Canada

Major Canadian Real Estate Markets That Reopened See Inventory Explode Higher

The Canadian real estate market is starting to see sellers return, especially in post-lockdown regions. Canadian Real Estate Association (CREA) data shows the sales to new listings ratio (SNLR) fell across Canada in May. The entire drop was due to inventory rising much faster than sales, in regions where the lockdown has been mostly lifted.

Sales To New Listings Ratio (SNLR)

Analyzing sales or listings by itself gives important macroeconomic information. It doesn’t tell anyone a lot about how hot or cold the market is. Instead, you need to compare the number of new listings hitting the market, in contrast to the number of units sold. That’s what the sales to new listings ratio (SNLR) is – the ratio of sales, in contrast to listings.

By using the SNLR, we can get an idea of how quickly inventory is being replenished. The higher the ratio, the more pressure on prices to rise. The lower the ratio, the more pressure on prices to fall. The general rule is between 40 and 60 percent, the market is considered balanced. Above that, prices are expected to rise, and below that they’re expected to fall.

An important exception to this rule is when the ratio is moving quickly. Fast rising ratios tend to push prices higher, even if they’re in a buyer’s market. Fast falling ratios can push prices lower, even in a seller’s market. Where a market is, is equally as important as where a market is heading. At least when you filter for enthusiasm.

The Economy Is Reopening, And Pressure Is Being Relieved Across Canada

Economists expected more inventory as lockdowns lifted, and they were correct. The seasonally adjusted SNLR for Canada fell to 58.8% in May, down 4.5% from the previous month. Generally speaking, economies locked down are seeing more buyers than sellers. Regions with lockdowns lifted, are seeing new listings surge faster than buyers.

Sales To New Listings Ratio

The seasonally adjusted sales to new listings ratio in select Canadian residential real estate markets.

Source: CREA, Better Dwelling.

Southern Ontario Real Estate Leads The Tightening of Inventory

Southern Ontario leads the country in sales accelerating faster than new inventory. Hamilton saw the biggest jump to 81.3% in May, up 20.8% from a month before. Kitchener follows with a SNLR of 76.2%, up 19.4% from the month before. Quebec City is in third with 80.4%, up 17.1% from last year. Worth a mention is Southern Ontario remains one of the most locked down economic regions in Canada.

Sales To New Listings Ratio Change

The monthly percent change in the seasonally adjusted sales to new listings ratio selected Canadian residential real estate markets.

Source: CREA, Better Dwelling.

Real Estate Markets With Looser Restrictions See Inventory Jump

Markets with the most restrictive measures lifted in May are seeing inventory rise. The SNLR for Halifax is the fastest falling at 64.7% in May, down 39.8% from the month before. Montreal’s ratio fell to 62.4%, down 36.4% from a month before. Fraser Valley was in third with 38.8%, down 14.5% from a month before.

Notably absent from either extremes are Toronto and Vancouver, which land in the middle. Toronto’s SNLR increased to 57.9% in May, up 6.5% from a month before. Vancouver’s fell to 40.1%, down 9.6% from a month before. It’s worth a note that Toronto is one of the last economies to reopen, and Vancouver was one of those least impacted.

When the lockdown was across Canada, the SNLRs jumped – even hitting over 100% in some markets. Economists, including four bank economists, are expecting inventory to outstrip buyers as markets reopen. One bank is forecasting the rise in Montreal, is the path major markets will follow. Pre-pandemic, it was arguably the hottest market in Canada, with soaring sales. After the lockdown was lifted, new inventory was almost 3x the amount seen during the lockdown.

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17 Comments

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  • GTA Landlord 3 months ago

    May was the most condo listings Toronto has ever seen, and the economy isn’t even reopened fully yet.

    • Marc 3 months ago

      The issue in Toronto has always been sellers are better informed than buyers.

      They don’t realize a lot of these sellers are being told from their real estate agent to dispose now, because falling rents mean falling prices (or turning a negative cap condo into seriously negative cap).

  • Karen Wilson 3 months ago

    Vancouver is reopen, but condo owners didn’t get their usual deep pocked international students to rent out units, and now there’s a ton of former student turned condo listings.

  • Terrance 3 months ago

    More bullish for stocks than I am for housing.

    “Says negative rates not a good idea, calls asset purchase QE”

    Macklem Sees Long Road Ahead for Canada’s Post-Virus Recovery:

    https://www.bloomberg.com/news/articles/2020-06-22/macklem-sees-long-road-ahead-for-canada-s-post-virus-recovery

    and I’m not particularly enthused by stocks. Government is pumping in liquidity, when prices are at record highs.

  • straw walker 3 months ago

    Difficult to forecast this economy.
    As Central banks continue to explode their balance sheets, when will this increased money supply have an effect.?? There is an old saying never bet against the FED.
    Will this economy continue going south, or will it turn into an inflation economy.??

  • Strategic 3 months ago

    Economics aside, I see a huge strategic mistake being made here by the liberals in regards to housing prices. If one is to think about the situation, this government sponsored housing bubble in major urban centers disproportionately impact young urban professionals.

