The Canadian Property Bubble Is Deflating Right On Schedule

The Canadian property bubble could have been built by the Swiss, it’s moving so precisely. The sales to new listings ratio (SNLR) is a measure of absorption, and has a track record of leading price growth. A couple of months ago, we said the rapid decline in the ratio would lead to price growth peaking right around now. Last month’s data looks like that prediction is holding true.

Canadian Sales To New Listings Ratio (SNLR)

If you missed it (or need a refresher), we did a run down on the historic relationship of home prices and the SNLR. Since 2005, the national benchmark has seen price growth peak 2 to 6 months after the SNLR peaks. The SNLR peaked in January of this year, so that would mean price growth would peak in March to July. It hasn’t yet, but the probability of it doing so this month (July) is now very high. 

The SNLR for Canadian real estate keeps spiraling lower, and it’s doing it at a very fast rate. The seasonally adjusted SNLR fell to 69.2% in June, falling 5.9 points from the previous month. It’s now 21.6 points lower than the peak reached in January. More bluntly, the market is 23.8% better supplied than it was back in January, relatively speaking. 

Canadian SNLR vs Annual Price Growth

The sales to new listings ratio (SNLR) compared to the annual rate of benchmark price growth, for composite homes across Canada.

Source: CREA; Better Dwelling.

Most people heard about the annual rate of price growth pushing even higher, but few looked at it. Annual growth for June came in at 24.43%, just 20 bps higher than it was a month before. It was the smallest acceleration for the trend since May 2020, when people thought the word was going to end. It’s an abrupt slowdown, considering how fast home prices were moving a few weeks ago.

Canadian Real Estate Price Growth Is Unlikely To Rise Further

For those not seeing it, I find a less abstract look at the numbers can make it more clear. Let’s do it in dollar terms. Back in January when the SNLR peaked, it was a very tight market. The following month saw the benchmark price rise $27,600 over just the month. Yeah, bruh. Seriously. Prices jumped by $27k in a month, and people thought it was fundamentals. 

The SNLR has fallen since then, along with monthly price growth. The ratio fell to 69% in June, and prices advanced $4,900 in the same month. Keep in mind people use the previous month’s data to make decisions in the current month.

Canadian SNLR vs Monthly Price Growth

The sales to new listings ratio (SNLR) compared to the monthly dollar change in the benchmark price, for composite homes across Canada.

Source: CREA; Better Dwelling.

The price move in June was influenced by perception of May numbers. Last month’s numbers will play a large role in market perception this month. That means this month is likely to see even smaller monthly home price growth.

Crunching the numbers yesterday, we showed June is likely to have been the peak. Prices need to rise 2.0%, about $14,800, in July to even maintain the current annual rate of price growth. If it doesn’t rise at least that much, we have June as the confirmed peak. That’s in line with historic SNLR timelines, which showed it would be between March and July. Can I get a “fuck yeah” for math?

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  • RMTL 3 years ago

    fuck yeah !!!!

  • Neek 3 years ago

    This is to be expected with the new cooling measures. But fundamentally does not address the fact that the entire world printed tons of money, not just Canada. Over the median term the price will still increase.

    I think its unethical to mislead people into thinking real estate prices will crash any time soon. Its better to suggest to them to buy in other cities rather than waiting for Toronto or Vancouver to crash.

    • DD 3 years ago

      if tons of money are printed and inflation is so high, next step is to increase interest rate to cover inflation! once interest rate increased, poor Canadians ( 50% of people in Canada that took low % mortgages won’t be able to afford to pay high interests because of housing to income ratio!). What comes next? crash , crash, chash!!!

    • Doomcouver 3 years ago

      With the amplitude of the run-up this massive, expecting it to keep going isn’t being intellectually honest. Debt-fueled asset manias aren’t sustainable, and the prices can’t rise in perpetuity. The market will normalize, it’s just a matter of when, and how big the pullback will be.

  • Pepp 3 years ago

    Hmmmm…… If BD’s theory is correct I see the SLNR peaking but there is also a large rebound. So by their own theory we should see a large rebound soon as well?

    Which is it?

    • GTA Landlord 3 years ago

      You’re looking at that chart incorrectly if you see that. The next correction due to the current price level is going to require a much more long term catch up of rental yields.

  • D 3 years ago

    The foreign buyers are exiting because of tapering of QE and the eventual rate hike. They don’t see a profit to be made with Canadian housing. The end result is $200k CAD for an average home, down form the current $800k CAD. Canada should ban foreign ownership and institute a new housing tax for Canadian individuals and companies with more than 2-3 residential property unless the company itself is in the business of property renting. No more free ride for people that take a loan out just to rent the place out at exorbitant rates!

    • DoubleD 3 years ago

      I would support this 100% and I bet many others would as well.

      • Alan 3 years ago

        Anyone who wants to buy a home would support it. FWIW I was in SanAntonia Tx Dec 2019 and brand new detached homes were $160K, 2800 sq feet with a double car garage would run around $225K, $300 would get you 3 car garage and 3200 sq feet..

    • John Thunder 3 years ago

      Lol a 75% drop… holy desperation! Even the wildest ranting posters wouldn’t say that

      • Doomcouver 3 years ago

        Not as impossible as you might think, though you can likely consider it the worst-case scenario. 75% would be a mean reversion back to inflation-adjusted 1990s valuations. I think it’s possible, but Canada would be a terrible place to live and work if that happens. 25%+ unemployment anyone?

    • neo 3 years ago

      You are a fool if you think the average house Canada is going to 200K. Let’s be real here.

      • flipg 3 years ago

        The $200,000. home is the house we can afford. The $800,000. home is the one invented by the Government to compensate for the 3rd world standard of living made possible Canadian wages.

