A Basic Understanding of Real Estate Cycles

 

I am sharing my own research which, I use for my own selfish reasons I do not hold my self out as an expert. I am just a Real Estate guy, trying to feed his children! In support of the statement above, I will readily change any and all beliefs, I have, when presented with facts, that would prompt me! Civilization rests on change. This change is cyclical in origin. A rhythmic series of extreme changes constitutes a cycle. When a cycle has completed, another cycle is started. The rhythm of the new cycle will be the same as that of the previous cycle. Although the extent or duration may vary You have the… —        Seller’s Boom —        Then the Buyer’s Boom Busts do not follow Booms Booms follow Busts The Buyers Side This is driven in the beginning by fear. The beginning of the buyer’s side will be quite hazy, to all involved As sales volume mounts and sales prices erode, it turns to despair, then to capitulation on the seller’s side On the sellers side The primary driver is greed and optimism This is an easy market This side always has a sharp quick upward value trend This will eclipse the previous value trend, as a sum If you have a ready supply of cheap money A “Mania “may form. What is a Mania? An excessive or unreasonable enthusiasm Historical Examples —        Mississippi Company, in the 1700’s —        The South Sea Company, 1700’s —        Wall Street Crash of 1929 —        Florida land boom of the 1920s —        Japanese asset price bubble —        The Dutch Tulip Mania’s You have to understand that sales volume on the sellers side drives prices up once Inventory is eroding On the buyers side it drives them down. The Market is a pendulum that forever swings between unsustainable optimism Which makes Real estate more expensive And Unjustified Pessimism Which causes Real Estate to be Cheaper The Intelligent Investor is a Realist. Who buys from Pessimists and sells to optimists Boom times are a time for Courage Bust Times are a time for Discipline By doing this you will not be swayed by the swings in the Market In the End…. How you behave is much more important than how the Markets Behave