Today i was asked if we are in a Bull or Bear market here in the Kawartha Lakes real estate marketplace. After a little bit of thought I had to say "neither".
We are not in a Bear market as average sale prices have been increasing, but are not in a bull market either because investor confidence has not reached bullish levels yet.
Often times a market becomes a bull market just before prices rise. This is because investors want to get into the market before prices rise.
The next question is a little bit like the chicken or the egg and which came first. Do investors cause prices to go up by stimulating demand or do prices riseindependently? The answer is notnecessarily a simple one as they both work together to create the cyclical effect on our economy, also known as boom and bust.
Prices naturally increase overtime as inflation increases, higher populations create demand and development increases scarcity for future development. With this natural effect and a confident investor sector prices themselves can inflate and create what is called a market bubble.
It becomes very hard to determine if a bubble is present and if it is going to burst. This can be seen in Toronto where economic and real estate experts have been saying that a Condo bubble exists and have predicted when it will burst several times and despite their best efforts have not been completely right as Condos are still going up throughout the GTA. In other words it is impossible to know with any certainty whether a bubble exists or when or if it will burst until after it has done so.
As we come out of the recession we come off of what was essentially a national, even international bubble burst, including real estate and the Kawartha Lakes.
So if you are a savvy home buyer or wish to become one now is a good time to get into the market place following a bear market and before the bulls enter the ring.
For more information about this subject or any other pleasecontact me or leave a comment.