One measurement to gauge the real estate market is the sales-to-new-listings ratio. It’s simply calculated by dividing the number of sales by the amount of new listings. For example, a ratio of 0.5 (50%) means one home is sold for every two homes that are listed.
Economist Will Dunning had this to write: “Price growth depends on the state of balance in the market. My forecasting system estimates that prices will rise at about the same rate as overall inflation when the sales-to-new-listings ratio is about 51%.”
ATB’s economist Todd Hirsch wrote this in a research note last month: “The ratio of home sales to new listings gives a good read on the overall balance in the residential market. There is a distinct seasonality to home sales, and as a result the ratio does fluctuate up and down.”
The two charts below show the close correlation between the sales-to-new-listing ratio and prices in the Calgary real estate market.
Month-to-date in September, the overall sales-to-new-listings ratio is at 63.58% compared to 55.52% this time last year – both figures above the 51% needed for home prices growth to keep pace with inflation.
You can track the ratio daily on my website here.