Anecdotal rumblings of a strong spring market are showing up in data, as impatient buyers, steady but elevated mortgage rates and a lack of supply trigger a surge in both sales and prices.
According to Lower Mainland real estate board data, home sales rose sharply in April with seasonally adjusted sales up more than 30 per cent from March. Actual sales were 12 per cent below year-ago levels. Higher sales reflect a demand-side resurgence after plummeting through 2022. Still, sales were 15 per cent below the same-month average observed from 2010-19.
Demand is being propelled by willing and able buyers – likely feeling unease by low inventory levels – while exceptionally strong population growth is likely adding to activity. New home listings fell 31 per cent year over year and are trending at their lowest levels since the early 2000s. Potential sellers have been unwilling to sell at prevailing prices, reflecting higher expectations after the pandemic surge, elevated rents and resilient albeit slowing economic and labour market conditions. The sales-to-active-listings ratio has shot back into sellers’ market conditions.
Buyers are paying up. The average price in the Lower Mainland jumped 3.8 per cent to $1.2 million – the highest level since May 2022. Adjusting for seasonal factors, we calculated a six-per-cent increase. The price moved to within 10 per cent of the pandemic high. Similarly, the benchmark price – which controls for housing attributes – rose 2.5 per cent and was trending higher, down about 11 per cent from peak. With average prices nearly 30 per cent higher than pre-pandemic levels, and higher mortgage rates prevailing, buyers are clearly stretching to get into the market, ignoring some of the economic and financial risks in play and betting on declining rates in the years ahead. Elevated prices are likely to limit upside on sales given affordability challenges.
Low inventory suggests that prices have already bottomed out unless inventory balloons in the coming months, which is unlikely in our view. However, rising prices could feed through into firmer inflation and temper the pace of interest rate reductions and curb demand growth.
B.C.’s labour market conditions were little changed in April, with seasonally adjusted employment inching up by 2,100 people (0.1 per cent). Employment rose 1.3 per cent year over year and 4.2 per cent from February 2020. Expansion of the labour force lifted unemployment to a still-low rate of five per cent. In the Vancouver census metropolitan area, employment slipped 0.1 per cent, and the unemployment rate rose to 5.4 per cent from 4.8 per cent.
Similar to the national trend, B.C.’s April part-time employment growth of 9,300 people (1.7 per cent) offset the contraction in full-time employment (7,300 people or down 0.3 per cent). The trend of consecutive monthly increases in full-time employment paused for the first time since October 2022.
On an industry basis, the goods-producing sector in B.C. reported decreases following upward-revised growth in March. Specifically, goods-sector employment fell in utilities (down three per cent) and construction (down 1.4 per cent). Services sector increased employment by 5,300 people (0.2 per cent). Notable gains were reported in education (up 9,400 people or 4.5 per cent).
Bryan Yu is chief economist at Central 1.