    The vast majority of liberal voters are young urban professionals, the liberals are simply killing their support base for the next 30 years. All the conservatives have to do is simply promote the idea that during the liberals reign housing have become unaffordable for young families.

    I don’t understand why the liberals would tax their own support base this way. And yes, housing bubbles are essentially a tax on the young and wealth transfer to the hold via health care and home value appreciation.

    Most young people I know hates the liberals because they prop up housing prices. Imagine if the conservatives sponsor a party that just targets young people who are stressed by housing prices. The party dont have to do anything but to take these voters away from liberals and the conservatives will reign forever.

    The liberals should be doing the opposite of what they are doing right now and lower home prices in urban centers.

  • Joe Doe 3 months ago

    This article is BS. It’s a placed piece by the industry. and as expected, the majority of “adjusted” data here points towards a “sellers market”. No surprises there.

    Well… I’m the buyer with cash. I’ll wait until sellers are “motivated” by unemployment or mortgage payments they cannot afford. I can wait forever, and I have. Ottawa, the BoC, CMHC, and our major banks have all colluded to keep housing going these past 20 years.

    The only tools left to these criminals are opening the floodgates to wealthy immigrants, and or extending mortgage terms to 30 -35 years.

    Go ahead, I dare you. As it’s clear that I can outlast 75% of homeowners, I’ll sit on my cash until things become unbearable for them. This is what greed nets you ….on the way down.

    • Michael 3 months ago

      It’s painful to watch the average person try to understand statistics.

      First of all, if the industry placed it – the industry wants prices to go lower? Because that’s what more inventory means.

      Second, you can’t compare one month to the next without seasonal adjustments. The seasonal adjustment model is created by Statistics Canada. I know, but you probably think Statistics Canada is a room of Realtors with a PhD that resulted in your boss not giving you enough to afford the lifestyle you want.

      Damn Realtors!

  • Balky Bartokamous 3 months ago

    It’s crazy here in KW with 5+ bids and selling 50-120k over list. Obviously it’s regional though as the amount of high paying job openings right now are in the thousands.

    • Mike 3 months ago

      It must be crazy in KW because in Listowel Ontario, 30 minutes away, it appears all inventory is being bought up at what I see as breakneck prices for a small town. The only way this is happening is people from KW are panicking and spending “whatever it takes” to get into the market. My home alone (which I thought was overpriced when I bought last year) has went up estimated 20%.

      • Balky Bartokamous 3 months ago

        It isn’t really panicking as the majority of people that have moved in near me (new subdiv) have moved here for work because there are so many jobs. There are two families that moved here for a big tech company and they’re in short term rentals bidding on places bug haven’t been able to get one yet.

        • Mike 3 months ago

          Sorry, I meant lower income people must be panicking to get a place as they’ve lost there chances in KW, as they are being priced out of the market. I know for a fact most people working in KW and living here, are here because they can still afford it as they are not high income.

    • JRD 3 months ago

      Seeing the same thing here in Ottawa and Kanata. Houses are going for 50-80k over asking. Market is over heating as we speak. An agent just told me vans of Chinese investors are driving around outbidding each other on houses. Your offer needs to be no conditions, no inspection to even get considered. My co-workers are all talking about selling their homes or buying an investment condo. The number of people I know from single income families who own 2, 3 or 4 investment properties is crazy. I hope the Bank of Canada and our politicians are happy with the situation they have created here. This is absolute insanity.

    • Chris 3 months ago

      It looks like you have nothing to worry about. According to zolo.ca the monthly drop in prices (in KW) is 11%. So keep your upper lip stiff. I am surprised with this 50-120K over list though.

  • alvi 3 months ago

    Mike enjoy the ride.

  • Manoj 3 months ago

    This is once again the hype of FOMO which creates the buying frenzy,.

    Basically people have to realize the entire Canadian housing market is controlled by the Organized RE machine. Which consists of the Media, Government (Fed, Prov and Muni’s), CREA, CMHC, Banks, Developers and Appraisers to name the main ones. Their remit has been to create a house price illusion of house prices can only rise linearly. The entire machinery is stacked in favour of the seller.

    The buyer has ZERO protection. The buyers agents are nothing more than pen pushers who draw up what is BOiLER PLATE contract which is created by the local Real Estate Boards and it has no ” force majeure ” close to get out in an unforeseen circumstances.

    Once you put down the deposit, the seller has a stranglehold on you and there is getting out option for the buyer.

    It is shocking to see in the 21st Century, this sort of practices continue to prevail. Especially for one of the biggest purchases a Canadian makes in their lives. Buying a home! With zero consumer rights??

    Until these sort of practices continue, house prices will continue on a upward spiral creating an illusion of paper millionaires who have a million dollar house but have zero savings and are begging for mortgage deferrals across the country because they lost their income.

    • Michael 3 months ago

      Did you even read the article? It’s literally the opposite of someone creating FOMO.

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