Top 50 Rules to Investing
Rule : 37
Real Estate Cycles are Not the Same As Stock Market Cycles.
Understanding the Real Estate Cycle
The American housing market has officially crossed the line from correction to stabilization. After stabilization, the phases are recovery and revival. Small-business owners should take a close look at real estate investment opportunities over the next few years, since this is when the money is really made.
As you can imagine, timing the real estate cycle is critical to achieving big returns on investment. In future submissions of this column, we'll discuss the other strategic objectives, like picking winning markets, purchasing properties, increasing value by improving property, and more. This edition is dedicated to the market cycle, how it works and where we are in it.
Visualizing the cycle in its entirety is the easiest way to grasp its predictability. But in order to see the pattern you have to zoom way out, because one pulse of a property takes 12 to 15 years.
Consider the following two cycles of median home prices. The first, from 1983 to 1996, started with the economy in rough shape. Then an economic boom pulled real estate and the DOW way up. It was a big party, everyone was making money, and then banks got a little crazy with their lending standards and the whole thing went off the rails--stock market crash, massive bank failure, real estate market correction and a serious recession. (Does any of this sound familiar?)
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