Toronto/Vancouver: Detached Homes Sales to New Listings Ratio Fall Update

A great way to forecast where a housing market’s prices are going is to study its sales to new listings ratio. If that number is getting larger, supply is tightening, and prices are likely going to be on the way up in the near future. If, however, the ratio is decreasing, prices are likely going to follow. Tracking this ratio will not give a perspective buyer or seller much warning, but it will equip them with some forward vision, as the ratio generally moves before prices do.

This leads us to our Vancouver/Toronto comparison series because Toronto appears to be trending nine months behind Vancouver’s real estate actions. From Vancouver’s sales to new listings ratio, we may be able to gain up to a year’s forward vision of the Greater Toronto Area market by leveraging both markets’ trends.

S to NL DH OctSource: TREB, REBGV, Better Dwelling, Six Housing Sense

Our first graph shows the last four years of sales to new listings ratio for each city’s detached housing market. The quarterly ratios themselves do not perfectly match, though they do show general themes that each city shares. In Vancouver’s case, its ratio rapidly increased and to a higher percentage than Toronto’s in the months before the city experienced its first housing price peak. Toronto’s rise was slightly more of a sustained build that kept supply low for a longer period of time. In both cases, each city then saw a drop in their ratio in the months before their prices peaked, meaning there was some warning that a price peak was near and a drop was pending. Since those initial highs, Vancouver has experienced a brief bounce back before falling below the 40% mark for the past year. Toronto has improved from a low of 35%, but has not yet gone back above 50%.

S to NL YoY DH Oct.pngSource: TREB, REBGV, Better Dwelling, Six Housing Sense

The second graph shows the year-over-year comparison for the detached housing markets of the Vancouver and Toronto areas. Here we see very close overlap between the percentage changes. Both cities experienced a strong rise then fall, which was followed by a nice yearly comparison recovery. The difference between the two now is that Vancouver’s market has dropped once more to negative year-over-year numbers. In comparison, Toronto is back in the positive and showing signs of recovery, even if October slipped slightly from July.

As we will continue to do in our comparison of the two cities, our final graph shows the nine-month time shift to drive home the similarities of the markets (Vancouver’s numbers are from January 2015 to the present and Toronto’s are from October 2015 to present).

S to NL DH TS OctSource: TREB, REBGV, Better Dwelling, Six Housing Sense

From the time shift, we see that the next few quarters may be interesting for Toronto. Should Toronto continue to follow in Vancouver’s lead, the GTA will see a drop in its sales to new listings ratio. Vancouver is now in its third straight quarter of year-over-year declining ratios, and current trends in the city make any change unlikely by January. If Vancouver really is showing Toronto its housing future, then the future does not look bright for either city. The coming months will be intriguing for us to see if Toronto can start to carve out its own positive path or also face the negatives of rising inventory.

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