Monitoring Price Behaviour in the Resale Housing Market: A Note on Measurement and Implications for Policy

The authors compare their constant-quality index of house prices in Toronto for the period 1974-89 with the standard Multiple Listing Service (MLS) index, which has widely acknowledged limitations. The short-run signals regarding price movements often diverge, and the MLS index suggests a more rapid rate of price escalation. They review the importance of accurate measures of resale prices to the formulation of housing policy, and to the related issue of whether the housing market is efficient.