Appreciating Home Appreciation

Every month the Ottawa Real Estate Board puts out a news release on the average home price, condo price, and sales volume for that month and how it compared to the year before. Consumers, interested in buying or selling a home, should note the following caveat included in each release:

“The Board cautions that average sale price information can be useful in establishing trends over time but should not be used as an indicator that specific properties have increased or decreased in value.”

In short, the houses sold last year, in this month, are completely different than the houses that sold this year, in this month.  It’s kind of the equivalent of comparing apples with oranges.  The same applies to neighbourhood statics (available to real estate professionals).

How much is a house worth?

So how do you know how much a house is worth?  Unfortunately, it is not a science.  We like to look at the appreciation of individual houses in a neighbourhood.  In other words, we find all the homes in a neighbourhood that have been sold more than 2 times over a 15 year period.  We can then calculate the appreciation for each of these homes, over time.  By doing this for several homes, we’re able to estimate an average appreciation for the neighbourhood.

That said, there are still challenging nuances with this approach. Perhaps the property has been improved.  Or, the seller’s/buyer’s motivations may have led to a sale price that was above or below market value.  Still, we believe this type of data analysis gives a truer representation of the appreciation in a particular neighbourhood than year over year comparisons of different houses.

What else goes into a property evaluation?

Working out average appreciation is just one tool in determining the value of a property.   We think there are many perspectives to consider, which is why we take a thorough approach. Whether you’re buying or selling, we’ll always analyze:

1.  similar homes that sold recently in your neighbourhood, and

2.  the price of similar homes currently on the market in your neighbourhood and comparable neighbourhoods

In other words, we dig into the data so you can be confident in your negotiating, whether your buying or selling your home.

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