Must be something in the water… or credit supply, since every Canadian market is becoming tight. Canadian Real Estate Association (CREA) data shows the sales to new listings ratio increased across the country in December. The rising ratios made for an unusual month – not a single major real estate market across Canada is a buyer’s market.
The sales to new listings ratio (SNLR) is one way to measure relative demand for inventory. The ratio is exactly what it sounds like – the ratio of home sales, compared to newly listed homes for sale. Using this measure, we get some idea of how quickly inventory can be replenished. The industry uses this as one of the methods of determining if a market is hot or not.
The hard work is collecting the numbers – after that, it’s a straightforward read. If the ratio is above 60, it’s a seller’s market – where prices generally rise. If it’s below 40, it’s a buyer’s market – where prices generally fall. Between 40 and 60, and the market is priced right for the demand at the time.
There’s a few caveats – most notable is velocity. Fast moving markets tend to act in the direction they’re heading. That is, if it’s a buyers’ market, but the ratio is rising fast – the market might start to act like a balanced or sellers market. It’s always best to use this indicator as just one of the market measures, when assessing how a market is doing.
The SNLR Is Rising Across Canada
Cities across Canada are seeing inventory get tighter, as the national ratio rises. The SNLR for the aggregate of Canadian cities reached 59.7% in December, up 4.8% from last year. The same month last year dipped, but the market is currently above 2017 levels. Yes, it’s not just your market getting tight – markets across the country are seeing demand rise.
Eastern Canada Sees The Largest Increases
The markets seeing the largest increases are all located in Eastern Canada. Halifax’s SNLR reached 78.6% in December, up 13.9% from last year – the biggest increase in Canada. Montreal follows with the SNLR hitting 78.4%, up 8.7% in the same period. Ottawa made the third biggest increase with an SNLR of 77.8%, up 8.1% from last year. Important note – all 3 markets, have seen the December SNLR rise for at least two consecutive years.
Sales To New Listings Ratio
The sales to new listings ratio in selected Canadian residential real estate markets.
Source: CREA, Better Dwelling.
The Biggest Losers Are In Southern Ontario
Southern Ontario is seeing the biggest drops to SNLR across Canada. Windsor leads with an SNLR of 70.4% in December, down 5.2% from last year. London follows with an SNLR of 72.9%, down 2.5% over the same period. Victoria came in third with a ratio of 60.3%, down 1% from a year before. Important to note, all 3 markets with the largest declines are still sellers markets.
Sales To New Listings Ratio Change
The percent change in sales to new listings ratio selected Canadian residential real estate markets.
Source: CREA, Better Dwelling.
December is an unusual month, since not a lot of people sell during this period. However, this year we saw a substantial rise in buying activity. Naturally, an unusual winter surge in buying activity would kill a lot of inventory. Either almost every single major market is hot across the country, or Canada is pumping too much cheap credit into its housing markets.
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