What is the MLS® HPI?
The MLS® Home Price Index (or MLS® HPI for short) provides home price trends for a specific municipality or community for different property types. Based on data from the Multiple Listing Service®, It uses advanced statistical modeling to give us the most accurate picture of market trends.
Why Do I Often See the Average Sold Price Quoted?
Prior to MLS® HPI, we relied on the Average Price. Although it is easy to understand and calculate, the Average Price only accounts for three attributes of each house that is sold: the Property Type, the Community and the Sold Price. The MLS® HPI, on the other hand, accounts for about 20 attributes of each house including the year built, size, location, parking, number of baths and basement development.
Is the MLS® HPI Very Different from the Average?
It can be. Consider these two headlines: “Calgary Row Housing (townhouse) Values Increase by 1.61% Over Last Year” and “Calgary Row Housing Values Decline by 3.84% Over Last Year”. These are both based on comparing the sold properties for September 2017 to those for September 2016. The first headline used the Average Price while the second used the MLS® HPI. How can we account for this difference? Although houses with the same features sold for less this year, there was a greater proportion of higher-end houses compared to last year. Also note that the Average Price is increasingly vulnerable to error with smaller sample sizes.
What is the MLS® HPI Benchmark?
The MLS® HPI Benchmark sets the dollar value for a typical house of a specific Property Type in a specific community. It first defines the properties of a typical house and then uses the same advanced modeling to determine the Benchmark Price each month. It has the same validity as the MLS® HPI.
The Bottom Line
The MLS® HPI and HPI Benchmark are statistical tools we use to understand market trends. The impression one gets from the media is that if house prices are increasing for Calgary then they are increasing for every community. That is not true. You need accurate market information on the community and Property Type you are buying or selling – to know whether it’s an appropriate time to buy or sell and to negotiate from a position of knowledge. Call us. We are here to provide our brand of personal service and professional results for any of your Real Estate questions or needs.