Herd Mentality? Toronto and Vancouver Home Sales and Inventory Are Moving Together

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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  • Lou 1 year ago

    Also no urgency to sell. We were thinking of listing, but then decided to just wait until the fall. Why not enjoy the summer?

    That might feel different if you’re worried about selling though.

  • Mortgage Guy 1 year ago

    There is a pull-forward effect though, my friend. Buyers are trying to use their pre-approvals before the B-20 Guidelines. I’m not sure how many couldn’t push their buying to the next month, but that would account for part of the need to buy a house while everyone else is pulling back.

    This probably pulled even more people forward, potentially creating a bigger gap in September.

    • Trader Jim 1 year ago

      Probably a good chunk of the market this time considering “highly indebted” (OSFI’s words, not mine) represent over a fifth of new mortgage debt.

  • Brian 1 year ago

    Those numbers don’t look sus at all. We need auditable transactions.

  • Robert 1 year ago

    The government continues massive printing and money devaluation. I guess herd understands it and noone wants to sell!

    • Income to house price ratio 1 year ago

      It’s not income that printed in your new house basement.
      Government has so many tools to absorb that amount of money, its has happened before.

  • Dll 1 year ago

    The solution is simple, tax multiple residential properties. Corporate owning deatched homes should be heavily taxed.

  • Bkl 1 year ago

    Its simple, the world increase money supply by 40%. Much of that into assets and mostly real estate in Canada. If you missed Toronto and Vancouver there is still a chance in other cities. In two years time even other cities will be out of reach.

    • NM Ayer 1 year ago

      Yes, because cities only need people aged 50 plus to operate. It’s all of those geriatric Gen Xers filling the bars and hip stores that create value.

      • Andrew 1 year ago

        you have to prove to yourself that you are capable to achieve your goals. If you in need of a house, go and get it.

  • M.Bury 1 year ago

    Wilful Blindness

  • ML 1 year ago

    Good to see the SNL picking back up. I purchased 2 investment properties in vancouver suburbs last year and have seen excellent gains… they are up around 40%… hoping they will go another 20% before I flip them. The bank of Canada promised low for long rates and guaranteed house appreciation, so this has just been great for so many canadians. I’ll hold my investments until 2023 when they say rates will rise again

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