Canadian real estate inventory is improving, relieving pressure on home prices. We took a dive through the June sales to new listings ratio (SNLR) from CREA. While it helped to explain why price growth is slowing, we got a few emails asking if it was really due to falling sales. Or is inventory rising to healthier levels, pushing home price growth lower? Let’s take a look at the sales and new listings numbers more in-depth to find out.
Canadian Home Buyers Fell At A Rate 12x Larger Than Sellers
Canadian real estate home sales fell a lot faster than new listings, and by a large margin. Seasonally adjusted existing-home sales came in at 50,810 in June, down 8.4% from the month before. To contrast, there were 86,632 new listings, down 0.7% over the same period. Fewer sales are clearly the driver in this case.
Canadian Homes Sales Vs New Inventory
The monthly percent change of seasonally adjusted home sales vs new listings in June.
Source: CREA; Better Dwelling.
Homebuyers have been dropping out of the market a lot faster than home sellers. Existing home sales fell at a rate 12x larger than new listings in June. In terms of the absolute number of units, sales fell 9x that of new inventory. The market is still very tight, but a lot of pressure was relieved on prices to rise, relatively speaking.
Toronto Home Buyers Fell At A Rate Over 3x Larger Than Sellers
Greater Toronto real estate also experienced a similar trend, just not as extreme. Seasonally adjusted existing home sales came in at 8,885 in June, down 9.1% from a month before. There were 13,909 new listings, down 2.5% over the same period. Fewer sales were the issue here as well, as buyers dropped out faster than the number of people looking to sell.
Existing home sales took a much faster drop than new listings, but the market was closer to balanced. The number of sales in Greater Toronto fell at a rate 3.6x larger than new listings. In absolute terms, sales fell by a 2.5x greater number of units than newly listed inventory. It was a lower rate than the national index, but Toronto wasn’t as tight of a market as the National level. A rare occasion, apparently.
Vancouver Home Buyers Fell At A Rate Nearly 2x Larger Than Sellers
Greater Vancouver real estate wasn’t immune to the national trend either. Seasonally adjusted home sales fell to 3,290 units in June, down 11.5% from a month before. New listings fell to 5,459 units, down 6.0% over the same period. You can probably already see the ratio is more balanced than the national market.
Existing-home sales in Vancouver fell at nearly double the rate of new inventory. Sales dropped by a rate 1.9x larger than new listings. In absolute terms, sales declined by 1.23x the units new listings dropped. Like Toronto, Vancouver’s market was closer to balanced than the national level. The market is loosening very quickly, it just doesn’t need to loosen as quickly as other regions.
A lot of takeaways here, but the most important is market mechanics appear to be intact. That’s a really big one too. As home prices rise, the market has fewer qualified buyers. Falling buyers? Check.
At the same time, higher home prices also create more incentive to sell your home. This is especially true for demographics that are mobile, such as retirees. More recently, the work-from-home crowd is also primed to take advantage of this trend. More sellers, or fewer sellers dropping out of the market? Check.
The market is finally starting to act rationally again. Now to find out if it’s so irrational, it will reject the irrational behavior over the past few months… or will it adopt a new normal, and try to push forward, inequality and all.
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And yet there was an 16% increase in price in June, what’s your point???
I imagine the point is you’re an idiot if you look at annual growth during a period of base effect for recent performance.
Canadian real estate will never ever go down. We can count on at least 8-12% increase every year, year over year.
The surest way to bring down Canadian real estate prices to much lower and affordable levels is to reduce immigration for the next 5 years. Talk to any realtor in Toronto/Vancouver and the Top 3 reasons you will hear about why you should buy today are “Immigration, Immigration, Immigration”. It is absolutely pathetic how Canadian policymakers have put so much emphasis on excessive immigration over the last few years but haven’t done enough to increase the supply of affordable housing. This is simple Demand/Supply Economics 101 stuff and yet somehow the people making public policy in Canada are incapable of figuring this out??? Until this is fixed the bottom 95% of Canadians will continue to see their standard of living inevitably collapse for the next several years…