I haven’t followed Norm’s blog too closely up until now, but I have to agree with you Larry, after reading his comment above, he has certainly earned my respect as a blogger.

Don’t be disappointed. I was just looking for some truths. Sometimes it’s only one thumb that holds the water back in the dam. I have great respect for Norm as a man and his opinion. That he would counter the proposition made asking the question worthwhile.

@ Norm,

Shouting is a good thing. It kept the three of us awake.

To both of you, my thanks and I’m sure the thanks of any consumer reading who was seeking clarity.

John makes some excellent points and I concede that my comment was both flippant and uninformed. I made “certain assumptions” which, in hindsight, may well be incorrect.

Assuming that the researchers accurately identified potential rents for the specific types and locations of properties that they examined, the study may carry more weight than I was prepared to give it on first glance.

My frustration results from the “weighted averages” which are often gleaned from Royal LePage House Price Survey (RLPHPS), and almost as often result in a misunderstanding of what’s really occurring in Canada’s real estate markets. The RLPHPS examines specific geographic areas of each city it reports on. Those areas are selected by the local contributor. As I understand the process, some contributors may break their entire market area into quadrants, while others select smaller pockets throughout their market. The data is valuable in identifying price trends within those areas, and it’s also useful in helping buyers identify areas which are affordable for them, but it can create some issues when it comes to weighted averages. As I said before, one cannot reliably arrive at a weighted average for an particular market unless every area of the market is included in the report. It appears that the researchers in this particular study have taken greater care in using the data from RLPHPS than I am accustomed to seeing in the media. I can clearly see that I need to take greater care when I open my big trap in the future.

The economists don’t “place the price of real estate in Regina at $347,100″. They studied two specific types of houses in specific neighbourhoods and compared housing costs to renting costs. Any rolled up average is for this sample data alone. The fact that excecutive 2-storey homes are priced well above the average in Regina explains why their numbers for Regina are skewed toward the high end.

But this doesn’t mean the report is flawed. It’s the local neighbourhood data used in the report that makes it so accurate.

The economists could very easily have sourced more accurate total average prices for each of the cities, but this wouldn’t have helped them. When using the owner cost of capital approach we can’t simply take the average price for a home in Toronto and the average price for a rental unit in the city to see if prices are balanced. We need to look at data more locally

The purpose of the report wasn’t to “produce a ‘house price’ for any city using the limited neighbourhood data that is collected for the survey”
To even suggest that shows that the commenter didn’t invest the time to actually read the report.

The report uses data for certain neighbourhoods and certain types of housing to see if prices are balanced using the owner cost of capital approach. The economists then assume that what holds true for the houses and neighbourhoods studied is true for all houses and neighbourhoods in the city.

There may very well be problems with that assumption, or any one of the other assumptions the authors highlighted in their report.

But the alleged flaws and “incorrect use” you dedicated an entire blog post to, are not flaws at all.