General Knowledge

Sales-to-New Listings Ratio (SNLR): The Buyer vs. Seller Market Dynamic

By February 13, 2024 No Comments
Sales-to-New Listings Ratio (SNLR): The Buyer vs. Seller Market Dynamic
Sales-to-New Listings Ratio (SNLR): The Buyer vs. Seller Market Dynamic

When selling a home, every individual wants the highest price. In contrast, homebuyers aim for the lowest.

That’s where the sale-to-list ratio comes in. It’s not just a number; it’s a window into the real estate market dynamics. It tells you whether it’s a buyer’s market, where you have the upper hand in negotiations, or a seller’s market, where demand is high and prices are soaring. Understanding this ratio gives you the power to navigate the real estate landscape confidently. It’s about seizing opportunities, making strategic moves, and, ultimately, coming out on top. Know your numbers, trust your instincts, and go after what you want with unwavering determination, whether selling or buying.

Sales-to-Listings Ratio (SNLR)

The Sales-to-New-Listings Ratio (SNLR) is a crucial measure in real estate. It tells us how many homes are sold compared to how many new ones are listed in a given time, usually a month. SNLR is shown as a percentage. A high SNLR, over 60%, is a seller’s market. Below 40%, it’s a buyer’s market. Between 40% and 60%, it’s balanced. SNLR is crucial because it shows the balance between supply and demand. A high SNLR means more buyers and fewer sellers. This leads to competition and higher prices. A low SNLR means more sellers and fewer buyers, resulting in lower prices and more power for buyers to negotiate. Understanding SNLR helps you navigate the real estate market with confidence.

How to calculate SNLR yourself

To calculate SNLR, divide the number of homes sold by the number of new listings in a certain time frame, then multiply by 100 for the percentage.

SNLR formula= Homes sold/New listings*100

For instance, if 5,000 homes were sold and 6,000 new listings were added monthly, the SNLR would be 83%: ((5,000/6,000) x 100).

NOTE: While this formula is simple to use, it’s important to analyze the results in the context of market trends, economic factors, and local market conditions for a complete understanding.

Using SNLR with other market indicators:

How do you estimate the actual direction of the real estate market amidst monthly fluctuations?

Explore the 12-Month Moving Average SNLR, your guide to understanding market trends accurately and clearly. Home sales and listings can be all over the map. Still, by calculating the 12-month moving average SNLR, or SNLR Trend, you get a smooth, reliable indicator of where the market is heading. It’s like cutting through distractions to find the path. Here’s how it works: take the average SNLR over the past 12 months. This eliminates the ups and downs, giving you a clear market performance trajectory.

January: 35% May: 55% September: 70%
February: 40% June: 50% October: 55%
March: 50% July: 55% November 65%
April: 60% August: 65% December: 60%

Now, let’s do the math:

12-Month SNLR Trend = ((35 + 40 + 50 + 60 + 55 + 50 + 55 + 65 + 70 + 55 + 65 + 60) / 12)

12-Month SNLR Trend = 55%

In this example, the SNLR Trend stands at a solid 55%. That’s the power of cutting through the noise to find the proper market direction. Whether you’re a seasoned investor or a first-time buyer, leverage the 12-month Moving Average SNLR to make informed decisions.

Buyer’s vs. Seller’s Markets

What is a buyer’s market?

A buyer’s market happens when the SNLR drops below 40%. That means there are more houses for sale than people buying them. Prices tend to go down because sellers are competing for fewer buyers. If you’re looking to buy, you’re in luck! You have many options, and sellers might be willing to lower their prices to make a deal.

Can home prices increase during a buyer’s market?

According to the Canada Mortgage and Housing Corporation (CMHC), a buyer’s market happens when the sales-to-new-listings ratio drops below 40%. In these times, home prices might still go up, but typically not as fast as inflation.

What is a Seller’s Market?

In a seller’s market, more buyers are competing for fewer homes. This often leads to bidding wars, where properties quickly sell for the asking price or even higher. Sellers have the advantage in negotiations. In this situation, sellers have more control, which pushes buyers to increase their offers or remove conditions from their offers. For example, buyers might skip the home inspection during a bidding war if they are confident or running out of money. The home prices usually rise faster than inflation in a seller’s market.

Overheated Housing Market

An overheated housing market occurs when many people want houses, but more must be available. This drives prices up really fast. The Canada Mortgage and Housing Corporation (CMHC) usually sees the housing market as overheated when the SNLR is over 70% for at least two quarters in a row. But it can vary depending on the area.

The Top Buyers’ and Sellers’ Housing Markets Across Canada

Province December 2023 SNLR Highlights November SNLR Change Market Type
Alberta 95% 77% ⬆️ Seller’s Market
Saskatchewan 85% 73% ⬆️ Seller’s Market
Manitoba 85% 67% ⬆️ Seller’s Market
Ontario 86% 44% ⬆️ Seller’s Market
Quebec 82% 59% ⬆️ Seller’s Market
Nova Scotia 107% 80% ⬆️ Seller’s Market
Newfoundland 131% 81% ⬆️ Seller’s Market

The Bottom Line

The SNLR provides a window into market conditions, distinguishing between buyer’s and seller’s markets. In a buyer’s market, you have the upper hand with more choices and potential for negotiation. Conversely, demand is high in a seller’s market, prices soar, and competition is fierce. Whether buying or selling, trust your instincts, stay informed, and confidently approach the market. With the correct information and determination, you can achieve your goals and succeed regardless of the market conditions.

NOTE: Remember, there’s more to the story than just the SNLR. Check out other important numbers like how many homes are available, how long they’ve been on the market, and the ratio of homes sold to those listed.

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