Two of Canada’s most important markets, which often lead the trend, are moving in an unusual way — together. Despite being across the country from each other, both markets saw a surge in the sales to new listings ratio (SNLR) for July. The measure, which gives a read on demand, shows inventory is getting tighter. While this might mean the market is heating up, it’s just as likely to be a mismatch of expectations.
Toronto Real Estate Inventory Is Tighter, But Not Like It Was Earlier This Year
The SNLR in Toronto made a sharp climb, but is still much lower than it was a few months ago. The ratio reached 74.8% in July, up from 68.6% the month before. In contrast, the peak SNLR was back in December, when it reached 122.4%. It’s a tight market by any measure, but it’s loosened by more than a third since its peak. This is likely why relatively tight inventory still resulted in falling prices.
Vancouver Existing-Home Inventory Is Also Tightening
The SNLR in Vancouver also made a sharp climb, but is still significantly lower than its peak as well. The ratio reached 76.0% in July, up from 64.0% the month before. Compared to the peak of 126.6% seen this past December, it’s still more than a third lower. Tightening market conditions, but not quite to the extreme we’ve seen earlier this year. Also, likely why home prices were flat in the region, despite a tight market.
Toronto and Vancouver Home Sellers Are Synchronizing
The most interesting point here isn’t the decline of price growth acceleration. Not even with a tightening market. It’s how similar buyers and sellers in two completely different markets are acting.
Buyers are scrambling to buy, while sellers aren’t appearing — despite a lot of people planning to sell this year. They’re more than likely waiting for the fall market, hoping to milk a few extra months of gains. Both cities are seeing the same thing, including the SNLR rising to within a point of each other. It’s a little odd, but not totally unexpected.
Toronto and Vancouver Sales To New Listings Ratio
The unadjusted sales to new listings ratio (SNLR) for Greater Toronto and Greater Vancouver.
Source: CREA; Better Dwelling.
Synchronization like this is often a sign of behavior-driven market mechanics. This is when narrative expectation takes over, rather than fundamentals. Both regions have seen the SNLR fall due to sellers dropping out of the market faster than buyers.
Last year a similar situation occurred as well, before an explosion of listings in the fall. That might be happening this year as well, though last year buyers were also pulled forward by falling mortgage rates. This year there’s nothing to pull them forward. If there are pent-up sellers building, they’re betting on a lack of pent-up inventory. If they’re wrong, the flood of inventory will soften the market and the pressure for prices to rise.
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