Canadian Real Estate Is Seeing Home Buyers Fall Faster Than Sellers

The Canadian real estate market has been very tight in terms of supply, but that’s beginning to change. The sales to new listings ratio (SNLR) made a sharp decline in April, according to data from the Canadian Real Estate Association (CREA).  Declines were seen at both the national level, as well as the majority of major markets. For the past few months, the number of buyers has dropped much faster than sellers.

Sales To New Listings Ratio (SNLR)

The sales to new listings ratio (SNLR) is the number of home sales compared to new listings. It’s one way to gauge the strength of supply and tells us how quickly inventory is being replaced. Better-supplied markets, where inventory grows much faster than buyers, often see prices fall. Likewise, a tight market with few sellers and many buyers will see prices rise.

The SNLR isn’t an exact science, but there are some guidelines to help interpret the levels. If the ratio is between 40% and 60%, the market is balanced and prices are right for the level of demand. If the ratio is above 60%, it’s a sellers’ market where prices are expected to rise. If the SNLR falls below 40%, it’s a buyers’ market where prices are expected to fall.

Once again, these are just industry guidelines for reading the indicator. Each market has its own ratios that local buyers respond to. Some will always skew higher, and some will always skew lower.

An important note to keep in mind is the velocity of the changes in SNLR. Fast-moving indicators can see markets act like where they are heading, instead of where they currently are. A ratio can be quickly rising, see higher prices, and still be in buyers’ market. That’s because the expectation is it will be in a sellers’ market soon, which maybe enough to drive prices higher. Same deal going in the opposite direction, with falling prices in a sellers’ market.

Sentiment sometimes leads an indicator, so it’s worth keeping an eye on big swings. This also isn’t a foolproof system, so it should be one of the many indicators you look at to form an opinion. Think of it as your starting point — not a single, conclusive indicator.

Canada Is Seeing Homebuyers Drop Faster Than Home Sellers

New resale inventory is coming in much faster than sales over the past few months. The SNLR fell to a seasonally adjusted 75.2% in April, down 6.1 points from the previous month. This is a very sharp decline from the 90.87% seen in January. It’s still a very high rate but is dropping very quickly — with only 9 major markets seeing the SNLR rise.

Canadian Real Estate SNLR

The seasonally adjusted sales to new listings ratio (SNLR) for Canada at the national level.
Source: CREA; Better Dwelling.

Ontario and Quebec Sees Markets Cooling The Fastest

The fastest cooling markets are light on inventory, but that may change very quickly at this rate. Ottawa saw the biggest drop with an SNLR of 75.6% in April, down 25.6 points from the month before. Gatineau followed with 77.8%, down 16.7 points over the same period. Hamilton came in third with an SNLR of 72.5%, down 15.8 points from a month before. All three markets have seen prices soar, so buyers were probably hoping for this bucket of ice water.

Canadian Real Estate SNLR

The seasonally adjusted sales to new listings ratio (SNLR) for major Canadian real estate markets in April 2021, compared to a month before.
Source: CREA; Better Dwelling.

Some Smaller Real Estate Markets Are Seeing Inventory Become Tighter

A few smaller cities are still seeing inventory tighten, bucking the general trend. Saguenay saw the largest increase with its SNLR reaching 112.2% in April, up 22.2 points from a month before. Saint John followed with an SNLR of 96%, up 12 points over the same period. In third was Thunder Bay with the SNLR hitting 100.4%, up 10.8 points from a month before. These regions also have very high ratios but are also very small markets in the first place.

Canadian Real Estate SNLR Change

The monthly percent change of the seasonally adjusted sales to new listings ratio (SNLR) for major Canadian real estate markets in April 2021.
Source: CREA; Better Dwelling.

Toronto and Vancouver Are Both Seeing Buyers Fall Faster Than Sellers

Toronto and Vancouver residential real estate both saw sharp SNLR declines. Toronto’s SNLR fell to 65.9% in April, down 6.2 points from the month before. The ratio for the region is now the third-lowest of Canada’s major real estate markets. Vancouver is a little higher with its SNLR at 68.1% in April, down 12.2 points from the month before. Both of these ratios indicate inventory is still tight, but not as tight as a few months ago. 

Canadian housing inventory is still tight, and home prices are still moving very fast. However, sales are falling much faster than new listings, and have been for a few months. It does appear the tightest window of the market has passed, meaning price growth may slow in the not-so-distant future. At the current rate of growth, prices have a big cushion for deceleration though.

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  • Kathleen Thomson 3 years ago

    Meep meep!

  • Jason Chau 3 years ago

    Countertrend is inevitable. Lowering interest rates pulls demand forward, and the lockdown slowed the ability to list homes for sale.

