Montréal Resale Market: inclusion of new homes on Centris^®

Using Centris^® data to analyze the resale housing market could lead to slightly skewed market readings. Our latest Housing Market Insight (HMI) for Montréal takes a closer look at this issue. It explores why the inclusion of new homes in Centris^® data can affect resale market analysis and to what degree in Montréal from 2004 to 2019.

Resale market analysis: the sales-to-new listings ratio

One of the indicators often used to analyze the resale market is the sales-to-new listings ratio. In this ratio, Centris^® sales are compared to new Centris^® listings. The sales represent demand from buyers, while the new listings represent new supply from sellers.

This ratio is very useful, as it defines the relationship between supply and demand. In other words, it helps us to determine the balance of power between buyers and sellers. The ratio also can be calculated separately for different housing types (single-family homes, condominiums, etc.) and geographic areas. As a result, it can be applied to compare market conditions between housing types or between different neighbourhoods within a city.

Centris^® data includes some new homes

It’s been generally assumed that the vast majority of Centris^® data (sales and new listings) is for existing homes. However, we learned in a previous HMI for Montréal that Centris^® data does include a non-negligible number of new homes. The result: if the number of new homes is big enough, it could affect our reading of resale market conditions.

A simple example: a case where there’s a large number of listings of new homes in Centris^®, combined with a low level of sales of such homes. That could give the impression that there is a wide gap between new supply and demand on the resale market, even though this is actually not the case.

New homes in Centris^® data for Montréal: 2004–2019

We used data from the Quebec Professional Association of Real Estate Brokers to see how many new Montréal homes were in Centris^® from 2004 to the third quarter of 2019. Some findings:

• Since 2004, for all housing types combined, new homes have accounted for about 6% to 8% of new listings in the Centris^® system. Sales of new homes have been lower, though, generally hovering between 3% and 6%.
• Deeper analysis showed that the inclusion of new homes was much more significant for condominiums. In some years, nearly 20% of condominiums newly listed in Centris^® were new homes. In the case of sales, the proportions were quite lower.
• When new homes are excluded from the data on Centris^® sales and new listings, the sales-to-new listings ratio is higher, meaning that resale market conditions are generally somewhat tighter.
• From the data on existing homes only, it can be seen, for example, that resale market conditions have in fact been slightly tighter for condominiums than for single-family houses since the middle of 2018. When all data (on new and existing units) are used, this moment is deferred by six months, that is, to the beginning of 2019.
• For condominiums, as of the third quarter of 2019, the sales-to-new listings ratio was close to 90% for existing condominiums, while this ratio hovered around 85% for all condominiums (new and existing).