A Globe and Mail article published this week questioning the accuracy of Canada’s housing data published by the Canadian Real Estate Association prompted me to write this long overdue post about sales statistics published by the Toronto Real Estate Board (TREB).
The Toronto Real Estate Board publishes a monthly report called Market Watch which is typically released during the first week of the month reporting on sales in the previous month. As part of their Market Watch report TREB also publishes a press release summarizing the sales statistics for the month.
The percentage change in the number of homes sold is calculated by comparing the current month’s sales to the number of sales in the same month in the previous year. For example, the percentage change in sales in September 2013 would show the increase or decrease from September 2012.
Up until June 2011, this was a pretty basic calculation. One could open the current month’s Market Watch along with last year’s Market Watch report to get the sales numbers required to calculate the percentage change which would of course be the same percentage change published by TREB in their press release.
In July 2011 TREB changed how they report the percent change in sales they publish in their press releases. TREB now compares the current month’s sales as published in their Market Watch report to an “adjusted” sales figure for the same month in the previous year. According to TREB the adjustment takes into account the fact that a number of the properties that were reported as sales a year ago fell through.
TREB has indicated that they are taking this approach because they want to use the most current and up to date data they have available. On the surface, this all seems pretty reasonable. After all, who doesn’t want to use current data?
But when we look at what’s really happening in a bit more detail, we see that TREB’s approach is not only flawed but it misrepresents the sales statistics they publish every month.
Let’s take a look at how this change impacted the sales statistics released in September 2013. According to the September 2013 Market Watch report there were 7,411 sales that month which was a 26% increase over the 5,879 sales reported in the September 2012 Market Watch report. But in TREB’s September 2013 press release they compared the 7,411 sales last month to an adjusted figure of 5,687 for September 2012. While on the surface this seems like a minor difference, the result is that TREB was able to report that sales were up 30% in September rather than 26%.
Comparing sales this month (unadjusted) to adjusted sales in a previous month doesn’t make any sense. The major problem with this approach is that the adjusted sales figure in the previous year is always going to be lower than what was originally reported for that month.
The following chart shows the actual sales reported by TREB from April-September 2012 along with the adjusted sales figure they used to calculate the percentage change statistics released in their press releases this year.