RAHB will soon be participating in CREA’s MLS® Home Price Index!
What’s the MLS® Home Price Index?
The MLS® Home Price Index, or HPI, is a tool for gaining a better understanding of the market trends in the residential market in our area, and how those trends compare to the rest of the country.
When we talk about housing prices, we usually refer to trends in average and median sale prices. These measures are readily available and easily understood. However, averages and medians do not always accurately determine trends because:
- data can be skewed by outliers
- all homes are treated as equal
- home “composition” is not taken into consideration
The MLS® HPI provides a better measurement of price and price trends for residential properties. It is based on real MLS® listing content from RAHB – that is, the attributes of the listed properties: number of bedrooms, number of baths, number of storeys, etc. The HPI uses that information to calculate what is the average home in an area, and then it can track how that average home price changes over time.
How does it work?
The HPI uses a base – or benchmark – year as a starting point for price comparison. The index base is always 100.
In RAHB’s case, the benchmark year is 2005, so the HPI value for, say, January 2005 is 100. If the HPI value for a single-family home in January of 2011 is 167.1, you know that the value of a typical single-family home is up 67.1 per cent compared to 2005.
What’s in it for you?
The real value of the HPI comes with the depth of information available to members. The HPI drills down into areas as well as types of properties – single family, townhouse and apartment. For each area, the HPI defines what the “average” house, townhouse and apartment is. In one area the average single family home might be a 3-bedroom, 2-bath, double garage home, while in another area it is a 2-bedroom, 1-bath home with no garage. Likewise for the townhouse and apartment categories – the HPI definition is determined by the mix of properties and their features in that area. This allows you to see trends that average or median sale prices just can’t provide.
RAHB will be publishing general information about the HPI, the same way it publishes general statistics, so the public will see what the general trend is. However, RAHB members will have access to much more detailed information, so you will be able to:
- help your clients understand home price trends for specific kinds of properties in a given neighbourhood
- position yourself as a credible, reliable source of insight into the real estate market
- broaden your knowledge of municipal, regional and national real estate markets, and compare trends in those markets
What the MLS® HPI doesn’t do
The HPI will not predict future price trends. It can only be used to track what the trend has been and what it is at the present time.
What’s the next step?
Once RAHB starts reporting the MLS® HPI trends for our area, you will have access to an HPI dashboard via REALTOR Link®. That’s where you will find the more detailed information the public doesn’t see. You will find information about housing trends in our area, as well as trends in other cities where HPI is reported.
How did the MLS® HPI come about?
It was pioneered by six founding partners: the real estate boards of Calgary, Fraser Valley, Greater Montreal, Greater Vancouver, and Greater Toronto and the Canadian Real Estate Association. In 2009, the partners contracted with Altus Group to develop the MLS® HPI, which subsequently launched in February 2012.
Since its founding, CREA’s Home Price Index has grown to include data from Regina, Saskatoon, Ottawa, Vancouver Island, Victoria and Greater Moncton, and will soon include some regional MLS® boards and associations, as well as RAHB.
Want more information?
Gregory Klump, CREA’s Chief Economist, will be presenting two knowledge pods on the HPI at REALTOR® CONNECTIONS AGM, Conference and Trade Show on March 9, and will return to RAHB after we launch the HPI to do more information sessions. Watch for more info about the date, time and location of the presentations.
You can also find more information about the MLS® Home Price Index.