Canadian real estate buyers are taking a break after driving most of the country’s markets to new highs. Canadian Real Estate Association (CREA) numbers show the sales to listings ratio declined across most of Canada in January. There were only three exceptions, all located east of Toronto.

Sales To New Listings Ratio (SNLR)

The sales to new listings ratio (SNLR) is a quick way to view real estate market demand, and is used by CREA. The indicator measures the ratio of home sales, to the number of new listings on the MLS. The thinking behind it is, by measuring same month absorption – we get a feeling for how hot or cold a market is. It’s how the industry can tell if a market is “balanced” or not.

Reading it is straightforward. If the ratio is above 60%, the market is called a “seller’s market,” where prices are expected to rise. If the ratio falls below 40%, it’s a “buyer’s market,” and prices are expected to fall. Between 40% and 60%, the market is considered “balanced,” and prices are just right. Be careful, fast moving ratios can change the market quickly. That is, sometimes a ratio is just making a brief stop in balanced territory before the market flips.

Real Estate In Eastern Canada Is Showing Improvements

Canadian real estate markets showing annual improvements were all located in Eastern Canada. Montreal showed the largest gain with an SNLR of 70.1% in January, up 6.6% from last year. Ottawa came in second at 70.2%, up 5.3% from last year. Quebec City is up to 52.6, rising 0.8% from last year.

Sales To New Listings Ratio – January 2019

The sales to new listings ratio in Canadian markets with more than 400 sales in January 2018.

Source: CREA, Better Dwelling.

That was it for positive indicators. Toronto real estate came in fourth at 49.5%, down 1.5% from last year. The national average was just under that in fifth at 54.3, down 4.3% from last year.

Real Estate In Western Canada Is Showing Further Declines

Western Canadian real estate led the way lower. Fraser Valley experienced the biggest decline with an SNLR of 48.5%, down 24.2% from last year. Vancouver real estate was in second at 43.3%, down 22.9% from last year. Calgary came in third with an SNLR of 45.9%, down 8.5% from last year. Fraser Valley and Vancouver are the country’s most expensive markets, and have seen some of the biggest gains. The cooling is therefore expected, after running overly hot for a few years.

Sales To New Listings Ratio Change – January 2019

The percent change of sales to new listings ratio in Canadian markets with more than 400 sales in January 2018.

Source: CREA, Better Dwelling.

Deteriorating macros following large price gains across Canada are cooling most markets down. Only 3 markets, which all underperformed the national price gains, are exceptions.

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