What it is

A market indicator that is to be used before or while you are in the market to buy a house - to get an understanding of how good (or not) the current housing market is for potential buyers, in general.

What it isn’t

A word of caution - the score is meant to augment your search and is not a replacement for any real-estate expertise or professional advice on individual listings/transactions and/or current market conditions – i.e. use this solely as an indicator before you embark on a buying journey, and not as an all-encompassing guide.

The idea is to provide a general sense of the housing market environment for buyers, before one goes into the specifics of what they can afford, current listings etc. i.e. helping answer the ever-relevant questions - ‘Is this a good time to buy? How is the market, in general?’

While there are housing price indices that measure month-on-month and/or year-on-year increases, giving us an indication of price changes, these offer a limited view from a long-term trend perspective, and miss out on other important parts of the housing market picture.

There is also a good sense of the general ‘feeling’ about the market e.g. ‘it’s a really tough interest rate environment right now’ or ‘the market is crazy right now (alluding to increased competition - supply barely keeping up with the demand)’ but there isn’t a single indicator to quantitatively assess the current housing market for buyers.

Analytical insight studied over 18,000 data points, dating back to January 1975, to devise a single HAi score (and supporting scores) to act as a general housing market indicator for home buyers - straightforward, and easily digestible, with as little complexity as necessary.

Markets,Geographies, and Timing

Markets,Geographies, and Timing

The latest available data (and hence scoring) is usually a few weeks behind, but is the most up-to-date reflection of market realities with actual real-estate data. Projections of the score into the future, are in the works. The score is currently available for home buyers in the Greater Toronto Area and the Canadian market. Other markets and geographies, and a similar seller's score, will follow in due course.

How?

How?

Ai computes scores using the following five factors of housing data:
1. Current housing prices,
2. Access to money (i.e. the interest rate environment), and
3. Deal Environment (selling price/listing price) - whether homes are going for, below, or above asking and by how much, together contributing to the affordability score.
4. # Home sales / Listings - to gauge availability in the market, and
5. R (a ratio of sales/listings) - as a measure of competition in the market, together contributing to the choice score.

1. Price: Whether the price is currently above or below the long-term trend (since 2012, which is the oldest available price data, currently), with a high score indicating you’re getting a good price i.e. prices are reasonable (below market trend).
Data Source: Developed by Analytical insight, using TRREB - Toronto Regional Real-Estate Board data

2. Interest Rate Environment: Looking at how ‘expensive’ money is currently, which for most buyers in this context means the current mortgage rates, with the prime rate acting as an overall indicator of the interest rate environment.
Data Source: Developed by Analytical insight, using Bank of Canada data (available since 1975)

Score of 0-100, with 0 indicating there has never been a higher rate, 100 indicating that there has never been a lower rate, with a neutral score of 50 indicating that the rate has been higher (or lower) 50% of the time.

3. Deal Score: Whether homes are selling above, below or at asking/listing price, with a higher score indicating a better deal

4. Availability: Number of sales or listings - while most of us instantly recognize the importance of affordability, we also need to make sure there’s sufficient availability in the market, i.e. answering the question - ‘Is this is a normal market?’ i.e. are there sufficient sales in the market? Especially, to balance the outlook when affordability is really good because a ‘good’ buyers’ market would also mean it’s not the greatest time to sell. So, while a really high affordability score is great! What’s the point if you likely won’t find your dream house?

A neutral availability score would indicate that the market is close to the long-term sales trend. A score of 0 would mean there are hardly any sales in the market. A score of 100, on the other hand, would mean there has never been such a great sales environment – which doesn’t say anything about how competitive the market is, though, which makes our next (and last) factor all the more important.


5. Competition: R (ratio of sales/listings) - finally, we need an indicator of how competitive the market is, currently, to ‘balance’ the availability. A Competition Score close to 0 would indicate the market has never been more competitive and a score closer to 100 would indicate that the market is at its least competitive.
Data Source: Developed by Analytical insight, using TRREB - Toronto Regional Real-Estate Board data

Scores are percentile ranks in a 0 - 100 range, with all scores in the range:

Score	Description	Colour code	Comment
< 20	Very poor
20 - 40	Poor
40 - 50	Below average
50 - 60	Neutral
60 - 70	Fairly good
70 and above	Good		top ~30 score
80 and above	Very good		top ~20
90 and above	Exceptional		top ~10

The affordability score (which considers the interest rate environment and pricing environment), choice score (which considers the availability and competition environment) and the overall Hi score (comprising the combined affordability and choice scores) also follow the same scoring rubric.