New Housing Price Index (NHPI)

Detailed information for August 2016

The New Housing Price Index (NHPI) is a monthly series that measures changes over time in the contractors' selling prices of new residential houses, where detailed specifications pertaining to each house remain the same between two consecutive periods.

Data release - October 13, 2016

• Questionnaire(s) and reporting guide(s)
• Description
• Data sources and methodology
• Data accuracy

Description

The New Housing Price Index (NHPI) is a monthly series that measures changes over time in the contractors' selling prices of new residential houses, where detailed specifications pertaining to each house remain the same between two consecutive months. The survey covers the following dwelling types: single homes, semi-detached homes and townhouses. The survey also collects contractors' estimates of the current value (evaluated at market price) of the land. These estimates are independently indexed to provide the published series for land. The current value of the structure is also independently indexed and is presented as the house series.

The NHPI is used by economists, academics and the general public to monitor trends in this important component of the construction sector. Within Statistics Canada, components of these series are used in the calculation of some elements of the Consumer Price Index. In addition, the series are used by the Canada's System of Macroeconomic Accounts for deflating the value of the national housing stock. Due to the level of geographic detail provided and the sensitivity to changes in supply and demand, the NHPI series are of particular interest to the real estate industry for comparison with the resale market. The NHPI is also used by building contractors, market analysts interested in housing policy, suppliers and manufacturers of building products, insurance companies, federal government agencies such as the Canada Mortgage and Housing Corporation (CMHC), and provincial and municipal housing agencies responsible for housing policy.

Reference period: The time period for which the NHPI equals 100; currently this is the year 2007.

Collection period: The collection process occurs over a ten-day period beginning on the 16th day of the reference month or the next business day if the 16th is not a business day.

Subjects

• Construction
• Construction price indexes
• Prices and price indexes
• Residential construction

Data sources and methodology

Target population

The target population for the NHPI consists of all models of new single, semi-detached and row houses constructed and listed for sale or sold in Canada.

The NHPI measures price change for house models that can be priced repeatedly and whose detailed specifications remain the same over time. Consequently, the observed population for the NHPI excludes custom built houses. In addition, the observed population is limited to houses constructed in 25 metropolitan areas. These metropolitan areas represent all provinces in Canada. In addition, these areas were assessed to have enough ongoing non-custom, new house construction and sales activity to support monthly pricing of comparable house models over time. This assessment was based on measures which included population growth, dwelling counts, issued building permits and housing starts.

Instrument design

The interviewers use a simplified price report to obtain the necessary information on the total price and the estimated market price of the land component, as well as detailed characteristics of the selected house models being priced. A description of the physical and non-physical characteristics of the selected house model and the corresponding total selling price of the house and land is requested as well as an estimate of the land value (defined as the market price). A residual value (total selling price less land value) which relates to the current cost of the structure (house) is then calculated. The price report was developed in the early 1980's, with input and feedback from the respondents and the Canadian Home Builders' Association.

The New Housing Price Report (NHPR) is a new electronic questionnaire which collects information on the characteristics and contractors' selling prices for new single homes, semi-detached homes and row houses. It was designed by the Producer Prices Division in consultation with the Questionnaire Design Resource Centre, the Canadian Home Builders Association as well as with residential construction contractors. The questionnaire has been field-tested with potential respondents and their comments on the design and content have been considered.

Through discussion with the builders, representative house models are selected for monthly pricing. Initially, builders are asked to identify their top selling house models. When these models are no longer sold, builders will be asked to select replacements which will be representative of their current construction portfolio.

House prices include the provincial value added taxes on materials when applicable. However, value added taxes such as the federal goods and services tax, the Quebec sales tax and the harmonized sales tax are excluded.

In addition to pricing data and the reasons for price change, detailed information is collected which describes the characteristics of each selected house model (e.g. living area, lot specifications, etc.). This information is used to determine the dollar value of changes in the characteristics or "quality" of the model for which prices have been collected. The reported model prices are adjusted for quality changes so that the NHPI will measure "pure" price change over time.

