Understanding Statistics

It’s important to recognize the difference between an average price and a benchmark price when evaluating real estate prices.

The benchmark price is calculated using the Housing Price Index (HPI), a more stable way of measuring real estate prices and market trends over time because it takes into account the type of homes sold; essentially one type of property is measured over time with the qualities and characteristics of the property remaining constant. The HPI is similar to the Consumer Price Index (CPI) which measures the change of price, or rate of inflation, over a given time period.

When the average price of property is calculated, the total amount of sales is simply divided by all the properties sold in a given time, which can easily misrepresent the current market trend because if a few properties sold for significantly more or less than the majority, then the average price of property sales would be inaccurate.

Let’s take a look at Vancouver West’s benchmark prices in September, 2014 over a three-year period and compare them to the average prices over the same periods:

All Residential Properties:

Year Benchmark Price: Average Price: Difference (%)

2012 $792,900.00 $1,080,728.00

2013 $808,100.00 $1,178,684.00

2014 $859,300.00 $1,281,820.00 49.2%

Condos:

Year Benchmark Price: Average Price: Difference (%)

2012 $465,600.00 $657,319.00

2013 $475,200.00 $582,973.00

2014 $494,600.00 $669,168.00 35.3%

Houses:

Year Benchmark Price: Average Price: Difference (%)

2012 $2,088,700.00 $2,259,214.00

2013 $2,086,800.00 $2,478,176.00

2014 $2,299,900.00 $2,863,463.00 24.5 %

Townhouses:

Year Benchmark Price: Average Price: Difference (%)

2012 $672,400.00 $749,668.00

2013 $703,800.00 $1,192,339.00

2014 $755,100.00 $1,009,358 33.7%

As you can see, statistics can be deceiving, so you must know what it is that is being measured to fully benefit from the statistics at hand.

If you have any questions, I’ll be glad to assist!


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