly below the national average, not 50% below. The Ottawa market is the direct result of massive federal spending and hiring spree. It’s ridiculous here right now, and totally out of step with the rest of the country. Fortunately, a recession is likely on the horizon, and it will force things to cool down here.

        • sean.is 7 months ago

          Like, totally 😉

        • Michael 7 months ago

          From CREA

          Canada national benchmark: $615,300
          Ottawa benchmark: $400,800.

          53% higher across Canada.

          • John 7 months ago

            Per your numbers, the national average is 50% above Ottawa. Ottawa is 33% below the national average.

            You’re both wrong, but that’s okay because now we all know the right answer!

          • Bluetheimpala 7 months ago

            John, this is hilarious. Keep it up. Tock. BD4L.

    • Stats 7 months ago

      Ottawa median income is 96K, and government employees have substantial pension plans.

    • Joseph 7 months ago

      Smaug, keep your eye on this report if in Ottawa.

      https://www.agentinottawa.com/stats/

      It usually updates within the first 5 days of each month. The picture wasn’t pretty based on the month of December, but things seemed to have “turned around”, if looking at a monthly basis. BTW, take a look at the historical prices numbers at the same link. Ottawa has been growing YoY by 1.6% (2013), 1.2 (2014), 1.6 (2015), 1.2 (2016); 5.4 (2017), 3.9 (2018). 2016 was the year to buy. It still has a way to go to catch up to the rest of Canada. Seems it was sleeping, along with Montreal, while the rest of Canada was jumping. Will be interesting to see what happens in October depending on who gets into power.

  • Chico Criswell 7 months ago

    I might be jumping the gun but It looks like we’re headed for a soft landing in some places.

    • LL 7 months ago

      Cool. Can you show us one example of a soft landing anywhere in history? It would be nice to see the world’s first unicorn. lol

    • Jason Chau 7 months ago

      A soft landing means income growth has caught up with home price growth. There’s zero chance that has happened. What you mean is prices stopped growing. This is more like when Wiley E Coyote runs over the edge of the cliff and doesn’t realize the ground from underneath him totally disappeared.

    • Smaug 7 months ago

      Soft landings are a fairy tale promulgated by bank economists and governments spokespeople. They don’t exist in real life.

    • Popeye 7 months ago

      What seems like a soft landing is a slow burn🔥🔥🔥

  • TK 7 months ago

    If Toronto and Vancouver determines they were 30% overvalued, what does that make the rest of the country that also made huge gains? Prices are up over 50% on a national level over the past 5 years.

    • Smaug 7 months ago

      Yes, it does. Winnipeg prices, for example, have more than tripled since 2000. Winnipeg boosters and RE pumpers are quick to point out that they were “just catching up with the rest of the country since houses were so cheap here before.”

      The problem with that logic is this: All the reasons why housing used to be so cheap in Winnipeg are still there. Winnipeg is still a low-wage backwater. So they’ll correct like everyone else. The fact that they “caught up with the rest of the country” means they’re seriously overvalued. I lived in that city for 15 years – Winnipeg has no business thinking they should be catching up to anyone.

  • Patrick M 7 months ago

    Prices growth in Canada is stabilizing, which means we’ll probably see low growth (less than 5%), but we are at no risk of suffering a US style crash. Our banks aren’t nearly as loose, and our customers aren’t nearly as poor or over leveraged.

    • Jason Chau 7 months ago

      bahaha. I think you need to review what “low growth” means.

    • SUMSKILLZ 7 months ago

      Job figures won’t stay rosy forever, Dougie employs 11% of Ontarians. He’s not happy about that, wants to change things. Construction and its allied industries employs a lot of people. That’s not looking so hot. If interest rates or reduced international capital flows into the GTA don’t knock down the house of cards, employment reductions might. Things are fragile.

    • Big Joe 7 months ago

      There’s also the group I hear “it’s about time Canada prices have caught up with Europe” mean while they have 21x the population…..

  • Kwo 7 months ago

    “either an economic boom or recession is likely to decide where the market goes from here”

    Great point! The US treasury yield curve inverted last week, which is an event that has preceded 7 of the past 7 recessions. The Canadian government bond yield curve recently inverted as well, so we’re in no better shape. The reason it helps push towards a recession is that it’s directly correlated to how much banks make when lending money. When the yield curve inverts, banks have to slow down all types of lending. Then bad things happen. Typically, a recession happens 6 to 18 months after the first full quarter of a yield curve inversion.