Sampling

This is a sample survey with a cross-sectional design and a longitudinal follow-up.

The NHPI has a multi-stage sample design. Cut-off and judgement based sampling approaches are used to select representative units into the sample.

FRAME
While there are multiple stages in the selection of the NHPI sample, a frame is only used in the first stage to select residential builders. The frame is a list of builders in Canada that were issued permits to construct single, semi-detached and row houses as reported in Statistics Canada's Building Permits Survey (BPD). The frame includes details such as the name and address of the builder, as well as the number and value of building permits for houses that builders have reported in the 12 most recent published months of the BPD.

SAMPLING UNIT
There are unique sampling units associated with each stage in NHPI sample selection. These include residential builders, housing developments and house models.

STRATIFICATION METHOD
Before sample selection, the frame of residential builders is stratified by metropolitan area.

SAMPLING AND SUB-SAMPLING
For the first sampling stage, the builders in each metropolitan area on the frame are ordered from largest to smallest based on their residential building permit values. A cut-off sample of builders which account for a minimum of the top 15% of the total residential building permit values in each metropolitan area. The aim of this approach to sample selection is to ensure that builders which develop entire subdivisions, usually on large tracts of land, will be included in sample. Smaller builders constructing fewer units can also be included so long as they build comparable house models that can be priced over a period of time. The average number of builders in sample during 2015 was 221. Sampled builders are contacted prior to data collection to confirm that they are in-scope for the survey and gather contact information.

The remaining stages in the NHPI sample selection occur when builders are contacted to collect data for the first time. During this initial collection, builders are asked to select both the residential development and the specific house models for which they will report monthly prices. Builders are instructed to choose one development in the metropolitan area for which they are reporting. This development should be the one for which they have the most lots available for sale.

In terms of house model selection, builders are asked to identify a maximum of three of their top-selling residential house models for pricing. The price changes observed for these sampled models will represent the price changes for all sales of in-scope houses for a given builder.

Over time, builders enter and exit the residential construction market. In addition, new developments will begin as sales of existing developments are completed and the range of house models offered for sale will evolve. To ensure that the NHPI continues to measure representative price changes for new homes, the samples of builders, as well as their developments and house models must be monitored and refreshed. For this reason, Statistics Canada subject matter staff continuously review the NHPI sample to determine when sampled units need to be added or removed.

Data sources

Responding to this survey is mandatory.

Data are collected directly from survey respondents and derived from other Statistics Canada surveys.

The collection of the selected house models and price information for most metropolitan areas, is conducted through the use of personal interviews carried out by interviewers who are based in the regional offices of Statistics Canada. Face-to-face interviews are conducted quarterly while telephone interviews are used in the intervening months.

Builders in the four new metropolitan areas are contacted to confirm that they are in-scope for the survey, to identify the appropriate respondent, to collect contact information for the respondent, and to request permission to pre-fill information in their electronic questionnaire. This contact is done by computer-assisted telephone interview.

Computer-assisted telephone interviews are also used to collect the first month of data from these new respondents. During this initial interview, respondents are asked to identify the residential development and house models for which they will report. This information is pre-filled in the electronic questionnaires that respondents will be sent for self-completion for all subsequent monthly collections. Telephone follow-up is done for failed edits and non-response.

View the Questionnaire(s) and reporting guide(s).

Error detection

Error detection is an integral part of both collection and data processing activities. Automated edits are applied to data records during collection to identify missing data, as well as capture and report errors.

During data processing, subject matter specialists review the collected data to identify and resolve errors, inconsistencies and outliers. This review focuses on the behaviour of the reported price changes, both to validate them directly and to ensure they are representative of new price movements generally.

In addition, reported model prices are adjusted for changes in the quality of both the structure and land. These adjustments help ensure that the NHPI provides a measure of "pure" price change based on comparisons of prices for identical house models in consecutive periods.

