The number of homes sold (that is, sales volume) over a specified period of time is a simple count of Ottawa home sales. Sounds like a statistic that requires no interpretation, doesn't it? But there are factors intrinsic to the data that must be considered before jumping to conclusions about market trends: seasonality, sample size, location, and time period for starters.

It is amazing how often I read reports from realtors claiming a huge upswing in sales based on 25% more sales in March than February, for example. Big deal! That happens every year - the key question here might be: how did the magnitude of the upswing compared to last year? The five-year average? The percentage may be high, but how to the absolute numbers compare historically? Is the distribution even across property types and locations?

Many underlying factors influence sales volume. The Canadian economy, the Ontario economy, the Ottawa economy, Ottawa's population growth, a major health or other social concern, new mortgage rules, changes in prime lending interest rates, changes in mortgage interest rates, a pending election, a recent election - the list is endless. The precise impact of these factors is an equation we typically cannot solve definitively, yet people will make conclusive statements in market reports. 

To fully characterize the market to help us make better decisions about buying and selling, we must analyse the number of sales in conjunction with other statistics, like available inventory. In combination, many metrics give us a clearer picture. A key question to ask about each statistic is, "does this data tell us more about buyer or seller behaviour?"

Every statistic is influenced by the behaviour of both groups, but most are driven more by one than the other. Do you think sales volume tells us more about buyers or sellers? These are the questions we ask when examining market data when we are advising you on marketing or offer strategy when you are buying or selling property.

The average selling price each month gives a basic idea of where Ottawa housing market prices are relative to the past. However, the number of sales each month is a statistically small sample set (ranging from about 600 to 3,000 in Ottawa and Eastern Ontario through MLS services) and therefore the average price over a single month of transactions is a number that shouldn't be taken too seriously on its own.

More importantly, the mix of property types and locations of Ottawa home sales each month can vary substantially. This alone can skew one month's average price. Average price bounces around throughout the year. To account for variations in housing stock, the MLS House Price Index (HPI) is a more robust measure of home price trends. HPI represents normalized prices. I periodically report on HPI data in the newsletter.

Year-to-date average prices derive from a large sample set and thereby provide a clearer view of absolute prices ("absolute" as opposed to "normalized" via the HPI), but still don't account for changes in the mix of property types and locations that have been selling. It's imperative in making your real estate decisions to understand that overall market average prices do not correlate with the prices in a specific neighbourhood or of any individual property. If you're assessing the value of a property for purchase or sale, it's crucial to perform a detailed market analysis for that specific property in its particular location at a specific point in time.

Do property prices tell us more about buyers, or sellers? You'll find periodic examples and discussion on this topic in my newsletter and articles in my Critical Thinking Blog.

The number of new listings entering the Ottawa housing market over a given period of time is another fundamental metric. It doesn't rely directly on any other statistic and by that measure is an almost pure indicator of seller behaviour in the market.

Keep in mind that in a slow market, properties that do not sell when listed for a period of time are often re-listed. This is partly due to conventional expiry of posted listings (realtor contracts with sellers are typically 60 to 120 days in duration). Each discrete listing of a property counts as a new listing. This means that the number of new listings does not equal the number of entirely fresh inventory hitting the market.

Adding to the discrepancy between new inventory entering the market versus new listings on the MLS system, some agents make a practice of cancelling and re-listing properties on a periodic basis (monthly, or even biweekly) in a lame attempt to keep their listing "fresh" or appear as a new property hitting the market. There are strategies and tactics one can engage to effectively improve marketing performance for a property that is taking time to sell - simply cancelling and re-listing is effortless and disingenuous. Why hire an agent whose only weapon in a tough market is to run more paperwork? Most agents who practice period re-listing make no changes whatsoever to the marketing with each iteration. You deserve better: hire a realtor who thinks critically and has an active Property Marketing Plan.

Like most statistics, inventory statistics are typically captured and reported monthly. Month-end inventory is a straight count of the number of properties on the market at the end of each month. Reports generally offer breakdowns by property type. From month to month, currently available inventory is equal to:

• Inventory at the end of the previous month,
• plus new listings this month,
• minus property listings that have expired or been cancelled,
• minus properties that have sold firm (no conditions, or conditions removed by month's end)

Inventory represents choice for buyers and competition for sellers. Continuously rising inventory suggests momentum in favour of buyers in the market, while continuously falling inventory begins to favour sellers. In Ottawa and Eastern Ontario there is a seasonal curve to the flow of inventory. From January through May or sometimes June, overall market activity increases - sellers lead the way (inventory grows), while buyers take some time to shop around and complete their purchases. The balance between available inventory and buyer demand impacts the lag between properties hitting the market and properties being sold. Inventory grows in proportion to the lag time.