What are House Price Indices and What Do They Mean to You!

When we hear in the news about the state of our housing market, values of homes in different areas around Canada, values by type of home, averages, increases and decreases in values - we have house price indices to thank for all of this.

House price indices give valuable insight into the direction of the housing market. These insights not only enable you to optimize what you are doing now but also give you the ability to plan marketing initiatives and even workflows based on what you could be anticipating in the future.

So what is a house price index exactly? Simply put, a house price index is an automated program that measures the price changes of residential housing. The Teranet National Bank House Price Index (HPI) is a great example.

The 3 most common methods used to calculate house price indices are:

• HR – Hedonic regression: This method analyzes the item being researched by its characteristics and makes its estimates based on the value of each characteristic. Hedonic indices are most commonly used by professionals who work in the area of appraising real estate, financing real estate, and those who evaluate the economics of real estate.
• SMA – Simple moving average: This method is a calculation that analyzes data by creating averages within a full data set. The simple moving average is the unweighted mean.
• RSR – Repeat sales regression: This method uses repeat sales from the entire market.
• Economists, banks, real estate sales professionals, real estate appraisers, government and brokers alike use house price indices.

Let’s use the recent news with respect to the Toronto housing market and the fact that the average prices of a detached home in Toronto is now 1 million dollars as an example – we have house price indices to thank for this information.

Knowing what is happening in the housing market across the board enables you to offer your clients better services and have more involved discussions about how their mortgage financing could be structured to anticipate changes or simply to measure if a home being presented is presenting a value consistent with what the market is calling for.

These are also a great marketing tool for brokers! Paying attention to news about house price indices enables you to leverage that content in your blogs and other marketing and presents you as a thought leader.

How can you track house price indices? One way is to stay on top of announcements. For example, the Teranet National Bank House Price Index is released on a monthly basis – release dates can be found here: http://www.housepriceindex.ca/Default.aspx. Don’t want to have to remember to check? You can also subscribe to receive a monthly report in your inbox.

Don’t get stuck without all of the available information. Make use of house price indices and have the info you need, whenever you need it. Purview For Mortgage Brokers has you covered. Call today: 1.855.787.8439.