Posthaste: Ontario's housing market is almost as loose as the great 1990s meltdown
Ontario’s housing market is raising red flags.
The market hasn’t been this loose since the 2008 financial crisis and there is risk the sales-to-new-listings ratio could drop as low as in the 1990s meltdown when prices plunged more than 30 per cent, says a new study from Toronto-Dominion Bank.
This October the province’s sales-to-new-listings ratio dropped to its lowest level since the financial crisis.
The concern is if higher interest rates further dampen demand the ratio will slip to levels not seen since the deep housing market downturn in the late 1980s to mid-1990s, said TD economist Rishi Sondhi.
Sales-to-new-listings ratios measure supply and demand in housing markets and help predict prices. A ratio under 40 per cent means a buyer’s market where new listings exceed sales, between 40 and 60 per cent is a balanced market and over 60 per cent, where demand outstrips supply, is a seller’s market.
During the late 1980s and early 1990s, home prices plunged by 32 per cent across Ontario, falling 38 per cent in the Greater Toronto area.
“Ontario’s ratio approaching where it was during these depths certainly raises our eyebrows and warrants closer attention,” said Sondhi.
What’s remarkable is normally it would take a deep recession to get the ratio to this level, he said.
A comparison of the two downturns offers reasons to believe such an outcome can be avoided, said Sondhi.
On a per capita basis, sales today are already at the lows seen in the 1990s, but listings are about 20 per cent lower than they were then.
The economic backdrop is also better. From March 1990 to May 1992, Canada was in a deep recession, brought on by high interest rates and fiscal belt-tightening, among other forces. Ontario GDP and employment
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