By: Luc Bouillon

Market Report: The Funhouse Mirror Affect

Tags: Market Report: The Funhouse Mirror Affect

The national average home price was down in March from where it stood last year. But home prices are not declining. Confused?

Average prices are affected by changes in the mix of sales, so year-over-year price comparisons can be like looking in a funhouse mirror: distorted.

To illustrate: line up a class of kids by height, calculate the average. Now excuse the ten tallest kids and recalculate the average. The average height has declined, but the kids haven't gotten any shorter.

A year ago, the national average price was pitched up by surging sales activity in some of Vancouver's priciest neighbourhoods. With activity there having subsequently returned to earth, the average has declined.

By contrast, the MLS® Home Price Index (HPI) is not affected by changes in the mix of sales. It's based on a sophisticated model of buyers' willingness to pay for various features that contribute to a home's value, and provides a clear picture of home price trends. The MLS® HPI remains up from year-ago levels, so the reality is that home prices are still climbing in the five major markets that it currently covers. That includes Vancouver, where the average price was down from where it stood last year. Unfortunetly the HPI is not calculated for Barrie, but we as REALTORS® can tell you without a doubt that this applies here as well!