More On Alternative Methods For Measuring Housing

When is the Canadian media going to stop headlining grossly misleading data published by the Canadian Real Estate Association (CREA)? Case in point: on December 15, the Canadian Press cited CREA data that house prices had dived 10% during the year to November.

That 10% “decline” represents not a pure price decline but a change in the mix of houses sold. CREA is aware of this and just recently began publishing another estimate of house prices that supposed corrects for this distortion. This measure shows a 4.7% decline, as the Financial Post reports.

Yet, even this is suspect. I just finished doing a few posts on a less distorted method called the Repeat Sale Price Index (RSPI). It indicated house prices were 3.3% higher over the year to October.

The RPSI is not perfect but would seem to be the least biased. It is the method now widely followed by the U.S. media (i.e. the Shiller-Case indexes). And the New House Price Index published by Statistics Canada shows a year-over-year increase in October of 1.5%, closer to the RSPI than CREA.

I think it is a rather huge disservice to the Canadian public to disseminate such misleading statistics. If gives an overly negative picture of the housing market. It may scare house hunters away from the market and lead house sellers to list at a lower price, creating a self-fulfilling prophecy. Lies, damned lies, and statistics, goes the saying.

Comments

[Realista:]

Another Very Misleading Numerical comparison yesterday.....

"Housing Starts Fall to 625,000 per year, same as in 1949!

In 1949 U.S. Population was 160,000,000 and Today 300,000,000.

In Reality Therefore, 2008 Housing Starts are Comparably --50% WORSE than 1949's!

2008 Dec 19 03:03 PM

[Stephen Kanitz:]

Interesting. Could it be because Canada Tax code does not allow MID mortgage interest deductions, and therefore does not stimulate housing over indebtness ?


seekingalpha.com/artic...

2008 Dec 20 09:25 AM

[pitaking:]

I live just outside of Calgary and we are looking at well over 10% drops in recent months. There is a ton of unsold inventory and very few buyers. If oil doesn't rebound to 60-75$ range this market is prime for a free fall.

2008 Dec 20 03:16 PM

[Smalltownba...:]

Correction to your correction. That is actually 95% worse.


On Dec 19 03:03 PM Paul Revere wrote:

> Another Very Misleading Numerical comparison yesterday.....
>
> "Housing Starts Fall to 625,000 per year, same as in 1949!
>
> In 1949 U.S. Population was 160,000,000 and Today 300,000,000. <br/>
>
> In Reality Therefore, 2008 Housing Starts are Comparably --50% WORSE
> than 1949's!

2008 Dec 22 08:07 AM