        • Neo 3 years ago

          Who is “we”? The only way homes get to $200,000 is if we get 80’s interest rates of 18-20% and that isn’t happening for a number of reasons. We would get back to 5-6% at best and that’s even a stretch and prices would fall and take us back to 2014-2015 prices but not 1994-1995 prices. We would be in the middle of a Great Depression and have much bigger problems than housing if that was the case.

          • DD 3 years ago

            2017-2019 prices dropped without interests rates going up!
            Bubbles get deflated without announcements.

          • DD 3 years ago

            taking limits off land restrictions can easily deflate the bubble
            its sheltor slavery in Canada
            internet monopoly
            gasoline monopoly
            you name it monopoly

          • DD 3 years ago

            “we”, most of Canadian working class, not making to afford $800 house!
            Nothing is transperent in Canada, not even real estates prices and tax history.

            If you check any US Realestate site price history you can find all information about the house you want to buy ( how many times it was sold and for how much )

          • DD 3 years ago

            if tons of money are printed and inflation is so high, next step is to increase interest rate to cover inflation! once interest rate increased, poor Canadians ( 50% of people in Canada that took low % mortgages won’t be able to afford to pay high interests because of housing to income ratio!). What comes next? crash , crash, chash!!!

          • Liam 3 years ago

            @ DD

            Interest rates increased 250% from 2017 to 2019. The decline in price did occur right as credit was being throttled.

          • M.Bury 3 years ago

            80’s interest rate of 18-20% was from a base of 9-10% a few years earlier, so about double. Your scenario of 5-6% is more than double current rates, so I think you just explained exactly how prices could get to around $200k.
            The question is: will BOC actually raise rates?

      • Park money once its 30% off 3 years ago

        Once its 20-25% off current price.
        Good place to park money!

    • Alice 3 years ago

      The major issue with Canada is despite its large landmass, there are only a few cities to live in.

      And don’t tell a Black Muslim, or Jewish man wearing a kippah, to live in say, a small town in Ontario or Alberta where they will most likely get assaulted or run over by a pick up truck by a Canadian nationalist.

      This forces newcomers to live in the few cities where NIMBYs don’t want more housing supply.

    • Alan 3 years ago

      Lets see, $200K after DP is about $300 a month in interest, I can afford that easy. Dont see it happening though when lot and development fees for a single family home in Toronto are close to $300K, never mind labour, material etc etc…

  • Jamie Hess 3 years ago

    Gas-lighters are still publishing articles on bidding wars for houses listed way under the value. LoL

  • DD 3 years ago

    Only blind can’t see it was coming

  • Derek 3 years ago

    But – but – my boomer parents said that real estate prices only go up?

  • Bruce Johnston 3 years ago

    F bombing is a weak mind trying to express itself forcefully.

    • Ian 3 years ago

      lol. You’re the guy he made fun of on social two weeks ago, aren’t you? BAHAHAHAHAHAHA.

      Still at it bud. Good for you, the jokes about you are hilarious.

      FYI, some of the greatest authors in history used the F word. Fuck off, and go back to the Footloose town you’re from.

    • Denise Platter 3 years ago

      A weak mind is someone that returns repeatedly. Im guessing you don’t really know who the author is, because you can rest assured he doesn’t care what you think.

  • John Thunder 3 years ago

    Quite funny how it’s now “right on schedule” considering the crash was “right around the corner” for the last 10+ years according to Better Dwelling. Since this is about the 12-15th + “right on schedule” I’ve read since I joined I wonder if this is a real one :p

    • Jamie 3 years ago

      Boomers are hilarious. In your mind when you make up how long ago you’ve been reading Better Dwelling, are you at their high schools and they’re writing handwritten? Or is your mind so gone, you have a hydros reality, where you were using an iPhone during 9/11?

    • DD 3 years ago

      wait and see

  • Alice 3 years ago

    It will be just desserts when NIMBY Boomers who sold their houses for #GAINZ return to their communities only to see it transformed into condos they can never buy back.
    The Boomers want to sell high, but they are expecting to buy during a crash. Those houses are already planned to become condos.

  • Intheknow 3 years ago

    Prices will stabilize until immigration kicks into gear, then thanks to the wonderful red tape on development, prices will go back up due to demand pressure especially on detached homes.

    • DD 3 years ago

      welcome to the Canadian slavery, where income to housing ratio is absurd!

      there is no land in Canada to build for the new commers

  • V 3 years ago

    Another FUCK YEAH,

  • V 3 years ago

    What ever you do, don’t listen to Al Sinclair from Hallmark Realty, Remax. “Where the magic happens” or where he magically bamboozled people into over paying while simultaneously increasing his commission. Pure scum inflating Real Estate prices while he’s shilling properties on cp24. Trust me my first transaction was with a Remax realtor, and they are scum. The realtor I worked with knew there was a stop work order on property but never told me just so they can sell a house and get commission. Stay far away from Remax and Century 21 ain’t any better. I sold with Century 21 and the commission was inclusive of hst. Then the head office charged me hst anyways. These people don’t know how to do business properly. Stay far away from these 2 companies.

  • Bob Walter 3 years ago

    So the news is its now growing at 15% instead of 20%.
    So it is still growing but less steep. Bit of a nothingburger then?

    • DD 3 years ago

      there news is – no one knows when bubble bursts
      it can burst

    • Blake R 3 years ago

      news-young Canadians have no future in this country and f up because of government elite monopoly on everything ( internet, land, gasoline, etc). Prices to income are getting ridiculous.

    • Crash 3 years ago

      it can crash with stock market together or on its own

Comments are closed.