You often read about average home prices in Ottawa or Canada as a whole. You’ll read, for example, that house prices on average were 1.6% higher in Ottawa in 2014 than in 2013. For the past 5 or 6 years there have been regular reports of average home prices in Canada escalating to the point that we have the highest priced homes in the World, and that we are headed for a housing crash.

Whether you believe that homes in Ottawa or Canada are over-valued or not, the basis for your opinion or anyone else’s is generally “average selling price.” The problem with this is that average selling price is calculated by taking the total selling price of all homes sold, and dividing by the number of homes sold. This calculation does not take into consideration a wide variety of very real factors that impact the answer to this equation and make it a lot less meaningful than you might realise; for example:

• if a lot of people are moving from central areas of the City to the suburbs, or vice versa; or if the majority of people moving into the City from elsewhere are moving to certain areas of the City and not others
• if an unusual number of very high-end properties happen to sell in a short period of time
• if a lot of people are choosing to buy smaller homes, to keep more money in their pockets for other areas of life

Think about that third point for a minute. If people decide, as a trend, to live in smaller homes because they are more affordable, then the average selling price of all homes sold will decrease. But that does not necessarily mean that larger homes are selling for lower prices than they did before – it might just mean that not as many larger homes are selling but they are still selling for the same prices as before, or even higher prices. In fact, if the total number of sales goes up a lot, then it is mathematically possible for all home prices to go up but the average price to go down.

Enter the Home Price Index. Instead of looking at the raw average of all home prices, we examine the mix of homes being sold and factor in the differences in location, size and style to “normalize” sale price information. The Home Price Index gives you a better idea of how the value of certain types of homes in specific areas of the City are trending.

Below is a gallery of graphs and charts of Ottawa Home Price Index 2014 information for three basic home types in different areas in and around Ottawa. These statistics use the Ottawa MLS area definitions which are provided here.

This article is part 2 of a 3-part series reviewing Ottawa Real Estate for 2014. Read part 1:  “Last Year In Ottawa Real Estate – 2014”

Read more about the Ottawa MLS Home Price Index here.