Imputation

Missing data are imputed by carrying the previous month's reported price forward.

Estimation

The price data, reported for all models from the sample of builders, are assigned equal weight in the calculation of the contractors' selling price index for each metropolitan area.

Building completions data provide the weights used to aggregate indexes for the metropolitan areas up to the regional, provincial and national levels. Separate weights are estimated annually for the house component, the land component and the total for each metropolitan area. Price-adjusted three-year moving averages of the value of building completions for each metropolitan area are used as weights for the house component. Ratios of average land to house prices based on NHPI data for each metropolitan area, are used to estimate the share of building completion values attributable to land. Price adjusted three-year moving averages of these values is used to weigh the land price indexes. The total weight (house and land), is then calculated using all this information.

SOURCE OF WEIGHT DATA
The weights used to aggregate indexes for the metropolitan areas up to the regional, provincial and national levels are based on annual estimates of the value of housing completions for new housing (excluding apartments) calculated by Statistics Canada's Investment, Science and Technology Division.

WEIGHT REFERENCE YEAR
The weights used in calculating the 2016 NHPI are based on building completions values for reference years 2013, 2014 and 2015.

WEIGHT UPDATE FREQUENCY
The NHPI weights are updated annually and are introduced with the release of the January reference month indexes.

The NHPI encompasses both elemental and aggregate indexes. The elemental indexes are calculated using the Jevons formula (equally weighted geometric mean) combining house model prices across builders in each CMA. The aggregate indexes are calculated using the Lowe formula (a fixed weighted Laspeyres), combining weighted city indexes to regional, provincial and national totals for each of the house, land and total selling price index series.

LINKING
With the introduction of a new basket, historical estimates are linked to the new basket by maintaining the same historical period-to-period changes. This is done by calculating a link factor for each index series as the ratio of the new index series (2007=100) in the overlap period to the old index series (1997=100). This link factor is then applied to the old index series to bring it up or down to the level of the new index series.

The overlap period for NHPI is currently 2007.

Quality evaluation

Prior to publication, the NHPI is analyzed for comparability with historical trends, as well as for coherence with results from related economic indicators, known current events and information from other external price index sources.

Disclosure control

Statistics Canada is prohibited by law from releasing any information it collects which could identify any person, business, or organization, unless consent has been given by the respondent or as permitted by the Statistics Act. Various confidentiality rules are applied to all data that are released or published to prevent the publication or disclosure of any information deemed confidential. If necessary, data are suppressed to prevent direct or residual disclosure of identifiable data.

Collected data are converted to price indexes and data are released as such, so that it is not possible to identify the suppliers of raw prices.

Revisions and seasonal adjustment

The NHPI is not subject to revision and is not seasonally adjusted.

Data accuracy

The statistical accuracy of this index depends on price and value data. Price data are obtained from a sample survey. The accuracy of the value data depends on the quality of the building completion data gathered by the Investment, Science and Technology Division of Statistics Canada. Both data sources are subject to their own errors.

The average monthly response rate for builders in the survey for 2015 was 86%.

Though the NHPI uses a sample survey methodology to obtain the necessary information, confidence intervals are not currently estimated, due to the longitudinal nature of price index series.

Indexes for all levels of aggregation are considered to be statistically reliable.

NON-SAMPLING ERROR
When the detailed specifications of housing model change between two consecutive periods, Statistics Canada uses values provided by the builder to render the prices for the housing model comparable over time. When inaccuracies in these dollar values occur and are not detected, they are a source of non-sampling error.

NON-RESPONSE BIAS
In terms of price data, it has been acknowledged since the inception of the NHPI house and land sub-aggregate series that the house-to-land split can contain some level of respondent bias. This is due to the very difficult task of separating the total value of a new house into a land portion and a structure portion. The allocation of value in such a circumstance may be easy for one builder to provide and conceptually difficult for another to determine. Nevertheless, all efforts are made to obtain, verify and edit this information in concert with the builders.