TO/Van Comparison: Detached Sales to New Listings

Our next step in the Toronto/Vancouver detached market comparison is to look at their sales to new listings ratios. Currently, inventory is growing in Canada’s two most significant housing markets, albeit at two different paces: drastically in Vancouver and slowly in Toronto. Tracking the monthly sales to new listings ratio of each city will provide insight into whether or not inventory will continue to grow, and what if any impact this will have on prices.

The recent history of each cities’ sales to new listings ratio shows how the trends rise and fall with housing prices. Examining the two markets’ detached sectors, the graph shows how each city saw a build of pressure in the months and year leading up to their price surges. Likewise, the graph shows that each city saw their ratios begin to fall before their prices peaked, providing pivotal insight that the end of the price run was near. More recently each city finds itself with lower sales to new listing ratios, which has helped to shape the price changes in each detached market.

S2NL Feb DetachedSource: REBGV, TREB, Six Housing Sense

Knowing that changes to the sales to new listings (S2NL) ratio happens in advance of price movement is all the more significant given our analysis around Toronto’s housing market following Vancouver’s. As this trend is maintained, Toronto can gain far more than a quick price warning from its ratio. Following our nine-month time shift, the Toronto detached market could gain up to a year of price warning from the sales to new listings ratio trending in Vancouver.

5 Year S2NL FebSource: REBGV, TREB, Six Housing Sense

Comparing how the two cities’ S2NL ratio performed over the past five plus years, we see that both cities were on the rise before their price peaks. For Vancouver that was until spring 2016 and for Toronto it was winter 2017. Since peak price gains, both Toronto and Vancouver have seen their S2NL ratios consistently below their five-year monthly average.

Time Shift 5 year FebSource: REBGV, TREB, Six Housing Sense

Leveraging the nine-month time shift (Vancouver’s line shows from January 2014 to the present and Toronto’s from October 2014 to the present) we can see how, though they are not perfect images of each other, Toronto has very much followed the same theme as Vancouver. The graph shows how Vancouver has moved with more extremes, frequently seeing S2NL ratios 40% or more above the five-year average pre-price peak, and now hovering around 40% below the average. In comparison, Toronto’s monthly ratios have not moved up and then down as wildly, but the drop from above the average to below moves perfectly in line with Vancouver’s with the time shift.

S2NL YoY FebSource: REBGV, TREB, Six Housing Sense

Reviewing the sales to new listings ratios for their year-over-year movements, we see the same patterns repeated. Each city was making gains in advance of their price peaks, if Vancouver again had slightly wilder swings up and down, and then both fell sharply as prices retreated. After the initial drop, each city sees their year-over-year results improve, though this reflects the numbers being compared to far lower stats from the year before.

TS YoY FebSource: REBGV, TREB, Six Housing Sense

Using the time shift comparison, we see how similar the two cities have behaved, though at times slightly behind the nine-month shift. We have previously noticed that Vancouver’s S2NL ratio moves a few months before prices react, whereas Toronto’s ratio has moved more closely to major price changes. For example in the early spring of 2017, the ratio changed just one to two months ahead of the price drop. Still, the general performances remain surprisingly aligned and show Toronto tracking behind Vancouver.

Using the nine-month time shift analysis we see that the sales to new listings ratios for detached homes in Vancouver and Toronto are not the perfect overlap that prices are; however, it is once again clear that the theme holds. The two cities have absolutely reacted in similar fashions, with Vancouver first and Toronto roughly nine months later. With this information we can estimate that Toronto’s sales to new listings ratio will remain low for 2019, possibly falling slightly below current levels. The higher level of inventory this will cause will continue to keep the downward pressure on Toronto detached prices, increasing the likelihood that Toronto continues to follow Vancouver’s price trends.

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