Don Campbell is a national best selling author, president of the Real Estate Investment Network, and Notable’s Real Estate Expert.

Bubble, Bubble, Toil and Trouble – Real Estate Market Will Rebound in Certain Regions

If you plan to invest between 2010 and 2013, it’s critical that you virtually ignore national real estate statistics. Sure they make a great story around the water-cooler, but these numbers will misdirect many uninformed investors.

During this period of economic recovery, we will witness large regional disparities in real estate market strength. In fact, real estate will become a more regional story than ever before. For instance, right now the national real estate numbers show large average gains, with all the pundits talking of a “bubble” forming. However, if you drill down into these numbers you see they are being skewed upwards by the strength of two large markets – Toronto and Vancouver. Those two markets alone make up the statistical weight of 49.5 per cent in the national number. Conversely, Edmonton and Calgary combined make up a total of only 15.96 per cent. This means if you are investing outside of Vancouver and Toronto, and you are basing your decisions on national trends and statistics, you are setting yourself with unrealistic expectations which will inevitably lead to increased frustration and poor investment decisions.

As of today, Toronto and Vancouver markets have over-shot their underlying economic fundamentals and therefore will need to move closer to the fundamentals of the market in the next 12 months as new supply comes on and buyers begin to be more strategic. When that occurs, the national number will also adjust, bringing fear into the market once again. This fear will affect uninformed investors even in regions just beginning to hit long term growth patterns. When these two major markets start performing closer to where they should be, national “bubble talk” will disappear and unsophisticated investors will inevitably start fretting about some other wave they didn’t see coming.

Just Two of the Inevitable Waves

These are just two of the many waves that are coming our way (the other one was discussed in last week’s post). Awareness of these inevitable waves, and the facts behind them, will assist you in becoming a calm and sophisticated investor who takes advantage of the peaks and troughs versus being frustrated by them. If you let the markets dictate your emotions, you will have a lot of difficulty building a long-term positive cash flow portfolio. However if you focus on reality you stand to take advantage of the ebbs and flows and make them work to your advantage. Become a geographic specialist – know your target region better than anyone else so you can quietly get on with managing your investment properties so they work for you, not the other way around.