January 4th, 2023, by Paul Rayburn

Year over Year stats and what You need to know. Stats, charts, and graphs can be very informative and are an essential part of many professionals’ or even individual consumers’ ability to analyze or interpret data. Issues may arise if the data is not qualified or presented to an audience in a meaningful way. Statistics in either raw or graphically presented forms may cause unnecessary confusion.  In addition, some stats or graphs actually should in fact be striking or even alarming.  The difference is that sometimes it is necessary and sometimes it is just noise. 

I recently watched a youtube podcast released on December 18, 2022, with the Chief Economist for the BCREA (British Columbia Real Estate Association) who indicated at one point that he sometimes dreaded explaining YoY stats (Year over Year).  This reminded me of a post I had responded to on LinkedIn by a reader of the Association of Interior Realtors monthly summary stats published in October of 2022.  The reader was somewhat perplexed that all signs were pointing to declines with huge shifts in YoY data for inventory, and days on market, and yet prices were still up in some areas.

Simple tables showing Year over Year data do not do a good job of explaining to the reader what is going on. Unless a reader had a year’s worth of monthly or quarterly tables in front of them and the type of mind to paint their own picture, a line graph can be infinitely more intuitive.  Unfortunately, without context, even line charts can be confusing, and admittedly some of these graphics with multiple sets of data displayed can be a little mind-numbing.  There are many other types of graphics that can be used but sometimes just a little added annotation and explanation can bring further clarity. 

Here’s the infographic referred to, the link will open a new window but please scroll down to continue the story.

Summary Stats available from the Association of Interior Realtors

https://www.interiorrealtors.ca/board-news/market-stats/new

The explanation can be found in the trends that had occurred prior to and over the course of that year.  In October of 2021, a year prior, values were on a steep increase with extraordinary demand on inventory creating record lows for inventory and days on market.  As we all know now, a few months later the Bank of Canada began an extraordinarily aggressive campaign to fight inflation.  This sent real estate markets into a frenzy to beat the rate hikes and lock in on a purchase and then a rapid decline beginning in February to May of 2022.  This would have the reverse effect of driving up the indicators of reduced demand in inventory and ultimately days on market while the declining prices were still above the prior year. 

In the case of the LinkedIn post, to help explain this apparent anomaly, one way that came to mind was to show the trend lines, highlight the periods being referenced, and highlight the issue. In these time series data graphics, we can see what was happening over a given period which puts the current market into some context.  In this example, it is dramatic when viewed over the past five or so years. As indicated that SHOULD have sent a signal to the reader that we are not dealing with an ordinary market and that stable or even increased prices on a YoY basis from Oct 2021 to October 2022 definitely SHOULD  NOT have been interpreted at that time as any kind of a stable market. This would be unfortunate as many readers may have interpreted it that way. 

In the above graphic, I have added a couple of elements to a typical line chart available from the BCREA or CREA websites. You can access similar charts for your market here. https://stats.crea.ca/en-CA/

In a forward-looking view over the next several months, when markets may actually begin to stabilize, the media will likely begin to sensationalize the year-over-year declines from February and March 2022 to the same periods in 2023. Once again, that would be sensationalized and probably gather some headline attention. This is important data but it would be most relevant for analyzing sales during the peak and must be put into perspective for the overall picture.

This is an updated graphic, with current data showing the YoY trends from Dec 2021 to Dec 2022. The yellow lines show current YoY trends, while the red lines show the most probable results that will be reported in or around February and March 2023. The grey shadows give some idea of my guestimate of the most reasonably probable range based on what I know today January 4th, 2023. *** I shouldn’t need to state this but obviously, do not bet your farm on my “guestimate”. It’s only for discussion purposes. With more analysis, we can possibly develop a reasonably credible range of probabilities for a future value, but that is an entirely different discussion.

One final set of graphics will provide some additional context and provide more insight. Getting back to the original point of this post which was to prepare you for the media reports and stats coming in the next few months. The following graphic shows the price trends over the prior three months from October through December for 2019 and 2022, omitting 2020 and 2021. I have focused on 2019 as it was the most reasonably stable recent 4th quarter period. The lines presented in this graph appear level in comparison to the above charts however, the visual scale must be kept in mind as this data is effectively stretched out on the horizontal axis, almost 70 times that of the whole period shown in the original graphic from Jan 2016 thru Dec 2022. When looking at the whole period in comparison to a relatively stable period, the current period is obviously on a generally significant decline with notable variables between markets in the direction of those trends. The entire interior of BC shows a 2% price decline which is actually fairly modest, while the South Okanagan is showing almost 8% which would be considered very significant and more in line with the most significant declines seen during the second and third quarters of 2022.

SIngle Family 4th quarter monthly HPI Benchmark price for 2019 and 2022.

Here’s a quick gif video showing the results of stretching or scaling the trend lines.

GIF, animation of the effect of scaling a time period.

Stats and graphs can be used in many ways, some are more helpful than others.  If you are interested in the real estate market or have decisions that need to be made, reach out to a professional Realtor or a Real Estate Appraiser in your market of interest and inquire as to how they may help you interpret the current market and available data.  These types of insights are invaluable and may allow you to make more informed decisions and negotiate your position for the best possible outcomes.

Here’s a link to the Podcast with Brendon Ogmondsun on Youtube https://www.youtube.com/watch?v=fkIlEDRXuuA

Thank you for reading and with that, I wish you a Happy New Year and all the best for 2023!

Leave a Reply

Your email address will not be published. Required fields are marked *