The typical spring market bounce looks to have ended before it even started as housing market struggles in the Lower Mainland continued through May. While sales firmed slightly, buyers remained hesitant to make major purchases. The recent oil price shock and impact on consumer wallets have tempered sentiment, adding to concerns about a weak labour market and economy, while soft rental market demand and excess inventory kept investors on the sidelines.

The latest MLS data reported a combined 3,211 sales in May. This was four per cent below a year ago, and the third fewest same-month sales in 20 years. While seasonally adjusted sales are estimated to have climbed about four per cent month-over-month (m/m), levels are close to the lows seen during the pandemic and financial crisis period.

This lack of traction remains somewhat puzzling given improved affordability from lower prices and stronger conditions in other provinces. We see this as reflecting long-term effects of the early pandemic run up in home values that have required larger downpayments from more recent buyers. Labour market uncertainty in a high-priced market like Metro Vancouver could have a more significant impact on behaviour given the size and balance of mortgages.

Weak demand coincides with a period of high listings. Active listings were above 25,200 units, and the sales-to-listings ratio remains entrenched in a buyers’ market, sitting below 13 per cent. Momentum has weakened and points, at best, to a flat market. The average price rose one per cent to $1.15 million in May but fell 2.1 per cent year-over-year (y/y). Levels have declined about 10 per cent from the 2022 peak.

A scan of the composite price indices which adjusts for product quality fell 0.2 per cent m/m (seasonally adjusted), and 6.4 per cent y/y. The deepest y/y declines have unsurprisingly been in the apartment sector (-7.8 per cent) where supply in the existing and new home market is saturated. Detached (-6.9 per cent), and townhome (-5.9 per cent) prices have not fared much better but are likely to hold up better going forward. Prices have fallen across all markets, with the deepest declines in the Fraser Valley.

In the short term, market conditions are likely to remain slow given economic conditions, flat interest rates and soft rental markets. A turnaround is expected in 2027 as the lack of pre-sales clearly points to insufficient long-term supply, and buyers will adjust to improved affordability.

B.C.’s labour market finally showed signs of recovery in May, according to the latest Statistics Canada Labour Force Survey. Employment increased by 0.9 per cent (+25,200 people) on a month-over-month (m/m) basis, outpacing the national increase of 0.4 per cent. However, this only partly offset recent declines as levels remained one per cent lower on a year-over-year (y/y) basis. The unemployment rate remained at 6.8 per cent in May, which was higher than the national rate of 6.6 per cent, while the employment rate recovered to 60.5 per cent.

Full-time employment increased by 1.5 per cent (+33,600 people) m/m but remained down 1.6 per cent y/y. Part-time employment dropped by 1.4 per cent m/m, though it was still up 1.6 per cent from year-ago levels. The shift toward full-time employment was encouraging and may point to some improvement in job quality.

By industry, employment declines were concentrated in the services sector, which increased by 0.8 per cent (+18,600 people) m/m but declined 1.7 per cent y/y. On a y/y basis, the largest losses were recorded in wholesale trade, at 9.9 per cent, reflecting softer goods movement and business demand amid slower economic growth, trade uncertainty and weaker activity in parts of B.C.’s goods-producing economy. In contrast, accommodation and food services increased by nearly 10 per cent y/y, pointing to stronger tourism- and hospitality-related hiring ahead of the summer season and the FIFA World Cup.

Goods producing industries posted modest employment gains at 1.2 per cent (6,600) m/m and 2.1 per cent y/y, driven primarily by strong growth in agriculture (+59.0 per cent y/y) and utilities (+21.5 per cent y/y), though both sectors are relatively small and can be volatile. The large loss was driven by forestry, fishing, mining, quarrying, oil and gas at 16.3 per cent y/y, reflecting continued weakness in B.C.’s forestry sector amid softwood lumber duties, tariffs, fibre-supply constraints and mill closures.

At the regional level, labour market conditions weakened across several census metropolitan areas. Employment in Vancouver increased by 0.2 per cent m/m and remained down at 1.6 per cent y/y. In Kelowna, employment increased by 0.6 per cent m/m, although it posted the highest unemployment rate in the province at nine per cent.

Bryan Yu is chief economist at Central 1.