Canada’s realtors have a new way to test the housing sector and, based on the first set of results, the market is showing signs of heating up again after posting its first price increase in two months.
The MLS home price index was up 5.2% in January from a year ago, and 0.27% from a month earlier, based on the five markets surveyed. For now, only Calgary, the Fraser Valley in British Columbia, Vancouver, Montreal and Toronto are surveyed, but that covers about 44% of the entire Canadian real estate market.
“The introduction of the [index] will provide clients and realtors a more timely and accurate gauge of home values in a number of major markets across the country,” said Gary Morse, president of Canadian Real Estate Association, which represents 100 boards across the country.
CREA says the new index uses a “sophisticated statistical model” that takes into account such quantitative measures as the number of rooms in a home and such qualitative measures as whether or not it has a finished basement.
The model also considers location, measuring proximity to schools and hospitals, even golf courses, when comparing prices.
The index will divide the information into different categories that include single-family homes split into one-storey and two-storey homes, townhouse or row units, and apartments.
The Ottawa-based group will continue to release its traditional monthly average price data, calculated by taking total value of housing sold divided by number of sales.
Gregory Klump, CREA’s chief economist, said the index more accurately measures the housing market. “Changes in average price and median home prices are open to misinterpretation, since they can swing dramatically based on changes in the mix of home sales,” he said.
The five boards involved with CREA started working on the project in 2009, partnering with real estate research firm Altus Group to come up with the index.
It faces competition from the Teranet-National Bank price index but is expected to issue results on a more timely basis. Teranet’s most recent statistics are for November while CREA’s cover January.
However, Teranet’s index represents 11 cities. CREA says it hopes to expand to 16 boards by 2013, which would represent almost 70% of the Canadian housing market.
The first set of results from the MLS index shows the housing market did rebound after a poor finish to 2011. Prices declined 0.20% in December from a month earlier and slid 0.7% in November from October.
Overall, the MLS index shows prices were up from a year ago in all five of the markets surveyed, led by Toronto, where they rose 7.6%. Prices in all housing categories rose, but the strongest showing was for two-storey homes, up 6.7% from a year ago.
“While home prices remain up compared to one year ago, price growth from one month to the next has been slowing, causing year-over-year gains to shrink, and prices are generally expected to continue to stabilize this year,” said Mr. Morse.