The Truth About The Present Market Trend

The boom is over.
That's old news by now and the question is, how far will the market fall and for how long? While none of us knows the answer to that, it's important to monitor the trends closely.

I've been reading lots of year-end wrap-ups of various different markets but, in my opinion, a full year is far too broad a time frame for monitoring emerging trends. For example, in our market, prices over the year fell around 2% but that does not take into account upticks early in the year and declines in the last quarter. So, because I'm a glutton for punishment. I took some time to break out and compare our local Georgian Triangle data for the last three months (Q4) for 2008. The data clearly shows that we have firmly entered a rapid and deep negative cycle in the market with declining sales and prices. The flip side to this is that we know from past experience, it can just as quickly and steeply turn the other way.

As the charts here show, listing inventory is still increasing and prices are softening which would suggest we are not anywhere close to reaching the bottom of this cycle. But, just as we can't always be eternally optimistic, we should also be careful about jumping on the doom and gloom bandwagon. I know that here, we are dealing with activity in the market both in offers and in showing properties to prospective buyers.

Since the media tends to overstate doom and gloom, it was surprising to read the editorial entitled "Gloom and doom can be overstated" that appeared in the Toronto Star on January 4th. In it, they point out that while the forecasts are gloomy, they are also not as bad as what we experienced in the recessions of the early 1980s or 1990s.

The five major banks forecast that Canada's gross domestic product (GDP) will shrink in 2009 but not as steeply as in those previous recessions. At the same time, the unemployment rate is not expected to climb as high; even in "have-not" Ontario.

They also remind us that, unlike the past, this time both the Federal and Ontario governments entered this recession in a surplus position giving them more room to stimulate the economy by investing in infrastructure and other measures that should leave us better poised as a nation when we come out of this downturn. There are also advantages to lower prices, interest rates and oil prices that will benefit this province with its heavy reliance on manufacturing. When we move back into positive growth, we should be "stronger than ever" as McGuinty was quoted as saying.

Keep the faith. This won't last forever.

Related Post:

2008 Year End Real Estate Report for the Georgian Triangle

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