Some clarity on housing prices

trebtalk
Some clarity
on housing prices
B Y R I C H A R D S I LV E R
A
s president of the Toronto Real Estate Board
(TREB), I’m excited to announce to you, the
consumer, that a new system to measure and
provide clarity on home prices and home-price
growth was launched on Feb. 6.
TREB, along with the Canadian Real Estate Association
(CREA) and four other major real estate boards across Canada,
have developed a new system called the MLS Home Price Index
(MLS HPI).
The MLS HPI is calculated using a sophisticated statistical
model that takes into account a home’s quantitative features
(for example, the number of rooms it has) and qualitative
features (such as whether it has a finished basement).
The MLS HPI approach provides a less-volatile measure of
price than averages and medians, which can swing dramatically
in response to changes in the share of very expensive or
inexpensive home sales from one time period to the next.
Each month, there will be two key outputs published using
the MLS HPI:
» A series of price indices – The MLS HPI price indices work
in a similar fashion to the Consumer Price Index (Canada’s
measure of consumer price inflation). The indices have a base
month/year of Jan. 2005, where the indices are equal to 100. In
Jan. 2012, TREB’s composite HPI was 143.1. This means that
the composite price index grew by 43.1 per cent between Jan.
2005 and Jan. 2012.
» A series of benchmark home prices – The MLS HPI has
also been used to establish benchmark homes down to TREB’s
community level of geography for major home types including
single-family homes (detached and attached, townhouses
and apartments). A benchmark home is composed of a set of
attributes typical of homes in the area where it is located, and
remains constant over time. This allows for an apples-to-apples
comparison of price over time.
038 TREB TALK-HPI_Consumer Column_L.indd 1
THE MLS HPI IS CALCULATED USING
A SOPHISTICATED STATISTICAL
MODEL THAT TAKES INTO ACCOUNT
A HOME’S QUANTITATIVE (E.G., THE
NUMBER OF ROOMS IT HAS) AND
QUALITATIVE (E.G., WHETHER IT HAS
A FINISHED BASEMENT) FEATURES.
So, in the coming months, look for an increasing amount
of data and analysis based on the MLS HPI in TREB’s monthly
Market Watch reports. This reporting section will be called
“Focus on the MLS Home Price Index.” Eventually, the MLS
HPI will become TREB’s headline price number for release
and reporting. However, traditional average and median
calculations will continue to be published in Market Watch.
This new approach will provide clarity for the consumer
and prove to be a major improvement over any other method
to measure home prices and home price change available in
the marketplace today. I look forward to discussing the many
benefits and uses of the MLS HPI in the coming months.
I invite you to learn more about the MLS HPI by visiting
homepriceindex.ca.
Richard Silver is president of the Toronto
Real Estate Board, a professional
association that represents 31,000
Realtors in the Greater Toronto Area.
3/6/12 3:01:34 PM
City of Toronto
Etobicoke
Toronto
Scarborough
market commentary
Courtesy of Toronto Real Estate Board
City of
Toronto
Active
Listings
New
Sales
Avg. Price
Avg. Days
on Market
Avg. % List
Price
January 2012
4,448
4,041
1,705
$499,045
31
99%
January 2011
5,034
3,675
1,677
$446,458
36
98%
% Change
-12%
10%
2%
12%
-13%
-
What’s Available and What It Costs
Sales rose two per cent in the City of Toronto to 1,705 – up
from 1,677 transactions reported in Jan. 2011. Of this total
sales figure, 775 transactions (45 per cent of the total) were
accounted for by condominium apartments.
“Even with strong condominium apartment completions
over the past year, condominium apartment sales have
remained strong relative to the number of listings,” says
Jason Mercer, senior manager of market analysis at the
Toronto Real Estate Board (TREB). “This is because there
exists a substantial pool of end users poised to purchase
units from investors.”
012 City of TorontoSectionCover_L.indd 1
The average selling price for all home types in Jan. 2012
was $499,045 in the City of Toronto, representing a 12-percent increase over Jan. 2011.
“Tight market conditions have certainly been the
foundation for above-average price growth in the city of
Toronto over the past year,” Mercer says. “The fact that the
rate of price growth in the city was in excess of the GTA
average also points to a compositional shift in deals toward the
higher end of the market in January.”
3/6/12 2:56:34 PM
HALTON
OAKVILLE
MILTON
BURLINGTON
HALTON HILLS
PEEL
MISSISSAUGA
BRAMPTON
CALEDON
ORANGEVILLE
market commentary
halton region
Active listings in Jan. 2012 were down by eight per cent in
Halton Region in comparison to Jan. 2011. Annual sales
growth outstripped the number of new listings, which means
that market conditions became tighter.
