Canadian Funding Corp Reviews CMHC Affordable Housing Reports

By Don Lawby – President, CENTURY 21 Canada

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.

A cautionary tale

A number of authoritative real estate organizations issue monthly home price surveys from which price averages are extracted and extensively reported in the media. Often these organizations caution that average prices do not reflect actual prices in neighbourhoods with specific geographies and housing types, but these cautions are largely overlooked.

Here are examples that illustrate some limitations of averages.

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.

Getting an accurate value of your home

So, the question remains: How does a Canadian homeowner determine the value of his or her existing home? Or how does a buyer determine the value of a prospective purchase?

The fact is, the Canadian housing market is made up of thousands of local housing markets that are affected by national, regional and local issues.

Local issues are many and varied. Prices of homes vary with proximity to rapid transit, shopping, parks and schools. Mountain or lakeside vistas are preferred over powerline panoramas or flight paths. Prices of homes in neighbourhoods a stone’s throw apart will vary with age, size and type of home. Homes at the base of a hill are more affordable than view homes at the top.

The most relevant housing market is the one that is closest to where you live today or want to live tomorrow. Neighbourhood surveys are more useful than city surveys, city surveys better than provincial and so on.

Most relevant are surveys of recent selling prices of similar homes on the same street or in the same neighbourhoods.

That said, it is difficult for homeowners to do their own surveys because listing prices – not selling prices – are available to the general public on the local MLS. The best course is to ask a realtor of your choice to show you statistics of selling prices of homes similar to yours in your neighbourhood. You will incur no obligation and, depending on your evaluation of the statistics you are shown, you will have a head start on your search for a realtor should you decide to sell your home.

Summary

The objective of this White Paper 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. We hope this White Paper helps homeowners extract information from those surveys that is most relevant to them.
http://www.jeffreyteam.com/blog/toronto-real-estate-market/real-estate-statistics-101/
reviewed by Moishe Alexander, CFC CEO

Though Nova Scotia’s March real estate sales activity was down 15 per cent from the same period last year, it was still the highest level of housing sales activity in the province in five months, as reported by the Nova Scotia Association of Realtors. The provincial Association also reports that year-over-year declines in activity continue to get smaller. In January 2009, the year-over-year decline was 32 per cent.

The value of all residential transactions recorded through the MLS system in Nova Scotia totaled $130.5 million in March 2009, a 16 per cent decrease from year-ago levels. The total value of all MLS sales activity in Nova Scotia was $137.4 million, a year-over-year decline of 17 per cent from March 2008.

“Despite the downturn, a number of buyers and sellers are taking advantage of the increased affordability the current market has to offer,” says Linda Smardon, president of the Nova Scotia Association. “Activity during the rest of the spring market will depend heavily on what happens with interest rates and the consumer response to the federal budget incentive programs,” she adds.

The average price for MLS home sales in Nova Scotia was down slightly in March 2009 compared to levels one year earlier. Edging down one per cent from March 2008, the provincial average price for home sales was $188,651. The national MLS residential average price in March 2009, by comparison, was down by eight per cent year-over-year. The MLS average price rose by 1.6 per cent in Halifax-Dartmouth to $229,548. The small decrease in provincial average price was in part the result of fewer sales in this region, where homes are priced higher than in other markets across the province. Sales activity was down by 19 per cent year-over-year in Halifax-Dartmouth, compared to the 15 per cent provincial decline. This resulted in fewer transactions at the higher end of the price spectrum being included in the calculation of the provincial average price.

The number of active listings continues to increase in Nova Scotia, but year-over-year gains are slowing as demand begins to recover and new listings trend lower.

“Home sellers are adjusting to the changes in the market and are working with their realtor to price homes realistically, and when that happens properties will sell. We anticipate a fairly strong April market,” Smardon says.

http://www.jeffreyteam.com/blog/other-real-estate/resale-housing-market-strong/

reviewed by Moishe Alexander, CFC CEO