18 Year Real Estate Cycles - Next Bust 2024?

[Johnson H.]

I have been researching real estate cycles and found real estate economist Homer Hoyt theory of 18 year real estate cycle in the 1930's. In the early 90's economist Fred E. Foldvary predicted the real estate crash in 2006 using this same methodology. 

"The chart above, was used by Fred E. Foldvary - in his now famous report - to predict the recession of 2008. If you look again at the chart, you will notice that the 2008 prediction was right in line with the 18 year cycle - which Foldvary uses as the basis for his report. In his report, Foldvary even explains why Hoyt's 18-year cycle theory diverged so drastically between 1925 and 1973. Foldvary points out that the cycle does not always function on a precise 18 year schedule, but - baring catastrophic events like a world war - for the most part the cycle should be right around 18 years. I'm not going to go in depth into all the various factors discussed by Foldvary in his report, but if you want to know more, I encourage you to read Foldvary's full 40 page brief."

http://www.nuwireinvestor.com/articles/the-real-estate-cycle-where-are-we-now-59319.aspx

http://www.cato.org/publications/commentary/great-18year-real-estate-cycle

Based on this information, it seems that the next top of the cycle will be in 2024 pending any wars or a large scale disasters. I know 10 years away seems like a long time from now but reading over the data and Fred E. Foldvary report, it seems to all make sense. 

BP Nation, what are your thoughts on this theory?

[Johnson H.]

@Ned Carey  - I totally agree with you, it may not be 18 years. I want to figure out the best metrics to track for the next bust so that I don't get caught up with it.

@Anna Shaver - My thoughts are aligned with yours. I wonder if we are at the top of a mini bubble or are we flat lining a bit before the next run up. New home sales are slipping in cities like Phoenix, Las Vegas and Atlanta as FHA cut loan maximums and those who got a FHA loan last year, only half would qualify this year. The median new home price is $100k more than a resold house in Phoenix.

Other negative economic trends I'm seeing:

• 10 Year Treasury rate slipped to 1.99% today which is very bearish. 
• 30 year fixed rate mortgage fell to 3.75% yesterday and will fall again today due to the above.
• Oil prices continue to decline. I am not sure if this is due to too much supply or not enough demand. This makes a very big difference to me.
• Softening economies in Europe, China and Japan.
• Ebola fears.
• The Dow is at 16100, a drop of 1000 points. What is the market scared of?
• Underemployment in the US is stubbornly high.
• Velocity of money is low compared to other upswings.
• New venture capital backed companies are at new highs in terms of cash burn rates. 

A good deal in real estate today may not be one three months from now. I don't want to be like one of your friends Anna!