Once again, be careful of headlines
Benjamin Tal of CIBC World Markets wrote in their current weekly insight wmi-1107.pdf that you have to be careful when reading headlines. His specific example this time around was regarding house prices and the dropping Canada wide;
House prices in Canada are falling. But looking simply at the headline numbers can be very misleading. At a
risk of being a bit technical, we will note that the headline numbers reflect a current weighting for each city,
which leads to a significant bias to the overall average price since dramatic changes in the volume of the sales
in certain cities can notably influence the national average price. Take Vancouver. The close to 45% year-over-
year fall in the number of homes sold in the city and the fact that Vancouver prices are much higher than the
national average combined to make it look as though national home prices were falling sharply when, in fact,
it was driven by fewer expensive homes being sold in Vancouver, as a fraction of the whole. The result: the
national headline number is down by close to 6% (y/y) last month but if properly weighted, house prices fell by
only 1%. Yes, prices are falling and they will continue to fall, but the headline numbers exaggerate the real
weakness in the housing market.
