July 2013 Monthly Report
Welcome to Summer!
Our
thoughts are with those who have been affected by the Albertan floods.
That said, we're confident that our Albertan brothers and sisters will
be able to recover from this disaster.
In
addition to reading about the Alberta floods in the paper, the news
often covers a wide variety of real estate stories. The media, in an
attempt to feed the public's insatiable appetite for real estate news,
often publishes interesting pieces of real estate information that help
sell papers. Due to constant heavy dose of statistical information, it's
important to understand how the data is collected and how to interpret
these facts.
Below are the 3 most commonly misunderstood real estate statistics in the media:
1) Pace of Canadian Housing Starts Up
This
shouldn't really matter to buyers or sellers out there. While this is
related to the real estate market, it is more relevant for the
construction industry than it is to the resale housing market.
Remember,
these are new home construction figures: not sales or pricing numbers.
Unless you're a construction worker or materials' supplier, this type of
information is largely irrelevant to your real estate decision-making
process.
2) Home Sales Drop!
This
kind of information is important for buyers and sellers to know and
also helpful for realtors to use. A drop in home sales is sometimes a
precursor to lower prices down the road. That said, there are a
multitude of reasons that home sales could slow that wouldn't also
result in a corresponding drop in prices.
It
is therefore important to remember that these are unit sale figures,
not price figures. These statistics also generally need to be seasonally
adjusted to reflect the fact that sales tend to be slower in the winter
and summer as opposed to the spring and fall. You should talk to a
professional to see whether a drop in sales velocity is because of a
slowing market or because of some other extraneous event.
3) Average House Prices Rise 6.5%!
This
is the most misunderstood of the media reports that come out because
averages are a terrible metric to measure house prices.
This
is because the type of home that is sold in a given month strongly
influences the outcome. For instance, if a lot of luxury homes are sold
one month, then the average price of homes will go up, even if the
typical home price doesn't change. This is exactly what has already
happened in Vancouver, where the average price has risen 5.4% year over
year, but the typical home price has fallen (see graph below).
| % change in home prices year-over-year |
| (June 2012 to June 2013) |
| City |
Average price |
MLS Home Price Index |
Teranet-National Bank HPI |
| Vancouver |
+5.4% |
-4.27% |
-3.24% |
| Calgary |
+2.6% |
+6.87% |
+5.84% |
| Toronto |
+4.9% |
+2.78% |
+3.87% |
| Montreal |
+0.8% |
+3.57% |
+1.92% |
| |
| Remember
to always read real estate statistics with an eye to these issues and
you'll become a more accurate analyst of the market. |
For a more complete analysis of these statistics, please feel free to contact me at the email address or phone number above.
| 
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