Probably one of the stranger titles you’ve seen attached to one of our blog entries here, but the reason we chose it is because it’s not just new realtors who need more homes to come on to the market. Fact is the entire real estate market in Canada needs them and not only to meet the need for housing in the country but also to continue having real estate make the needed contribution it does to the country’s GDP. We’re not economists so we’ll steer clear of that end of it but we do know why there needs to be more housing on the market in Canada, and that includes sales of existing homes as well as new home builds.
The builds will almost certainly be more important in the long term and bigger picture, but in the here and now there’s a lot of reasons why fewer homes are going onto the market than are needed, despite it 100% being a seller’s market in most areas of the country right now. Any time there’s type of supply shortcoming when there are many people who want to be homebuyers it can be tough for realtors new to the business. That’s why our online real estate lead generation system here at Real Estate Leads is such a good choice for real estate agents who are looking for every competitive advantage.
Let’s look at this shortcoming in greater detail this week.
Starving for Supply
Over the last 14 months demand for housing has been much, much higher than expected and that is true for both major urban centres and rural communities. Historically low interest rates are prompting a lot of people to want to dive into the housing market. The problem is they can’t because of insufficient housing stocks and demand outstripping supply creating a tremendous spike in valuations.
There’s been a lot of talk about how first-time homebuyers and young families are being priced out of the real estate market. Recent months have seen suggestions that the Bank of Canada (BoC) should begin to normalize monetary policy by raising rates. Maybe, but the long-term solution is additional inventory coming to market.
Much easier said than done.
The good news would be the Canada-wide sales-to-new listings ratio looks to be heading in the right direction. April’s ratio eased to 75.2 per cent, down from a peak of 90.6 per cent in January and our long-term average for the nation sales-to-new listings ratio is just under 55%, highlighting that the latest reading remains historically high.
But inventory is not doing its part.
The number of months of inventory – how long it would take to sell present stocks at the current sales activity – is at just 2. This is up from 1.7 months in March. Long-term the average is just over 5 months. That’s a very bare cupboard as the expression goes, and a lot of people are looking for a plate.
Buyers Starting to Boil?
It’s also true that Canadian homebuyers are quite displeased about it all. A recent Nanos Research-Bloomberg News survey found that 70% of them agreed that the spike in home prices was a major problem for the national economy, and many feel that interest rates should go up the same way new homebuyer mortgage stress testing regulations have. That has its drawbacks too of course.
More Roofs Over More Heads
Nearly every housing expert believes that the more effective solution to dousing the red-hot Canadian real estate market is by adding more supply. While it’s not as easy as snapping your fingers to make that happen, there needs to be a more long-game approach to this. Federal government intervention is probably not a good idea.
We’ll conclude with some good news in that price growth might have peaked, which could give those hoping to buy a home some reason to think positively.
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