Recently, the Dow Jones industrial average broke an all time high, and recent stock news shows that the index is ready to break through to 12,000, which would also be a record high. Investors all over the world are asking themselves if this means another bull market, meaning a market that is going to be going up and up is about to start? Or is this a short term rise, and a bear market, or a market that is going to be going down, is starting? Investors have argued over the direction of the market for generations, just like sports fans arguing over who has a better defense.
Pessimists of the current markets point to the fact that while the NYSE is way up, the other markets like the Nasdaq and the S&P 500 are far below a possible record high. They also point to the fact that recent economic indicators are showing a downturn in the economy, although optimists argue that any economic downturn will be short-lived.
One of the best bellwethers for the overall economy is real estate. Since the real estate market deals in such “real” terms, meaning that they deal in land, homes and large buildings; things you can see and touch, the real estate market is very stable and not prone to seismic shifts in price and quality.
If you are going to judge the real estate industry on how stocks might do over the next year, than you might want to think about selling off your holdings now. Real estate experts agree that a “housing bubble” is about to burst, sending the price of real estate across the country into the basement, and a good chunk of the economy with it. A real estate bubble is caused when a flurry of investing causes the market to become overvalued. With the 5-year long real estate boom over, prices from California to Arizona to Florida are coming back down to earth, and the economy at large is going to suffer.
Cities like Boston have already been feeling the affects of this burst bubble. The real estate market there has been in decline for months now and the trend is spreading to New York and even out west where the housing market has been red hot for years.
While there is no way to predict what the NYSE and the other stock markets will do over the coming year, if the real estate market is an accurate indicator, than there could be trouble ahead and a bear market might not be far off.
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