Canada

Canadian Real Estate Inventory Surges As More Sellers Look To Cash In On Exuberance

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 SNLR

The 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 Change

The 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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15 Comments

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  • Ahmed 7 months ago

    Good time for investors to unload without taking a loss. Isn’t this what they did during the US bubble, to lower investors losses?

  • Taryn 7 months ago

    Media is to blame for the bubble, but it’s just too lucrative.

    They parade out “experts” (read: people that make commissions), to project how the market is going to be in the spring, based on a one week interval read.

    The first January during a pandemic, in the middle of a near national lockdown, people don’t list their homes for sale? THERE’S NO MORE INVENTORY EVER, HERE’S THE PRESIDENT OF A REAL ESTATE COMPANY TO TELL YOU HOW YOU’LL NEVER HAVE A HOME BASED ON WHAT HE SAW THIS MORNING.

    • Christopher Barclay 7 months ago

      My favorite now is the flip flop agent, they don’t realize shatters there credibility as a news org.

      “The agent that warned against buying (yesterday) now says you should buy (today).”

      Agent on TV, ” Thanks, Diane. Like I said to you on the phone, the market is going to crash and people should be worr… oh, now the market is much higher and will never fall, and you missed out on the dip I told you to buy on.”

    • SH 7 months ago

      How is the media to blame?

      The “media” didn’t force the government and central bank to rig the market to favour speculators (including foreign) over middle class Canadian workers.

      The media didn’t force the Bank of Canada to artificially suppress rates, nor did they force the government to mandate that banks grant no-questions-asked deferrals to landlords with no requirement that the landlords pass on the deferrals to their tenants.

      The media also did not create the CMHC whose sole purpose is to transfer risk from the banks to the taxpayers.

    • Lars 7 months ago

      If i had to ‘blame’ something for the current red hot housing market i would start with record low interest rates. 5 year fixed rate of 1.5%? Variable under 1%? Yes, they are a little higher today. If rates stay crazy low real estate prices will go much higher. And yes, the media will report on ‘hottest real estate market ever’ but that is factual. Now who is it who sets interest rates? (Central bank / government.)

  • Cannuckster 7 months ago

    What … the market is still undersupplied!

    I’m gonna get me a hammer, some nails and plywood to slap together a house in Toronto that I’ll list for $2.2M and sell for $2.95M …

  • Holton 7 months ago

    Well, if you do the math you know why prices are at what they are.

    We printed lots of money, that means inflation. If you buy a property now, part of your mortgage is principal. Especially with such low rates much of it is principal. So if you can rent out your property at or higher than your mortgage amount you are saving money. Now on top of that, we will see very high inflation soon. That means your property will also track with inflation unlike your wage.

    That is why people are buying now. The government made the mistake of propping up house prices during the pandemic. Now the only thing they can do is allow high inflation to lower that amount of debt in real terms. Which means buying a property is a good way to combat inflation.

    • Little Birdie 7 months ago

      If we do start to get inflation on this scale, they’ll likely need to raise interest rates as that’s one of the few tools they have to control inflation. So you’re also betting you’ll be ok with whatever the new rate is when it comes time for your mortgage renewal (minus everything else that’d come with any rate increase). This isn’t as cut and dry as you present.

      • Holton 7 months ago

        Yeah, usually when inflation goes up they say they will raise interest rates. But what happens if the government decides its ok to have a little more inflation for extended period of time to revive the economy and most importantly to lower debt amount in real terms.

        Many countries have done this, just look at Asia and you will understand how they done similar things. They create housing bubble first the. They allow higher inflation over 10 years. Everyone’s wage and all other prices are now 2X 10yrs ago. So servicing that mortgage become much easier.

        The moment they decided to prop up housing prices during pandemic this tells me they will do anything to prop up prices. The only way out is to allow higher inflation.

    • Axel McLion 7 months ago

      Property will track inflation, then in next sentence you day inflation will lower debt in real terms. Which is it?

      Income won’t track inflation? Then nobody can afford to buy, economy probably crashes and housing becomes worthless.

      • Holton 7 months ago

        Really? property price will track inflation. Everyone knows that, and inflation will lower debt you borrow today in real terms. For example if I borrowed 200k 10 yrs ago what is the purchasing power of 200k today compare to 10 yrs ago? Does your wage increase faster than inflation?

        • Axel McLion 7 months ago

          Wages are not keeping up with inflation, which is why we have stagflation. Housing prices can’t inflate beyond wages and credit availability. Wages affect going up. Jobs aren’t coming back. We are transitioning towards ubi instead. And I can’t see ubi sustaining million dollar average homes, let alone pumping them higher, unless we have hyperinflation in which case those homes probably end up worthless due to bigger problems that will arise.

    • Paul 7 months ago

      Unless you lose your house.

  • Lars 7 months ago

    For single family homes we have record low inventory (supply), record high demand and recored low interest. One of these factors being in record territory would result in a spike in prices. But with all 3 being in record territory at the exact same time and we have ‘hottest real estate market ever’. Not surprising. Interest rates are, in my humble opinion) the key variable. Government policy is resulting in asset price explosion (real estate and stocks). As a result we have a new class divide in this country: those who own assets (net worth is through the roof) and those who do not own assets (net worth is stagnant). Government policies usually have unintended consequences…

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