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A leading Canadian economist has charted why he says Toronto homes may only get more expensive in the coming months and how Vancouver’s market appears to be correcting.

Robert Kavcic, a senior economist with Bank of Montreal, has plotted long-term monthly sales-to-new listings ratios for the two big housing markets, which have been the country’s hottest all year.

Kavcic says the ratios, calculated by dividing sales by new listings and expressed as a percentage, are a “proxy of market balance.”

The Canadian Real Estate Association explains ratios between 40 and 60 per cent suggest a balanced market, while anything above ventures into a tighter seller’s market and ratios below indicate markets with higher supply levels, thus favouring buyers.

“Notably, sales-to-new listings ratios… have gone in opposite directions in recent months, with Vancouver quickly loosening up, while sellers remain in firm control in Toronto,” Kavcic writes in a note published this morning.

toronto-vancouver-sales-to-new-listings“Note: Latest points are estimates based on non-seasonally adjusted results,” says BMO Economics of the above chart. Chart: BMO Economics

Vancouver’s sales-to-new listing ratio was 90 per cent earlier this year, according to CREA. So, for every 10 homes listed in a month, there were nine sales.

As of August, the ratio had plummeted to the mid-50-per-cent range in Vancouver, while Toronto’s was above 70 per cent.

“If this is any guide, price growth could accelerate further in Toronto in the months ahead, while Vancouver is already likely in correction mode,” says Kavcic.

Last month, the benchmark price of a Toronto home was $669,300, up a blazing 18 per cent from year-ago levels and 1 per cent above the month prior.

The Metro Vancouver benchmark home price was $931,900 in September. Although that’s a soaring 28.9-per-cent increase from a year ago, the benchmark price is down 0.1 per cent from August.

“While Vancouver’s housing market continued to soften in September, Toronto remained drum tight,” Kavcic adds.

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