Back in September, you first read about a national HPI that was to be launched in 2012. We’re happy to say that the MLS® Housing Price Index (HPI) is coming to Calgary in February, as part of a nationwide rollout involving boards in Canada’s largest cities.
This new monthly price measure will enable us to better determine real price changes. For example, many agents have experienced a scenario where the monthly average price increased by 5%, and our clients say, “Prices increased, shouldn’t my house be worth more?”
The 5% increase is often misinterpreted, and could be caused by a number of factors including a rise in luxury home sales. As average prices can be skewed by the composition of sales, it does not reflect price trends based on the type and features that a home provides.
The index will help as price trends will reflect changes caused by individual’s willingness to pay for home attributes.
What does this mean for those working with REALTORS®?
By using MLS® HPI, we will be able to offer more comprehensive and purer data than ever before – data you can use for property comparisons, understanding future price trends and estimating current market values.
So how does it work?
The MLS® HPI is calculated using a sophisticated statistical model that estimates home prices based on their quantitative and qualitative features, including:
• Number of rooms above the basement level
• Number of bathrooms and half-bathrooms
• Square footage for main living and basement areas
• Whether it has a fireplace and/or finished basement
• Lot size
• The age of the property
• How the home is heated
• Foundation, flooring, siding and roofing types
• Whether the property has a waterfront or panoramic view
• Whether the property has been sold previously
• Proximity to shopping, schools, hospitals, police stations, churches, sports centres, golf courses, parks, and transportation (including train stations, airports etc.)
Upon valuating these features or attributes the index and the benchmark price are formulated.
MLS® HPI Benchmark
A ‘benchmark home’ is one that shows a set of attributes typical to the area/sub-market where it is located. Since ‘typical’ homes are different from one area to the next, their descriptions differ between areas.
If you’re interested in the benchmark home attributes that will be tracked by the MLS® HPI in your community, please email me with “Community Benchmark” as the subject, and the community you’re interested in. The typical home for each community will remain constant over time, indicating that attributes will not change.
For example, the following table outlines some of the attributes that comprise a typical home for each of the following communities:
|Property type||2 storey||2 storey||2 storey|
|Age of property||16||16||50|
|Above ground bedrooms||3||3||3|
|Number of covered parking spots||2||2||2|
|Number of full baths||2||2||3|
The MLS® HPI benchmark price is calculated by taking the values determined by the model and applying it to these attributes for the ‘typical’ homes in each area. The value of these attributes is generated based on geographical groupings where the sales that have occurred are similar to each other, i.e.”homogeneous”.
Continuing with the above example, the following data would also be available for each community.
|Benchmark Price||% change one month||% change six months||% change one year||% change three years|
|Mount Royal – two storey||$1,320,774||0.69||-5.23||-4.61||-7.05|
|Hawkwood – two storey||$410,286||1.27||-0.63||4.61||-0.58|
|Edgemont – two storey||$477,760||-0.58||-2.30||4.29||3.03|
As noted in the table above, the price of a two-storey home and its attributes vary from each community as do the trends in pricing. This type of monthly summary report will include each community by property type and will be available after the HPI launch in February.
I look forward to helping you with your real estate needs with this added tool at my disposal.