What is a benchmark home price?
Does it make sense to look at the benchmark home price in the area you want to buy? Short answer: Yes. Find out what it means and why.
Why are mortgages so expensive in Canada?
Created By
Ratehub.ca
A benchmark home price is a statistic used to track changes in housing prices over time in specific geographical areas. Because homes can vary widely in size and features, a simple average is often not meaningful. Instead, real estate experts calculate benchmark prices using recent sales data for homes with specific features typical of a given neighbourhood.
For instance, if most homes in the area are bungalows with two bathrooms and a finished basement, the benchmark would be based on sales data for that type of home. This prevents the numbers from being skewed by sales of tear-downs and “monster” homes (large detached dwellings on relatively small areas).
Benchmark prices are usually calculated for different categories, like attached and detached houses, and condominiums. These prices are then aggregated into a housing price index (HPI) to analyze changes in housing prices over time in a neighbourhood, city or province, or across Canada.
The methodology for these calculations is adjusted from time to time to improve the relevance of the data. For instance, until recently, the MLS Housing Price Index was calculated using definitions of typical homes that were 15 years old. Now, however, these definitions are updated every five years.
With the popularity of renovations, the features of a typical home are changing more rapidly than in the past. Using a five-year period, the numbers will better reflect current homes and their prices in each community.
Example: “The Canadian Real Estate Association (CREA) publishes the most widely used housing price index (HPI) in Canada, the MLS Home Price Index, which reports changes in pricing for benchmark homes in different communities across Canada based on sales data from the MLS System.”
Read more about real estate:
- Where to buy real estate in Canada
To simplify the task of buying a home in Canada, we dug into real estate data and trends to find the top cities and regions for home buyers this year, based on current home prices and recent price growth. - How to use equity to buy a second home
We look at four common ways of financing the purchase of a second property using equity built up in your current home. - Are home renovations tax-deductible in Canada?
Doing home renovations? Find out if there are any tax incentives that Canadians are able to claim. - The Canadian mortgage stress test, explained
Most home buyers in Canada will encounter the stress test when applying for a mortgage. Here’s how it works and what it means for borrowers.
Share this article Share on Facebook Share on Twitter Share on Linkedin Share on Reddit Share on Email
Related Articles
MoneySense at the MoneyShow: Capital gains and ETF sessions
Here’s how to get your free ticket to attend two MoneyShow virtual expos.
Where are rent prices headed in Canada?
A new Desjardins report predicts rent inflation will slow in the next few years.
What to know as Canada’s capital gains tax changes remain in legal limbo
The federal government’s capital gains inclusion rate increase has yet to become law. There’s a slight chance it may...
How Trump’s election win could affect interest rates in Canada
Experts say Donald Trump’s promised policies risk higher inflation and could weigh on the Canadian dollar.
Looking for a mortgage in B.C.? Don’t limit your options to the big banks
Sponsored By
Coast Capital
Why are Canadians still frustrated with the economy?
Inflation is down, wages are up. But the economic recovery has been uneven, with “two contradictory trends” shaping Canadians’...
What is Sun Life’s new decumulation product?
While not guaranteed like an annuity, MyRetirementIncome is a flexible and simple financial product for those needing to convert...