The Myth Around ‘Average Sale Price’ Toronto Real Estate Board Statistics

After nearly 30 years in the business and three market crashes, I’ve seen almost everything. Certainly I’ve watched the media go on and on about the significance of the ‘average sale price’.

By definition, the average sale price is defined as the sum of all the sale prices in a particular area divided by the number of sales.

Take a look at the sketch above. The left column represents a group of sales prior to the ‘world ending’ last September with the collapse of the financial markets. X represents the lowest priced sale in the group, Y represents the highest price and Z represents the average of that number of sales.

The right column represents a group of sales happening in say December 2008 or January 2009. There were fewer sales in that period. Most impacted were sales in the upper end of any market segment. X again represents the lowest price, Y the highest in THIS time period and Z is the new average, lower in price than the Z from the typical 2008 market.

Because there were fewer higher priced neighbourhood sales in the period, the average sale price dropped. Let’s say that number was 25%. That does NOT mean that the price of individual homes in that neighbourhood declined by 25%.

So how do we work out to what extent individual homes values have changed? The way we always have!

We find comparable houses or condos in the neighbourhood that have sold in the last 0-90 days and compare those sales to the one we’re valuating… either for a buyer before presenting an offer or for a seller when advising what the accurate market value of their home is at that time.

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