Deciphering the Buzzwords

There’s a lot of buzz words and phrases in the real estate world. Too often, we use that language without understanding if our audience of buyers, sellers and interested parties truly understand the meanings and implications.

Daily I get asked: how is the Real Estate Market? People see the stories in the media, which will typically be negative and focused on the largest markets, and wonder if those same conditions exist in smaller markets like Guelph.

Today, I’m going to focus on one of the primary tools we use to gauge how the market is doing: SNLR!

The sales-to-new-listings ratio (SNLR) is an important metric that provides insights into market conditions and can significantly influence buyer and seller strategies in the real estate market. Basically, this is the measurement of how many sales are happening vs new listings entering the market place during a selected period, usually monthly. The higher the percentage, (sales / new listings X 100=%) will indicate how “hot” the market is.

Here's how it affects both parties:

FOR BUYERS…

In a Buyer's Market (SNLR below 40%)

More Negotiating Power: Buyers have more leverage to negotiate prices and terms.

- Less Pressure: With more inventory available, buyers can take more time to make decisions.
Potential for Better Deals: Sellers may be more willing to accept lower offers or include additional incentives.

Typically, buyer markets won’t last a long time as once buyers know they have the upper hand, the market tends to flood with buyers. However, in a market with high interest rates and a poorly performing economy, this type of buyer’s market could linger, much like in the early 1990’s.

In a Seller's Market (SNLR above 60%)

Quick Decision-Making: Buyers need to act fast, as properties will sell quickly.
Competitive Offers: Buyers may need to make offers above asking price or waive conditions to be competitive.
Less Room for Negotiation: Sellers have more leverage, so buyers have limited ability to negotiate.

The covid and early post covid markets were the strongest we’ve seen in a couple of generations which drove prices well above the historic trend line and forced buyers to pay high premiums in order to have their offers accepted.

FOR SELLERS…

In a Buyer's Market (SNLR below 40%)

Pricing Strategy: Sellers may need to price their homes more competitively to attract buyers.
Longer Time on Market: Homes may take longer to sell, requiring patience from sellers.
Flexibility: Sellers may need to be more flexible in negotiations and consider buyer requests.

This is the time when Sellers need to be strategic and need to price ahead of the market, meaning lower than the current decreasing market in order to sell ahead of the competition or risk being left behind and chasing the market down. Not a good situation to be in!

In a Seller's Market (SNLR above 60%)

Higher Asking Prices: Sellers can often list their homes at higher prices due to increased demand.
Multiple Offers: Sellers may receive multiple offers, potentially leading to bidding wars.
Fewer Concessions: Sellers can be more selective and may not need to make as many concessions to buyers.

Again, the pre-covid and early post covid market showed exactly how dominant the position sellers were in.

In a balanced market (SNLF between 40-60%), things look a little more even for buyer and sellers. Both buyers and sellers have relatively equal negotiating power. Price tend to rise with inflation, rather than skyrocketing or dropping unexpectedly. Homes spend a reasonable time on the market - not flying off the shelves, but not sitting for months + months either. This is where our market has spent most of the time over the past 30 years. Price have gone up, on average, by 5% per year - steady & predictable growth.

It's important to note that market conditions can vary by location and by property type. In Guelph, for example, the August 2024 SNLR was 53%, indicating a balanced market trending towards a buyer's market. The Toronto Condo market in particular was significantly into a buyers market as the inventory of motivated sellers increased dramatically.

The overall trend in our area suggests that buyers may have slightly more leverage in negotiations, while sellers may need to be more strategic in their pricing and marketing efforts - for now. It will be interesting to see the impact of interest rate decreases on a market that remains stubbornly high because of the ongoing affordability issues and lack of desired inventory. But that’s another post for the weeks to come.

Our mission is to ensure buyers and sellers are fully informed and educated about the local real estate market. Understanding the SNLR and its implications can help both buyers and sellers develop effective strategies for navigating the real estate market, whether they're looking to purchase a property or list their home for sale.

No matter if you’re a buyer or a seller - if you’re wondering about what moves to make next, don’t guess! Reach out to us directly to see how we are able to help & represent you in your real estate decisions.

Thanks for reading & enjoy the weekend!

Paul Fitzpatrick

Appointment Calendar: https://calendly.com/homegrouprealty

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