Tuesday, January 20, 2009

Price Indexes Revisited

A couple weeks back I took a look at price indexes, and someone pointed out there was an organization in Canada that was doing an index much like the Case-Shiller index in the States. So we'll be taking a bit of a look at that today, and for those interested in getting it straight from the horses mouth, you can check it out at housepriceindex.ca.

Unlike the index of house prices I did where I just took the average residential prices, this one only compares "sales pairs" where they compare the sale prices of identical properties over time, and yields a truer result. For a better explanation click on the "Methodology" link on their site, complete with examples. Here is a chart of their indexes for the six markets they follow, as well as a composite of those six.

Canadian Home Price IndexYou'll notice that unlike Case-Shiller, they set their index point at June of '05 rather then January of '00. For the sake of comparison I will change that point back to January of '00, because I think that gives a bit more perspective to the time line. So here is a look at that same data with with the index point adjusted.

Canadian Home Price IndexAs you can see, the chart still looks much the same as time progresses. For comparative purposes, now I'm going to take a quick look at how this index relates to the average price index I did earlier by charting the shared markets. Since theirs is a 3-month moving average, I'll include both the monthly average residential price as well as a 3-month moving average of it, which just just kind of smooths out the figures.

Vancouver Comparison
Calgary Comparison
Toronto Comparison
Ottawa Comparison
Montreal ComparisonFor the most part it seems that the Canadian-HPI trails the residential average by about 4-6 months, which while prices were rising left it a bit below, but now that prices are falling its now even or the higher of the two.

You can kind of read into this what you will, but you can see that obviously there is a relationship between the figures as they do track together. So while it was certainly a quick and dirty price index that I compiled, the data provided was actually somewhat useful... but like I said earlier, the HPI by Teranet is by far the better of the two.

In my next entry (probably Thursday) we'll compare Case-Shiller's US index with Teranet's Canadian House Price Index, and see what relationship those two may or may not have.