The driving factors behind real estate, according to Kieran's extensive research are:

• Factors influencing demand such as population changes, construction, the number of people per household and employment levels;
• Factors influencing the financial elements of house prices like the average rental rates, average income of residents, availability of financing;
• Emotional factors like the number of days it takes the average house to sell, the number of listings on the market and the overall sales volume.

The drivers of the market are what will actually take the real estate market from one phase to another and it takes a combination of factors to move the market not just one strong element. Market influencers, on the other hand, might present short term opportunities or red flags to be aware of but they aren't driving the market into a new phase or out of an old phase.
 
So fellow Canadians if you're getting wrapped up in the media hype about the housing bubble and boom allow me to use this quote from the book to tell you what I am trying to say:

"Many real estate market observers mistakenly believe that a real estate boom has begun when the real estate cycle enters the beginning of the recovery phase." p. 71

By the way ... Keiran Trass also says that  this is also the point when wise investors enter an aggressive buying pattern with an intense focus on cash flowing properties.
 
One might say that sending 5500 letters out to home owners, placing signs on posts, posting ads online, and in newspapers is aggressively pursuing cashflowing deals. We might be wrong about where the market is at .... but we're buying properties with $500 - $800/month positive cash flow so we're ok to be wrong while we take those cheques to the bank. (If you don't know what I'm talking about then it's time you checked out our blog - Life As Real Estate Investors).
 
And for our dear American friends ... we welcome you to invest in Canada if you'd like. Things are pretty stable up here these days but we definitely don't have the same juicy opportunities that you have around you!! But I have some wise words from Kieran Trass for you as well:

"Before the sunrise everything is dark as the previous night comes to a close. They say that the night is always darkest just before dawn, but as the sun moves closer to breaching the horizon the reduction in darkness is subtle. Then slowly it gets lighter and lighter until suddenly the sun rises and floods the landscape with light. While this light is strong, initially it is not accompanied by too much warmth, although before long the warmth increases. So too the recovery phase seems subtle in its arrival, until suddenly real estate values start to rise and everyone recognises the recovery." p. 71

It's always darkest just before dawn my friends.
 
We've said it before, but it's worth saying again: Ignore what the headlines in the paper are saying about the housing market. Focus on what is going on in your backyard. And, pick up a copy of this book - The Housing Bubble - you'll be glad you did.

Published on February 18th, 2010

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