During these first days of summer, as economists are telling us that the worst of the recession may be over, Canadians are wondering how the values of their largest financial assets – their homes – are holding up. Media reports of real estate statistics have left many Canadian homeowners rightfully confused. The problem is that these statistics are usually based on averages of city, provincial and national markets. Such averages are pretty much irrelevant to what’s really happening in specific neighbourhoods. Our analysis suggests that Canadian homeowners should avoid relying on city, provincial or national averages to value their homes. Instead, sellers should monitor selling prices of similar homes in their own neighbourhoods. Buyers should monitor selling prices of typical homes in the neighbourhoods where they want to live.
Canada
In mid-June, CREA reported that the Canadian national average price for home sales via the Multiple Listing Service® (MLS) in May 2009 was $319,757, +0.4% compared with May 2008.
Greater Toronto
The Toronto Real Estate Board reports that the average home price in May 2009 was $395,609 for all transactions (single and detached homes, condo apartments and condo townhouses) in the Greater Toronto Area (GTA). The GTA is the country’s most populous urban concentration bounded by Lake Ontario on the south, Lake Simcoe on the north, Burlington on the west, and Newcastle on the east. This average price has little relevance to prices in the specific neighbourhoods and communities in the GTA, where prices for single detached homes ranged from $1.53 million in the Toronto neighbourhood between St. Clair Avenue and Bloor Street east of Bayview Avenue; to $709,000 in a rural neighbourhood east of Newmarket; to $255,000 in Oshawa.
Average home prices
Averages themselves are largely misleading. Suppose that in Year 1 five homes sold for $200,000, $220,000, $260,000, $290,000 and $500,000 (average $294,000), but in Year 2 only the first four homes sold (average $242,000). Statistically, this would mean that the average price of homes sold in this neighbourhood in Year 2 fell by $52,000, or 18%, from Year 1, even though all houses that were actually sold fetched identical prices to the previous year. Homeowners in this neighbourhood who didn’t carefully analyze the data would think their home values had fallen dramatically over the year, when, in fact, values of typical homes in the neighbourhood were stable.
Summary
The objective of this report is to help homeowners understand the relationship between widely reported real estate statistics and the value of their homes. We recommend that homeowners carefully scrutinize home price surveys from a variety of real estate organizations and economists. For a FREE evaluation of your home and for information on recent sales in your neighbourhood, please contact me at www.seankavanagh.ca
For more information on buying or selling real estate in Burlington, Hamilton or Oakville, Ontario, or if you have questions about current market trends, mortgages or interest rate information, please visit the Sean Kavanagh Real Estate Resource Centre at www.seansells.ca. I’d be happy to answer any questions to accommodate all of your real estate needs. Follow me on TWITTER! You can also contact me at 905-220-9198 or at www.realestatechat.ca as I am now a moderator on the Ontario Real Estate chat forum as well as the Burlington, Ontario sub-forum.
I look forward to hearing from you!
Sean Kavanagh
Building Lasting Relationships and Exceeding Expectations