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What Does it Mean to be “Bulllish” on the Housing Market?

12 September 2012

Over the past two years or so, the headlines in Canadian newspapers have been screaming that many experts and analysts across the country are “bullish” on the housing market. Just recently, one reader wrote in to ask us just what exactly this meant.

“Bullish” is actually just one attitude that can be taken towards the housing market; “bearish” is the other. And it’s not just the housing market that employs these two terms, but investor markets of any kind. In fact, being “bullish” or “bearish” is most often heard on Bay Street around the stock market. But still, that doesn’t answer the question of what these two terms mean.

Being “bullish” on the housing, or any other, market means that one thinks it’s on the rise, about to go up. Being “bearish” on the other hand, means just the opposite; that the market is about to, or already is, on the decline. And while these meanings might be relatively simply unto themselves, they both (the bear in particular) have a very interesting history.

To be “bearish” dates back to a saying that was used in Europe in the 1700s; each area used it a bit differently. In Germany the proverb was “Don’t sell the bearskin before you’ve killed the bear”; while in Holland the saying went, “Don’t sell the bearskin before the bear is dead.” Italy, England, the Netherlands, and Spain all had their own variations of the saying as well, but they all meant the same thing. You can’t sell something that you don’t have; or rather, don’t put value into something that isn’t actually yours. You’ll only lose.

You can see how this would be true for any investing market. On the stock market it pertains to investors that believe a stock is going to skyrocket in price. If it doesn’t and the investor is left with it, they could also be left with great losses.

It’s just as true for the housing market. Investors take the form of homebuyers and homeowners. And if you think that the value of your home is going to appreciate far more dramatically than it actually does, you could also land in hot water by asking too much when selling it; or by taking on all kinds of debt that your equity simply can’t back up. Just ask all those U.S. homeowners that found their homes underwater after the recession hit. If they had been a bit more bearish (and been mindful that they hadn’t yet caught the bear by saving up for a proper down payment,) they may not have found themselves in as much trouble.

Being “bullish” then, is just the opposite; and means that markets are on the upswing. While there’s no intriguing history that goes along with this term, it’s thought it was chosen based on the characteristics of a bull. This is an animal that is strong, powerful, and charges ahead. This is just like a strong market that’s surging ahead. If it’s the stock market, it could simply be doing extremely well at the moment. When talking about the housing market, it could mean that home prices and home sales are up; and that there’s currently a lot of activity on the market.

So there you have it. The simple explanation of what it means to be “bullish” or “bearish.” And while experts and analysts may have been bullish for the past couple of years regarding our housing market, it’s likely that we’ll start seeing much more bearish views as the market’s set to cool within the next few years.

Hope that answers the question! If you have a question that you need an answer to, leave a comment for us below or, Like us on Facebook and leave a comment on our Timeline!

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