Canadian real estate buyers are facing less inventory, and more competition. Canadian Real Estate Association (CREA) data shows the sales to new listings ratio (SNLR) increased in most markets this past January. The rising ratio, used to help understand demand, reached a “seller’s market” last month. Not just in one place either – the whole country is now a seller’s market.

Sales To New Listings Ratio (SNLR)

The sales to new listings ratio (SNLR) is one way to gauge relative demand of inventory. Analysts use it to help determine how fast new listings are coming in to replace sold inventory. The lower the ratio, the more inventory will build. The higher the ratio, the tighter inventory is. When people talk about supply and demand, this is one of the core metrics used to understand it.

The SNLR is a straightforward read. When the SNLR rises above 60%, the market is a seller’s market – and prices should rise. When the ratio falls below 40%, the market is a buyer’s market – and prices should fall. Between 40% and 60% the market is considered balanced, and priced right for demand. Generally the ratio needs to stay in the range to see it respond in the expected manner. There’s also a few caveats, such as priced right for the market now, doesn’t mean it’ll be priced right later.

Canada Enters A National Seller’s Market

Canada entered a national seller’s market last month, after a big spike in sales. The SNLR for Canada’s urban aggregate reached 60.5% in January, up 6% from a year before. Montreal had the highest SNLR of any city at 79.8%, up 9.6% from last year. Halifax followed with an SNLR of 79%, up 14% from a year before. Ottawa came in third with an SNLR of 78.6%, up 8.4% from a year before. The national number is the highest for January in at least 3 years. The top 3 cities have also seen at least 3 consecutive increases for the month.

Sales To New Listings Ratio

The sales to new listings ratio in selected Canadian residential real estate markets.

Source: CREA, Better Dwelling.

The lowest ratios of any urban market were all located in the Prairies. Saskatoon has the lowest urban SNLR at 42.8% in January, up 2.7% from a year before. Regina follows with an SNLR of 47.7%, up 4.7% from last year. Edmonton comes in third with an SNLR of 48.7%, up 4.7% from last year. Despite having the lowest ratios, all three markets are “balanced” by this indicator. These markets also saw improvements from a year before.

Eastern Canada Is Seeing The Fastest Rise In SNLR

Eastern Canada is seeing the fastest rise in SNLR, and it’s really fast. Halifax made the biggest jump with the SNLR reaching 79% in January, up 14% from a year before. Montreal was in second with an SNLR of 79.8%, up 9.6% from a year before. Toronto came in third with an SNLR of 58.8%, up 9% from last year. All three markets are firmly above their 2018 number as well.

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.

The only declines for SNLR were located in Southern Ontario. The Windsor-Essex region reported an SNLR of 69.8% in January, down 5.4% from a year before. London’s SNLR fell to 72.8%, down 1.9% from last year. The drops still weren’t enough to bring the markets out of seller’s territory.

Canadian real estate sales are growing faster than new inventory in all but two markets. The sudden surge in sales over the past few months, likely has to do with delayed B-20 demand. The surge in demand is removing a lot of pressure on prices to fall, which compounds inventory issues. Ironically, fewer people want to sell during a seller’s market.

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