The average selling price in Jan. 2012 was $491,561,
compared to the $543,424 recorded in Jan. 2011.
“While supply tightened last month, it is interesting to
note that the average selling price was actually down 10 per
cent in comparison Jan. 2011,” notes Jason Mercer, senior
manager of market analysis at the Toronto Real Estate
Board (TREB).
“Tighter market conditions coupled with a lower average
selling price points to a different mix of homes sold this past
January in comparison to last year. There likely were fewer
higher-end listings sold compared to Jan. 2011. As we move
into the spring, we will likely see a more representative mix of
home sales in Halton Region,” Mercer continues.
012 HaltonPeelSectionCover_L.indd 1
Courtesy of Toronto Real Estate Board
peel region
The average annual rate of price growth in the Peel Region/
Orangeville market area amounted to 13 per cent in January
– well-above the overall TREB average of nine per cent. Sales
growth continued to outstrip growth in new listings, pointing
to increased competition between homebuyers for listings that
were available during the month.
“Since the resale home market recovered from recession,
average annual rates of price growth have been well above
the long-term average in the GTA,” Mercer says.
“While market conditions have been tight and price
growth has been strong, and the above-average rates of
growth have been largely mitigated by low borrowing costs.
This means that a household earning the average income in
the GTA can still comfortably cover monthly mortgage
payments along with taxes and utilities associated with
the average priced home in Peel Region and Orangeville,”
Mercer continues.
3/6/12 3:48:16 PM
durham region
pickering
ajax
whitby
oshawa
clarington
uxbridge
scugog
brock
market commentary
Courtesy of Toronto Real Estate Board
durham region
Active
Listings
New
Sales
Avg. Price
Avg. Days
on Market
Avg. % List
Price
January 2012
1,415
1,143
582
$318,668
37
98%
January 2011
1,588
1,134
513
$304,638
39
98%
% Change
-11%
1%
13%
5%
-4%
-
What’s Available and What It Costs
There were 582 sales in Durham region through the Toronto
Multiple Listing Service (MLS) system in Jan. 2012 – a 13-percent increase compared to Jan. 2011. Sales growth outstripped
growth in new listings. Active listings at the end of January
were down by 11 per cent in comparison to a year earlier.
“While Durham is associated with the lowest average
selling price compared to other GTA regions, it has not
been immune to the strong price growth brought about by
the combination of strong sales and a constrained supply of
052 DurhamSectionCover_L.indd 1
listings,” says Jason Mercer, senior manager of market analysis
at the Toronto Real Estate Board (TREB).
The average selling price rose five per cent annually to
$318,668 in January.
“Even with strong price growth, many parts of Durham
Region continue to offer substantial value to buyers, especially
those households looking to purchase a single-detached home
for well-below the average price for the GTA as a whole,”
Mercer continues.
3/6/12 3:05:21 PM
YORK REGION
MARKHAM
RICHMOND HILL
VAUGHAN
AURORA
NEWMARKET
KING
WHITCHURCH-STOUFFVILLE
EAST GWILLIMBURY
GEORGINA
SIMCOE COUNTY
BRADFORD–WEST GWILLIMBURY
NEW TECUMSETH
ADJALA TOSORONTIO
RURAL ADJALA TOSORONTIO
ESSA
INNISFIL
market commentary
Courtesy of Toronto Real Estate Board
YORK REGION /
SIMCOE COUNTY
Active
Listings
New
Sales
Avg. Price
Avg. Days
on Market
Avg. % List
Price
January 2012
2,165
1,764
893
$542,066
33
98%
January 2011
2,420
1,675
863
$487,932
37
97%
% Change
-11%
5%
3%
11%
-11%
-
*The following Simcoe County municipalities are included in this table: Adjala-Tosorontio, Bradford West Gwillimbury, Essa, Innisfil, New Tecumseth
What’s Available and What It Costs
The average selling price in York Region/South Simcoe County
grew by 11 per cent year over year in Jan. 2012. The average
price level, at $542,000, was the highest of all the GTA regions.
“York Region and Simcoe County encompass a diversity
of home types, from single-detached homes on large estatestyle lots through condominium apartments and townhomes
located in planned city-centre developments. This diversity
attracts many different types of buyers to the region, and is
why sales have remained strong relative to listings,” says Jason
043 York-Simcoe SectionCover_L.indd 1
Mercer, senior manager of market analysis at the Toronto Real
Estate Board (TREB).
On average, homes were on the market for 33 days before
selling in Jan. 2102 – down eleven per cent from 37 days in
Jan. 2011.
“Competition between buyers has been strong, which
means that the average listing has received more attention
compared to last year. The end result is that deals have been
reached at a quicker pace,” Mercer continues.
3/6/12 3:02:09 PM