Canadian real estate sellers were scarce at the end of the year, but are now starting to show up. Canadian Real Estate Association (CREA) data shows new listings outpaced sales in February. The market is still undersupplied for the winter’s record sales activity. However, some of the steam is being let out, as sellers likely try to cash in on the huge gains they made.
Sales To New Listings Ratio (SNLR)
The sales to new listings ratio (SNLR) is one of the ways the industry measures the ratio of buyers to sellers. It’s a proxy for absorption, and helps analysts and (better) agents explain inventory flows. When the ratio is low, it means more inventory will be accumulating, bolstering supply. If the ratio is high, it means less inventory accumulates, showing higher demand.
Each market has its own relative “normal,” but the industry has some general guidelines. If the SNLR is above 60%, the market is considered a seller’s market. Prices are expected to rise in this scenario. If the ratio falls below 40%, the market is a buyer’s market. Prices are expected to fall in this scenario. If it’s between 40% and 60%, the market is balanced, and priced right for the volume.
A single forecasting indicator obviously has caveats, but a big one for today is velocity. If the ratio falls quickly, a market can act like a buyer’s market — even with a very high ratio. The opposite is also true, where a fast rising market can feel like a seller’s market, even with a low ratio. Perception plays a big role in this area, since markets are only as rational as its participants.
Sellers Rise Faster Than Buyers Last Month
The ratio remains high at the national level, but made a sharp drop. Canada’s SNLR fell to 84% in February, down 7.2 points from a month before. Three markets in February had ratios above 100%, meaning inventory was shrinking. It seems bad until you realize 10 markets had ratios above 100% in January. Like I said, things are still tight — but more sellers are coming in fast. Let’s break this down by market.
Sales Grew Faster Than Listings In 7 Canadian Real Estate Markets
Seven major markets saw the ratio increase, meaning demand grew faster than supply. The SNLR in Saskatoon showed the fastest growth reaching 69.5% in February, up 10.5 points from a month before. Winnipeg follows with a ratio of 90%, up 5.4 points over the same period. Fraser Valley comes in third with an SNLR of 87.8%, up 5.2 points. To contrast, the month before every single market made an increase.
Canadian Real Estate SNLRThe sales to new listings ratio (SNLR) for major Canadian real estate markets in February 2021. Source: CREA, Better Dwelling.
Most Real Estate Markets Are Seeing Listings Rise Faster Than Sales
Most of Canada’s real estate markets are seeing a little gas come out of the valve, but some made very sharp drops. Trois Rivieres’ SNLR made the biggest point drop at 82.3% in February, down 40.1 points from a month before. Montreal followed with a ratio of 91.5%, down 35.9 points. Hamilton came in third with a ratio of 80.5%, down 25.6 points over the same period. All three of these markets still have very high ratios, but they were all above 100% just a month before. Small improvements.
Canadian Real Estate SNLR ChangeThe seasonally adjusted monthly point change in the sales to new listings ratio (SNLR) for major Canadian real estate markets in February. Source: CREA, Better Dwelling.
Two of Canada’s largest real estate markets didn’t see an extreme movement, relative to other markets. Greater Toronto’s SNLR fell to 72.8% in February, down 10.5 points from a month before. Greater Vancouver’s ratio climbed to 76.0%, up 4.5 points over the same period. Toronto is seeing some pressure release, while Vancouver is seeing a little more build up.
The market is still undersupplied for the level of buying activity, but that can change very soon. Sellers are listing at a very rapid rate, especially in places like Toronto, where many people said they would be listing in Spring. It turns out listing a home for sale in the winter, in the middle of a pandemic, may not be all that appealing to sellers.
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