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 the Central Okanagan, MLS inventory already sits above the long-run average, with the past 12 months of listings averaging 2,028, while the unemployment rate most recently checked in at 5.6% regionally. Historically, an unemployment rate in the range of 6.0% to 10.0% has correlated with average annual inventory of between 2,000 and 3,500 available listings, although Kelowna’s unemployment rate has been known to fluctuate more than some of the larger markets in Canada. 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
4,000
14.0%
mortgage deferral program Sep 2020-Mar 2021
3,500
12.0%
3,000
10.0%
2,500
8.0%
2,000
6.0%
1,500
4.0%
1,000
2.0%
500
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, CENTRAL OKANAGAN SOURCE: LABOUR FORCE SURVEY, STATISTICS CANADA, AOIR
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