  • DB 7 months ago

    Patrick em..mmmm excuse me ???
    Our banks aren’t nearly as loose, and our customers aren’t nearly as poor or over leveraged.
    During the Great Recession Canadian Banks got a reprieve due in part to slightly better stop gaps in place and pure luck…ever since then BOC has been struggling to keep the house together when in fact we are very lose and ready to crumble…They (the banks) are banking (pardon the pun) are banking on the feds to be there when the shite hites the fan sort of speak…the unfortunate thing for tax payers is..they will. Vancouver and Toronto are two of three legs that prop Canada up, and the feds can’t afford to let them fail.. and yes more and more Canadians are getting poorer and over leveraged..bankrupts are steadily growing and at record highs and more and more people are finding out their HELOC will not be able to help them anymore…the banks are not giving as many of them out now that the market is declining and they are already maxed out.

  • Rana 7 months ago

    Loosing pants republic

  • Oakville Rob 7 months ago

    Forgive me if I’m repeating myself….

    Today, if a young couple want to buy a house in Toronto they need about $1,000,000. Say they have been able to save $150,000 after tax cash for a downpayment. That’s a ridiculous sum for a young couple to save by the way, especially after tax. Their mortgage is $850,000 at 4.25% over 25 years is $4800 per month. That’s 30% of $16,000 a month. So they are making about $30,000 a month or $360,000 a year.

    People who earn $360,000 annually don’t like $1,000,000 houses in Toronto. They prefer $2,000,000 houses. That’s why $2,000,000 houses are becoming $1,000,000 houses and $1,000,000 houses are becoming less too.

    The median income for a Toronto household is $65,000 will support a $300,000 mortgage. As long as all those people have $400,000 in a piggy bank waiting to invest – in what may have proven to be a very unstable asset – we should all be ok.

    • Observer 7 months ago

      You just nailed it Sir
      Excellent comment!

    • Sam 7 months ago

      Hey Rob, I totally agree with your sentiment but I wanna point out the general “30% rule of thumb” is usually used with gross income!

      • Oakville Rob 7 months ago

        Roger that, and thank you. It’s been a while since I have had to qualify for a mortgage.

        So the $65K lot can support a $325,000 mortgage.

    • JJ 7 months ago

      Ding Ding Ding

  • rustinpeace 7 months ago

    thats where the international money laundering crowd comes in. In my friends building one unit sold for 590k. Its a one bed room condo. Other units were not selling anywhere near that. Nothing special about that unit either. I can make a guess about who bought the unit. Anyways after that sold other units went up in price immediately

    • SUMSKILLZ 7 months ago

      The under 1 million comps in the 905 look pretty horrible. One positive though, if you follow 2019 comps your place will likely sell. Buyers have not completely vanished. Downtown condo families are still migrating to the 905.

  • AreWeCrazy 7 months ago

    Have we reached peak idiocy?

    Savers are punished, and people with 0 debt are seen as “morons”.

    Not owning a place is “crazy”, but levereaging yourself up to your eyeballs having multiple “investment” condos with negative carry, is a “genius” move because real estate always goes up!

    I guess the government will just bail out the banks/homeowners via wealth taxes to protect the “canadian dream” of home ownership at the cost of everyone else/future generations.

    When everyone uses their house as an atm via heloc, and 50% of condo investors are cash flow negative you better believe they will vote for any bureacrat that agrees to bail them out.

    Meanwhile some guy at the whole foods tried to get into a fist fight with me for “stealing” his parking spot. I ended up just giving it to him bc he wanted it so bad.

    Greatest city in the world! #Toronto

  • CanadaSucks 7 months ago

    I am surprise by this,. Some people are. Really Wait until at the end of the year. In Montreal price of gasoline and diesel is about to 1.30$ from 1.10$ two month ago. Dollars vs US went down at about 1.34$. Inflation is coming big time in Canada with a possibility of Bank of Canada raising rate to avoid demolishing inflation in Canada. Canada is not US and cannot print money at infinity because there is no international demand for CAN dollars .

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