What is your home really worth?
When considering what their home is worth these days, Metro Vancouver homeowners would be wise to heed that old expression about there being three kinds of lies: lies, damned lies and statistics. The world of real-estate statistics, especially in these volatile times, can be a complex and confusing area where amateurs should tread with care. Cameron Muir, chief economist for the B.C. Real Estate Association, notes there are three main types of real-estate evaluations used by the industry: the average price, the median price and the House Price Index.
The average-price method has its shortcomings because a few higher-valued home sales in an area tend to skew prices upwards. “For example, in Metro Vancouver, say the average price is $850,000,” he says. “The fact is, 70 per cent of homes will actually be sold for below that number.” A median price reflects a point where 50 per cent of homes sell at a higher price and 50 per cent below it — again, it’s of limited value, Muir says.
The most useful gauge for consumers buying or selling is the House Price Index, which tries to measure price trends of a “typical home” in a specific neighbourhood with a certain number of bedrooms and other attributes. But any one of these evaluations doesn’t do the job by itself, he says. “There is no perfect pricing measure, making it very hard for you to get a representative number for your home.”
Jon Bennest of the Vancouver research firm Urban Analytics says he notices how real-estate statistics are misapplied in articles considering the affordability of Vancouver real estate. Commentators often calculate the costs of servicing a mortgage as a measure, “but people have the equity to buy these homes based on their wealth and net worth rather than on what they earn.” It’s not just prices that consumers should approach with caution. Developer Michael Geller notes that there is a world of damned statistics surrounding square footage. With no one standard of measurement, square footage can vary significantly from condo development to development.
Depending on whether you measure from the interior mid-point or the absolute exterior of a wall, you end up with a total plus or minus 50 to 80 square feet. At current construction costs, that can mean a difference of $50,000 to $80,000 on the purchase price of a 1,000-square-foot home. A developer is obliged only to disclose the measurement method used, a question buyers should always ask before signing on the dotted line, he said.
All of this, the experts say, makes it important for those in the market to consult with a local realtor before buying or selling a home.
BY MICHAEL BERNARD, WestCoast Hom & Design Magazine