I have to confess, I’m a bit of a sucker for headlines. Out of the two headlines covering the Toronto Real Estate Board’s January statistics, the National Posts Toronto's Real Estate Market Shows Signs of Cooling Down headline grabbed my attention faster than the Toronto Star’s Tax Stokes Demand for Houses. Call it a new story trumping a very old story.
But after reading both articles, it’s the Star that ends up giving readers a more honest account of the current state of the Toronto Real Estate Market. The flawed analysis in the National Post article misguides consumers into believing Toronto’s real estate market is cooling down, when the statistics do not support their headline.
The National Post decided to make a headline out of the fact that average home prices fell from $394,931 in December to $373,499 in January. The first problem with their analysis is that comparing data on a month to month basis doesn’t take into account any of the seasonal factors that may be influencing the market. This is an issue I talked about in a previous post.
But more importantly, the National Post’s analysis missed the significant spike in prices between October and December 2007, likely caused by home buyers trying to avoid the city of Toronto’s new land transfer tax which took effect February 1, 2008. The average sale price for a home in December 2007 was $394,391, the highest monthly average in history and an increase of 17.5% over the same month in 2006.
So is the market really cooling down or did the unreasonably high average sale price in December make January look worse than it really is? Prices in January 2008 were up 6% over the same month last year. If the market is cooling down, the Toronto Real Estate Board’s statistics don't show it and neither does the National Post’s analysis.
February 7, 2008Market |