The 18 Year Property Cycle & The Winners Curse

What Do I think About The Market?

There is one common question I am asked more than any other it is, “What do you think about the market?” I am always reviewing the latest changes in real estate and keep a very close on on what is going on in the market.

One of the reasons is that I have a large community of real estate investors who ask this question often. The other reason is that 98% of my net-worth is currently held in real estate!

I would say that gives me some incentive to keep my pulse on the market and any trends that could help us make investment decisions.

The above picture shows a theoretical chart of the 18 year property cycle and below I will break that chart down into what we have seen so far in the most recent years. I will also address in one sentence what I expect will be the outcome, “The Winners Curse”.

I am currently working on a presentation that I will reveal at an upcoming event. I will be presenting it at the end of October and will go into the actual details of what I see coming and how we can advantage ourselves as real estate investors! Expect a follow up post before or after the event!

Here is the Simplest Overview

2008-2012 was the drop.

2012-2019 was the beginning of a steady ride up the led to a slight slow down in the market for a period

2019-2026 The bat out of hell boom that started right at the same time as Covid and hasn’t let up yet…

2024-2026 We will be coming up on the Winners Curse

We are seeing the signs in the market to set this up currently.

The Winners Curse

In a common value auction, the auctioned item is of roughly equal value to all bidders, but the bidders don’t know the item’s market value when they bid. Each player independently estimates the value of the item before bidding.

The winner of an auction is the bidder who submits the highest bid. Since the auctioned item is worth roughly the same to all bidders, they are distinguished only by their respective estimates of the market value. The winner, then, is the bidder making the highest estimate.

If we assume that the average bid is accurate, then the highest bidder overestimates the item’s value. Thus, the auction’s winner is likely to overpay.