Of course it depends on what market, where, property type, and so on, which is why we stress to the public the importance of talking to their local REALTOR®, but arguably one of the best all-round statistics to share with clients to help answer that question, is the Sales-to-Active Listings Ratio (SALR).
The SALR, sometimes called list to sale ratio or sales to actives, 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 BCREA, for the Lower Mainland, an SALR higher than 20% indicates a seller’s market, under 12% a buyer’s market, and in between – 12% to 20% – is 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.
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.
How does the SALR stand up to ‘real life’?
The SALR reflects what you experience as a REALTOR®.
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. Clearly, members were exceptionally busy, and it was a stressful time. There was a huge shortage of supply and very challenging 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. After the first full month of the impact of COVID-19, the ratio dropped to 11% in April.
So, when you’re looking for a statistic – one number – that can provide an accurate snapshot of what happened in the market in a given month and can help give context to the question, how’s the market? Look to the SALR. Our Monthly Statistics Package contains a graph that details the ratio for that month for the entire board area and if you want specifics – the SALR for an individual residential property type and sub-area that you can share with clients – head to the FVREB Stats Centre.
Source: FVREB Communications