US history reveals clear 18 year cycle in real estate prices

June 05, 2017
Jim Demetriou

A Phillip Anderson article, suggests there is a 18 year cycle that averages out to 14 years up and 4 years down. An extract of his article is below. To read the full forecast and see the charts, please see:

http://www.phillipjanderson.com/18-year-real-estate-cycle/

THE 237 YEAR OLD PROPERTY SECRET

For over 25 years I’ve studied economics and markets. And I can say categorically that the Western economies exhibit an 18 year real estate cycle. Generally this averages out as 14 years up and 4 years down.

A study of US history, for example, reveals a very clear (average) 18 cycle in US real estate prices, measured from trough to trough or peak to peak. The actual cycle has never been shorter than 17 years, never longer than 21.According to my research, the Australian market follows the US.

The good news is that once you understand the real estate cycle, you can forecast it. History, I assure you, does repeat. And if you can forecast correctly, you can make money.

Every 18 Years…

What do I mean by a real estate cycle? It’s how the economy will move — and why — over time. You’ll have a guide as to when to buy real estate and when to stay out of the market. You’ll understand much more about the stock market too.

Not only has the real estate cycle been historically consistent at about 18 years in duration, each cycle has unfolded in a highly regular and consistent manner. In 2005 I created a clock to give you a visual diagram how the repeat plays out based on my research of US real estate (land) beginning from 1800.

Granted, I make an assumption. And that is the cyclical behaviour I’ve discovered will repeat. But once you discover the fundamental law of economics — 19th Century economist David Ricardo’s Theory of Rent — you’ll see that a repeat is all but inevitable. Why? Because the underlying structure of the economy never changes, despite the endless fiddling and additions in regulations and laws.

You can see this most clearly in the history of the United States.

The United States Federal Government began selling off its newly acquired real estate, officially, under a set legal structure, on May 10th, 1800. After that, here is what took place:

U.S Public Land Sales, Acres ‘000, 1800 - 1923

1818, a peak in land sales and land speculation, followed by a downturn.

In 1836, land sales and land speculation peaked again, ending in a depression; the next peak, in 1854, was followed by a depression; the 1869 peak was also followed by depression, likewise in 1888.

The downturn following the 1908 peak was cut short by the build-up to the First World War, and real estate speculation (frenetic this time) peaked again in 1926, followed five years later by what is today judged the world’s worst ever depression, although 1893 was probably worse.

A construction-led boom (mainly government financed) peaked in 1944; the ensuing downturn was cut short by rebuilding after the destruction of the Second World War.

In other words, for the first 144 years of real estate enclosure in the US, land sales and / or real estate construction peaked almost consistently, every 18 years. This chart demonstrates that the world’s worst downturns are always preceded by land speculation (the chasing of the economic rent) fuelled by misguided credit creation courtesy of the banks.

Since the Second World War (once the US economy finally shrugged off the distorting effects of all the dislocation wrought by the war) the rough 18-year cycle reasserted itself with some vigour. The downturn that began in 2007 was just history repeating.

I now believe the cycle from 1992 -2010 is over and the next real estate cycle will run to 2028.

Disclaimer: Mortgage Choice, its brokers and employees, do not have an affiliation with the author or agree with or support his views and research. The article is produced for interest purposes only. Mortgage Choice advises that property buyers seek their own independent, professional advice.

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