When HouseSigma, real estate boards, and local media track the housing market, we often focus on prices \u2014 what sold last month and for how much, whether values are up or down year over year, and so on. That’s useful and newsworthy in itself, but price data tells only tells us what already happened. By the time a trend shows up in sale prices, the conditions driving those price adjustments have often already changed.<\/p>\n\n\n\n
HouseSigma’s Market Temperature graphs measure something different: the absorption rate, which is the share of active listings that sell in a given month. It captures the live balance between supply and demand. You can find these Market Temperature graphs by scrolling down a little on any of our Market Trends pages, such as this Metro Vancouver page<\/a>, this GTA page<\/a>, and this Greater Calgary page<\/a>. (You can also choose any other HouseSigma-covered geographic area, and filter by factors such as municipality, neighbourhood, and home type.)<\/p>\n\n\n\n When we examined five years of transaction data across Metro Vancouver, the Greater Toronto Area and Greater Calgary, a clear pattern emerged. The absorption rate doesn’t just describe current conditions \u2014 it often moves ahead of what sellers actually accept at the negotiating table, otherwise known as the sale-to-list-price ratio. <\/p>\n\n\n\n This means that the absorption rate can give us a clue about where prices are heading, because if we can predict that sellers will be forced into giving deeper discounts (or if they have the power to not accept discounts, or even force buyers to offer over list price) then we can predict what the overall typical sale prices will be. <\/p>\n\n\n\n A tale of three major markets<\/strong><\/p>\n\n\n\n The pandemic buying frenzy of 2021 and early 2022 pushed absorption rates to extraordinary levels in all three urban areas, though the experience differed considerably between them. <\/p>\n\n\n\n In the GTA, demand was so intense during that period that monthly sales far outpaced the number of “active listings” \u2014 the count of available homes for sale at the end of the month. This can happen when homes that are being listed throughout the month are being snapped up, in addition to existing inventory, and never make it to the month-end inventory count. <\/p>\n\n\n\n Check out this graph below, with the blue line and left-side Y axis showing the absorption rate across the GTA as a whole over the past five years.<\/p>\n\n\n\n