Canada

Most Canadian Real Estate Markets Are Seeing Buyers Disappear Faster Than Sellers

Canadian housing is cooling very fast, something few would believe a few months ago. Canadian Real Estate Association (CREA) data shows the national sales to new listings ratio (SNLR) fell in June. The measure, a proxy for demand, shows buyers are dropping out of the market faster than sellers. Most markets are now displaying this trend, which generally cools prices as well. Two markets are now even in balanced territory, something Canada hasn’t seen for a few months.

Sales To New Listings Ratio (SNLR)

The sales to new listings ratio (SNLR) is a measure of absorption, helping to give a read on market conditions. Higher ratios mean inventory is low compared to sales, placing pressure on prices to rise. Lower ratios mean inventory will accumulate, placing pressure on prices to fall. What’s high inventory, and what’s low inventory though?

There are some general guidelines the industry likes to use. If the SNLR rises above 60 percent, the market is a “sellers’ market,” considered low inventory. When the ratio falls below 40 percent, the market is a “buyers’ market” where inventory accumulates. between the two is a “balanced market” where prices are perfect for the level of demand and don’t need to move. 

One thing to keep in mind is stability and velocity. For a market to respond as people expect, the ratio needs to settle in the range. A fast-rising ratio can see a market behave like a sellers’ market, even though it’s below 40 percent. Similarly, a fast-falling ratio can act like a buyers’ market, even if it’s above 60 percent. This isn’t a definitive indicator but should be one of the many you use to form an opinion on where the market is going. 

Most Canadian Real Estate Markets Are Seeing the SNLR Fall 

Canadian real estate is generally seeing market conditions loosen very fast. The seasonally adjusted national SNLR fell to 69.2 percent in June, down 5.9 points from a month before. Considering this ratio was 90.9 percent in January, it’s falling faster than most assumed it would. The ratio is still high, but with this kind of drop, it can flip in just a few months. Three-quarters of major markets experienced a drop in the SNLR.

The quick drop is finally bringing the market back into the stratosphere. Ottawa and Edmonton are the first two markets to fall back into the balanced range of SNLR. Ottawa’s ratio reached 59.9 percent in June, down 10.7 points from a month before. In  Edmonton, it fell to 58.6 percent, down 7.6 points over the same period. Those might be the only two balanced markets in a while, but they’re likely to have some company soon. But first, let’s talk about the markets that are booming.

Quebec Real Estate Bucks The Trend, and Sees SNLRs Soar

Real estate in Quebec had been lagging the rest of the country, but is now heating up. All three major markets to see the fastest rise in SNLR were located in the province. Quebec City had the sharpest increase in the country with an SNLR of 98.1 percent, up 26.7 points from a month before. Trois Rivières came in second at 88.5 percent, up 14.6 points over the same period. Saguenay was third with its SNLR at 93.8 percent, up 9.6 points from a month before. 

Canadian Real Estate SNLR By Region

The sales to new listings ratio (SNLR) for major Canadian real estate markets.

Source: CREA; Better Dwelling.

Most of Quebec’s real estate markets have been performing modestly, and didn’t see a pandemic boom. It’ll be interesting to see if these markets follow the path of “flattening,” like much of the rest of Canada. Though these are all very small markets compared to big cities, so fast changes happen often. 

Halifax Is The Fastest Cooling Real Estate Market

The fastest falling ratios were recently pandemic favorites, but are unwinding with reopenings. Halifax was hit with the sharpest decline with the SNLR falling to 61.2 percent, down 44.3 points from a month before. Sudbury fell to 74.7 percent, down 16.1 points over the same period. Thunder Bay was in third with an SNLR of 83.9 percent, down 16.1 points from a month before.  

Two of those markets still have very high ratios. Sudbury and Thunder Bay still have very low inventory. However, an abrupt shift like this typically means market perception is changing. Sudbury’s decline was due to a sharp drop in sales, and Thunder Bay was due to an increase in sellers. Halifax got the one-two, with a sharp drop in sales and new listings rising almost 50% in a month. 

Canadian Real Estate SNLR Change

The seasonally adjusted monthly point change in the sales to new listings ratio (SNLR) for major Canadian real estate markets.

Source: CREA; Better Dwelling.

Toronto Real Estate Has One of The Lowest SNLRs In Canada

Greater Toronto is one of the lower ratios in the country. The SNLR fell to 63.9 percent in June, down 4.6 points from a month before. It was the sixth-lowest SNLR for a major market in the country. Four-fifths of markets have higher ratios. We’ve talked about Toronto’s SNLR more in-depth earlier this month, since it tends to lead.

Hamilton, the city just down the expressway from Toronto, is losing steam fast. The ratio fell to 71.6 percent in June, down 11.5 points from a month before. The market is the sixth fastest falling ratio in the country, and half of markets have higher ratios. IMF data shows the city has the biggest overvaluation of any market. 