    Increasing borrowing rates will push demand outwards, while reopening will free up more demand.

  • GTA Landlord 3 years ago

    16 point drop on SNLR. Prices have never not fallen after a 20 point drop. This month is do or die.

    • Credit Guy 3 years ago

      CMHC said prices will rise, so I’m assuming this is when they fall.

  • WS 3 years ago

    Massive correction was underway, but along came Covid.
    Politicians grasped the opportunity to be heroes, and thus delayed the inevitable.
    The good thing (if you are a bear) is that the soft landing is out of the question now.

    • Credit Guy 3 years ago

      100%. They thought COVID was a nothing burger in March, but deployed QE to help with slowing sales in 2019.

      Expansionary monetary policy is all this government has. Welcome to Canada. Can I get you a mortgage application?

  • Canaduh 3 years ago

    Interest rate? Low.
    Both in market and your house.
    Bye insanity.

  • James Ling 3 years ago

    Still near record SNLR after pent up demand has been easing and guys are commenting that prices are going to drop this month… LOL!

    • Jerry 3 years ago

      There’s two analysis, one from an institutional advisory firm, and another from a commercial bank for their institutional clients that shows this is exactly the issue.

      You’re exaggerating as this month to dismiss the fact it’s a valid comparison even the real estate industry has been saying. Of course, you’re the kind of guy that also probably says they’ve been hearing a Gen Xer say this in the news since they were 8, and your wife says you’re really handsome.

      • James Ling 3 years ago

        Im sorry you’re angry you can’t afford what you want Jerry, I really do hate what is happening with real estate, but jumping up and down flapping your arms isn’t going to get you that house you want.

        • Jerry 3 years ago

          I’m a real estate developer, and you’re a construction schmuck hauling wood for chump change in the country. But sure, I can’t afford what I want. Everyone that disagrees with you must just be poor.

      • James Ling 3 years ago

        Also I dunno any GenX doomsayers over the last 8 years other than the ones who couldn’t save for a downpayment, most of GenX is just fine, it’s the later generations that this problem hits. Just because you’re a GenX that dropped the ball that isn’t the majority.

  • Kolf 3 years ago

    Hmmmm, please explain where all the worlds newly created money / credit will go if not equities and real estate. The entire world’s real estate prices went up due to this fact.

    Well, I guess real world economics dont matter here, just wishful thinking.

    • James Wilson 3 years ago

      Oh god. People still don’t realize the money is created when the bank creates a mortgage, not the money is created and finds its way to a mortgage.

      Canada’s public education is worth what people pay for it, I guess.

      • Kolf 3 years ago

        Oh god, you do realize that once mortgage is create that money is transferred to the seller and spent in the economy right???? So there is a circulation effect which multiplies that original amount many times.

        Whatever education you had probably didn’t include math or economics 101.

        • dani 3 years ago

          its the fact that its created from the banks for soul control over us.

        • David Tran 3 years ago

          At a velocity rate of 1.1%, so its impact is almost null because it’s a low-velocity transaction. The net draw from productive capital is negative.

          Keep digging when you realize you don’t understand something. Hopefully the person you responded to didn’t a basic economics class.

  • Smug Canadians 3 years ago

    The cat landed on a trampoline! We checked for a pulse, but it’s still dead.

  • Smug Canadians 3 years ago

    You know what’s the funniest thing? There are some smart people out there that think things can continue to go up forever. Silly children!! We adults will let them have their fun though.
    Can I invest in bankruptcy lawyers? 🙂

    • James Ling 3 years ago

      You rant and rave because you couldn’t afford the house you wanted… you have no money to invest lol

      • Average Man 3 years ago

        I have money to invest, just not enough to afford a house somewhere I actually want to live. How fucked up is that? I have a higher-than-average income and what should be, what was, quite recently, a decent sized downpayment, but over the last year-and-a-half things have changed on me. So I guess I’m just gonna have to invest the downpayment elsewhere. Maybe in Smug’s bankruptcy lawyer business.

        Smug, get at me man.

  • herman 3 years ago

    should i buy a condo in scarborough, hamilton or ottawa at this time for 400k? or am i gonna regret it… these properties were all 300k last year lol.

    • Charlie Lee 3 years ago

      The bet’s with the government or with economics. Good luck to whichever side you pick, you’ll need it.

  • Cameron Wilson 3 years ago

    Great post!

  • Charlie Lee 3 years ago

    Veritas said this is the most important indicator for price, and forms a leading trend. Any update on that piece from a while ago?

  • Hugo 3 years ago

    Every day this country feels more and more like I’m back in Venezuela, but without the decent food.

Comments are closed.