Nothing Average About House Prices

I woke up this morning to a headline (and as a result, many Tweets) that caught my eye.

“Calgary single-family home prices crack half million dollar mark.”

Some of the RTs of this headline offered personal commentary—good and bad. What does it mean for the average family? For sellers? For buyers?

Of course, one only needs to read the first paragraph of the post on the Calgary Herald website to find out that the price being spoken of—the half-million dollar mark—is referring to the average price of single family homes sold in Calgary in May, which was on a total of 1,710 transactions.

Of course, just a few short days ago there was another headline about Calgary’s May real estate market, on that same website (the Calgary Herald): “Luxury home sales in Calgary set record in May.” That’s right, as of May 29, there had been 70 single-family homes sold in Calgary for more than $1-million.

Today’s blog post about the high average price of a single family home in Calgary, when read as a standalone piece, could strike fear in the hearts of first time buyers—and it could make dollar signs dance in the eyes of sellers, but of course, it can’t be read in a vacuum. Any time you talk about average prices, you have to look at the data being used.

In this case, even the Herald reported on it. There were a high number of “luxury” homes sold in May. In fact, there were more “luxury homes” sold in May 2012 in the Calgary area than there were in the boom months of March and July 2007. That high number of luxury home sales can skew the average price of all single family homes sold.

There are many things to consider when thinking about what “average” real estate prices mean to a typical buyer or seller. First, all real estate is local. The average price in Calgary doesn’t tell you anything about current values in a specific neighbourhood—and there are definitely wide variations in prices across the city. Second, the average temperature in Canada tells you nothing about you how should dress for a day, so in the same way, the average house price isn’t going to tell you how much you’re going to have to pay for a single family home.

Remember that any time you’re looking at housing statistics—you can’t do so in isolation. One news story about rising (or plummeting) house prices does not a full picture make. Try to help your clients make sense of it all, but keep in mind that nobody has a crystal ball about what any of these numbers and statistics definitively mean.