As the Government prepares to restart the economy we thought it appropriate we take a quick review of market stats from April.
We hope this update will provide a point of reference for our buyers and sellers to help gauge their market timing as we move into late spring and early summer.
We expected to see a sharp drop in sales for April as we confronted the COVID-19 pandemic however as we move through May it appears buyers and sellers are adapting to a new normal and analysts are expecting activity to pick up as the economy gradually re-opens. While home sales were down by more than half compared to this time last year, the supply of homes for sale, which normally rises through the spring, was down close to 10 per cent on a seasonally adjusted basis and down 23.7 per cent year-over-year. That slide in total active listings means that prices remained firm despite the sharp fall in sales.
Depending on what market, where, property type, and so on – one of the best statistics to get a gauge on market conditions is the Sales-to-Active Listings Ratio (SALR). The SALR is the percentage of available listings on the market that have sold. If the SALR is 28%, it literally means that for every 100 properties on the market, 28 are selling.
According to British Columbia Real Estate Association (BCREA) an SALR higher than 20% indicates a seller’s market, under 12% a buyer’s market, and in between – 12% to 20% – considered a balanced market.
Typically, a SALR ratio higher than 20% indicates there is strong demand and more buyers then there are homes available. Over time, a seller’s market can cause home prices to increase faster than the average rate of inflation.
When less than 12% of available inventory is selling, it means there are more homes for sale than there are buyers and again, a slower market can put downward pressure on home prices causing them to decrease over time.
A balanced market is when supply and demand are about the same, home prices keep pace with inflation, and there’s sufficient time for buyers to find a home and for both buyers’ and sellers’ agents to negotiate a fair price.
How does the SALR stand up to ‘real life’?
It’s worth noting that either end of that range isn’t like a light switch – a SALR of 23% doesn’t necessarily mean that the market is on fire, but it does indicate a healthy, steady market. And vice versa, a SALR of 9% doesn’t mean the sky is falling, it simply indicates a slower than normal market.
The SALR reflects what you experience as a consumer.
Remember the crazy busy market three, four years ago? The SALR for Fraser Valley condos was 85% in May 2017, and it was over 100% for townhomes. Homes were literally ‘flying off the shelves.’ The average days on market for attached properties was two weeks or less. There was a huge shortage of supply and was a very stressful time for buyers and their agents.
Contrast that peak with the recession in 2010 when the SALR for detached homes in the Fraser Valley bottomed out at 10% in August.
Fast forward to this year… our market was steadily improving earlier at the beginning of 2020 with a SALR of 24% in both February and March for our region.
Where are we at now?
In the Fraser Valley, after the first full month of the impact of COVID-19, the ratio dropped to 11% in April. This ratio is backed up by April pricing stats.
In April the average residential sale price in the Fraser Valley registered at $769,666. Compared to the average price in April 2019, $706,159.
So, when we are looking for data that can help answer the popular question “hows the market?” we look to the Sales-to-Actives Listing Ratio.