How useful is an ‘Average Canadian Home Price' metric?

How useful is an Average Canadian Home Price' metric

?

Canadian Real Estate Association (CREA) is developing a new measure of the health of the Canadian real estate market.

While perusing Vancouver real estate news on Google this morning it struck me how utterly useless and misleading an average' Canadian home pricenumber actually is. In a country the size of ours with one end a hop skip and jump from Europe and the otherend almost touching Russia, is it useful in any way to talk about national average home prices? I don't think it is.

To illustrate my point, take this article from the Vancouver Sun, dated today, Dec 7, 2010. The opening paragraph of the article reads

"OTTAWA Canadian home prices should continue to rise next year, despite sales levels flattening in most major markets, said Re/Max in a report released Tuesday. The real estate firm said home prices should, on average, rise three per cent to $350,000 by the end of 2011, while existing-home sales will remain flat. It forecast that home sales this year would be down five per cent to 441,000, with prices growing seven per cent to $340,000."

So what happened and how is this information at all useful? It's not. Creating an average using an average house price of $780,000 in Vancouver's west side and combing that with the average house price in Labrador just doesn't make sense. Yes, I'm over-simplifying but you get my point.

It appears that CREA is creating a solution to this problem by coming up with a new way to measure the health of Canada's housing market. CREAis looking to create an index that adjusts for bias and skewing in places like Vancouver and metro Toronto where prices are high. CREAis partnering with the Altus group out of Toronto to develop a model similar to the Standard and Poors Case-Schiller national home price index. This index measures US housing market activity month to month.

The closest Canadian alternative to this model is the Teranet National Bank Index but this index currently only considers six cities.

Lets look for something a little more accurate in the near future.

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