Economics
The MLS® Home Price Index is the REALTOR®'s competitive advantage
One of the most critical factors when Canadians are contemplating either selling or buying a home is determining the best possible price for it. Every seller wants to get the most that the market will bear, while every buyer wants to pay as little as possible.
In every successful real estate transaction, the middle ground is eventually established between those two competing requirements. But if a seller lists a house with an unreasonably high price, or a buyer is hoping to pay an unreasonably low amount, one or both sides of the transaction are going to be frustrated and disappointed.
Determining the right price for any given home is not an easy matter. The real estate marketplace in Canada is a dynamic and active one, with prices rising – and, occasionally, falling – based on the normal laws of supply and demand, but also influenced by macro-economic factors such as demographic trends, interest rates, employment rates and wage gains. Individual markets within Canada can be a lot hotter than others, and can just as quickly cool off if there is a shift in the macro-economic trends. Within any local market, there are individual neighbourhoods, house types and features such as swimming pools or large yards that all ebb and flow in consumer desirability and so add additional variables to the pricing equation. And that's all before you factor walk scores, locations of local schools and shops, the general condition of a home and other elements specific to each individual house.
Taking the guesswork out of this whole process is one of the most valuable skill sets REALTORS® bring to the table.
Taking the guesswork out of this whole process is one of the most valuable skill sets REALTORS® bring to the table. Using their knowledge and experience, REALTORS® can guide both sellers and buyers through the murky waters of determining the optimal listing price or the best offer price for a home.
Helping REALTORS® in this complex task is the most detailed and accurate set of software tools available anywhere in the world. It's called the MLS® Home Price Index, or HPI for short. It was developed by CREA and a number of local real estate boards specifically to identify the trends in home prices for specific neighbourhoods in Canada and how those trends affect the market price of a home.
The HPI is not intended to predict the value of an individual property. Rather, it uses data from participating Board and Association MLS® Systems, the most comprehensive and accurate source of real estate data in Canada, to give a more precise picture of home price trends in a given region, municipality or neighbourhood.
There is a public version of the HPI available to anyone curious about home-pricing trends, but it is limited to tracking trends across broad markets. Only REALTORS® have access to this powerful tool at the neighbourhood level and for a number of different types of homes. In a marketplace where home sellers and buyers have countless other options available to them and where a lot of other housing market data has been made freely available, the highly granular and exclusive data available through the HPI gives REALTORS® a huge competitive advantage.
Thanks to a decision made this past year, that advantage is going to become available to REALTORS® in many more markets across Canada. CREA has committed to working collaboratively and on a cost-shared basis with any local Board that wants to develop the MLS® HPI for its local marketplace. This will include even smaller boards where the relatively lower number of transactions may mean a quarterly, rather than monthly, calculation of the MLS® HPI will be done.
Getting the price right is perhaps the most critical element of any real estate transaction.
Getting the price right is perhaps the most critical element of any real estate transaction. Using the powerful granular data available exclusively to them, REALTORS® can provide a service to both home buyers and sellers that no other players in the real estate marketplace can provide. It's a potent competitive advantage.
