The Home Price Index (HPI) is a measure used to track changes in the price of residential properties over time. It provides a more accurate and comprehensive view of the housing market's price trends than traditional average or median price measures. The HPI is calculated by various Canadian real estate boards and industry organizations, including the Canadian Real Estate Association (CREA) and local real estate boards.
Key features of the Home Price Index in Canada include:
Benchmark Property: The HPI uses a benchmark property, which represents a typical property with a set of specific attributes (e.g., size, location, and features). This benchmark property's price is tracked over time to measure price changes.
Geographic Coverage: The HPI covers various regions and markets across Canada, including major cities and provinces. It provides a breakdown of price trends for different types of properties in different areas.
Seasonal Adjustment: To account for seasonal variations in the housing market (e.g., higher prices in the spring and summer), the HPI is seasonally adjusted, allowing for a more accurate comparison of prices over time.
Comparison to a Base Period: The HPI is typically calculated relative to a base period, which is set at a specific point in time. Changes in the index are then expressed as a percentage relative to the base period.
Weighted Index: The HPI uses a weighted index methodology, giving more weight to properties that are more similar to the benchmark property and less weight to properties that differ significantly.
Data Sources: The HPI relies on data from local real estate boards and multiple listing services (MLS) to track property transactions and gather information about property characteristics.
The Home Price Index provides a more nuanced understanding of real estate market trends compared to simple average or median price statistics. It can help policymakers, economists, and real estate professionals analyze and forecast changes in housing prices, making it a valuable tool for understanding the state of the Canadian housing market.
It's important to note that the specific methodology, coverage, and data sources used in calculating the Home Price Index may vary between different organizations and regions in Canada. Therefore, users of the HPI should be aware of the particular details and sources associated with the index they are referencing.
Find out more about how to use the HPI for your purposes here.