economy
A POTENTIAL EFFECT OF RISING UNEMPLOYMENT A weakening labour market affects local real estate markets vis-a-vis reducing demand, but a high unemployment rate often corresponds to an increase in the availability of homes.
Typically, we talk about subjects like housing supply in the housing section of this publication, but in this case we have the correlation between the unemployment rate and MLS inventory in economy. Let us explain: a low unemployment rate over the past two years has been a critical component of the relatively constrained inventory we’ve observed in markets across BC and Canada, even in the face of generationally-high interest rates. And further increases to the unemployment rate could change that dynamic.
Here in Metro Vancouver, MLS inventory sits right around the long-run average, with the past 12 months of listings averaging 13,719, while the unemployment rate most recently checked in at 5.8% regionally. Historically, an unemployment rate in the range of 6.5% to 8.0% has correlated with average annual inventory of between 15,000 and 23,000 available listings. As high interest rates continue to work their way through the economy, an increasing unemployment rate is likely in the near term, and that could lead to a greater availability of homes for sale.
EMPLOYING ADDITIONAL INSIGHT INTO INVENTORY
16.0%
30,000
mortgage deferral program Sep 2020-Mar 2021
14.0%
25,000
12.0%
20,000
10.0%
8.0%
15,000
6.0%
10,000
4.0%
5,000
2.0%
0
0.0%
UNEMPLOYMENT RATE LEFT AXIS
TOTAL MLS INVENTORY, MONTH MOVING AVERAGE RIGHT AXIS
DATA: 3-MONTH MOVING AVERAGE, SEASONALLY-ADJUSTED UNEMPLOYMENT RATE & 12-MONTH MOVING AVERAGE TOTAL LISTINGS, METRO VANCOUVER SOURCE: LABOUR FORCE SURVEY, STATISTICS CANADA, REBGV & FVREB
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