By /

MLS Home Price Index (HPI) Information For You

 

Developed using data from the Multiple Listing Service®, the MLS® Home Price Index (or MLS® HPI for short) allows you to see trends in home prices for a type of home in a given area, with the same set criteria over time.  The concept is to see how just Granny Smith apples have done, instead of all types of apples, which may include much more or less expensive types.

It does make sense in concept, and it is worth seeing general trends over time. However, because it is designed to minimize the impact of changing styles, it may not be as relevant to property types where styles do change fairly rapidly, like condos. Therefore, it must be used in the same way as other generalized statistics.

You can see it in action across Canada and get more info on it at http://www.crea.ca/housing-market-stats/mls-home-price-index/

We can drill down to a particular area and property type in the Ottawa area for you – just contact us. (Interestingly, Area’s A through H range from the borders with Quebec to the north and east, to the St Lawrence, and west to Merrickville and Brockville, so a bit more selectivity is worthwhile.)

The MLS® HPI is not designed to predict the value of an individual property. However, since it is based on MLS®listing content the MLS® HPI provides a relatively accurate picture of home price trends in a given region, municipality or neighbourhood.

The MLS® HPI can help you gauge changes in housing prices over time, including changes in:

  • Overall home prices for the market as a whole
  • Prices for specific housing categories in a given area, or for the overall market

 

How is the MLS® HPI different from average and median home price calculations?

The MLS® HPI is based on the value homebuyers assign to various housing attributes, which tend to evolve gradually over time.

This means that price changes calculated using the MLS®HPI are less volatile than those derived using common measures like average and median, which can swing dramatically in response to changes with high-end or low-end sales volumes over time.

It is often difficult to determine if average or median price fluctuations really reflect changes in buyers’ willingness to pay for certain housing attributes, or just changes in the volume of very expensive or inexpensive home sales from one time period to the next. The MLS® HPI removes that uncertainty.

 

How does the MLS® HPI work?

The MLS® HPI tracks changes in home prices by comparing price levels at a point in time with price levels in a base (reference) period. The base period value is always 100.

For example, if the base period for single-family homes is 2005, and the MLS® HPI value for single-family homes in December 2011 is 149.1, you know that the value of single-family homes is up 49.1%, compared with 2005 (149.1 ? 100 = 49.1%).

Above is the example of the criteria used for the home type “apartment”.  The HPI tracks that same type of apartment across the years so that changes in size, finishings, etc are not included.  The criteria listed above for apartments may not be so typical of the style now-a-days, but it still follows that style across the years.

Curious about how your type of home has done?  Or curious about how another type has done?  Just contact us and we’ll be happy to run an HPI for you!

 

 

Check out more articles in the with similar categories – Article, Board Sales, Ottawa Real Estate Market