Vancouver Had The Third Lowest SNLR For Canadian Real Estate Markets

Greater Vancouver real estate had the third-lowest ratio in the country. The SNLR for the region fell to 60.3 percent in June, and is just a hair away from being in the balanced market range. We took a deeper dive into Vancouver’s SNLR earlier this month, since it’s also considered a market leader. 

Fraser Valley, the board that borders Greater Vancouver, is seeing a much faster drop in the SNLR. The ratio fell to 71.4 percent in June, down 12.0 points from a month before. It was the fourth-fastest falling ratio, and over half of markets are now higher. While 71.4 percent is still very high, the abrupt shift is worth keeping an eye on.

Canadian real estate markets are seeing a very dramatic shift from just a few months ago. It went from a scorching hot market to one where buyers are dropping out faster than sellers. Whether it’s just a lull or a more permanent shift in the market will remain isn’t totally clear, and won’t be for months. What is clear is the market cooling is coming in like a freight train. That said, prices may already be responding to the change in the SNLR

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13 Comments

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  • Jason Chau 3 months ago

    FOMO in reverse. One person sees their friends wait, so the rest of them all wait. What breaks the slide lower though?

    • GTA Landlord 3 months ago

      If people see others lose money, it propels lower. Its dropping despite the government trying to expand credit availability to everyone though.

    • Paul 3 months ago

      I don’t think friends is the right word here, and waiting isn’t what caused it. If “buyers” disappear it is usually money exhaustion that causes it. Further proof that we were bidding each other up.

  • Patrick 3 months ago

    The market starts cooling the same month they taper QE. A coincidence, I’m sure.

  • Trader Jim 3 months ago

    If you believe the government only started to give out credit when sales fell because they wanted to help with affordability, not try to prop prices up, I’ve got a dilapidated Vancouver home for $2 million for you.

  • V 3 months ago

    But Al Sinclair from hallmark realty REMAX told me to “come in high and hard”, you mean I can lose money now? And prices are going to drop?

  • NotAHomeCanada 3 months ago

    One day the housing market under the CMHC umbrella will make the entire Canada cry. It’s a result of cumulative mistakes by Government bodies. They let everyone earn tons of money i.e. flippers, investors, banks, Hongkong (Chinese) buyers, mafia, realtors, and money launderers. They forget about Canadians, the immigrants, the middle class, the sole bread and butter to their economy. Canada is still not become their home yet. They found in parks since they don’t have cottage home, for them their rent or saving for a home is so long starched they quietly move of this bidding war.

    • D 3 months ago

      blah blah blah, immigrants this immigrants that. Nobody has a right to live in this country even the white “natives”. Canada is not even a country to begin with as it’s still a commonwealth “nation”. Until Canada becomes a full fledge republic/federation there is no Canadian nation, country, or citizenry. Any non citizen immigrant that manages to stay here for four years straight can easily get “citizenship”. Canada is not a place to be proud of, it’s merely a place for internationalists to make money and live decent. Everybody here in Canada san’s the Siberians (first nations, inuit, Real natives) are internationalists. Canada is not an ethnostate and multicultural states inevitable fail.

  • Bkl 3 months ago

    Please, this is due to the new policy to cool the market just like in 2017. We all know what happened after. The fact is the entire world printed tons of money last year and immigration is basically frozen and the boarders are closed. We are opening very soon. People who wait on the side lines now will be very sorry once boarders open. There is no way for prices to drop after such insane money printing. The whole world printed more money last year than 2008. Get this through your head.

    • Ed Higgins 3 months ago

      The policy must have been so effective, it worked three months before it started, and impacted global credit everywhere. That’s some mighty strong policy work from an agency whose policy doesn’t actually impact the majority of buyers .

      • Bkl 3 months ago

        Hmmm, you should good how much money supply increase in the past 18 months. But of course everyone is wrong because you want prices to drop. What happens when prices drop? You would probably be the first to buy? Exactly, thats exactly why prices wont drop. Because there are tons of people who want a house close to city center with a nice backyard and near shopping transit etc. Don’t be angry at me, you are really the reason prices wont drop because as soon as you can afford a home you like you will be willing to max out your credit to buy it. You are part of the problem.

        • Ed Higgins 3 months ago

          Why would I want the value of my house to drop?

          You can’t come up with a logical explanation as to why home demand began to drop in February, so you assume “it must be because he’s jealous of my home!”

          “They printed money!”

          Apparently, you don’t understand how balance sheet roll-offs for QE work either. The money printed isn’t permanent, it gets destroyed on roll off if there’s no replenishment, or absorbed by new allocation to cover new liabilities, reducing the size of futre prints.

          Best of luck to you, and don’t let the bears bite.

    • Average Man 3 months ago

      That really depends on how many speculators are in the market right now. If the purchasers were really end users or genuine investors, than you’re right. This is how much a house costs now. If there were a significant number of highly leveraged speculators, then prices very much could drop.

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