{"id":2429,"date":"2016-06-03T08:01:57","date_gmt":"2016-06-03T12:01:57","guid":{"rendered":"http:\/\/dankrell.com\/blog\/?p=2429"},"modified":"2021-11-23T16:43:57","modified_gmt":"2021-11-23T21:43:57","slug":"housing-bubble-countdown","status":"publish","type":"post","link":"https:\/\/dankrell.com\/blog\/2016\/06\/03\/housing-bubble-countdown\/","title":{"rendered":"Housing bubble countdown"},"content":{"rendered":"

The March S&P\/Case-Shiller U.S. National Home Price Index<\/a> (spindices.com) was announced May 31st<\/sup> to reveal a 5.2% increase in home prices.\u00a0 Although down from last March\u2019s 5.3% increase, home prices seem to be appreciating at a regular pace, with the metro areas of Portland, Seattle, and Denver leading the way with double digit gains (year-over-year price increases of 12.3%, 10.8%, 10.0% respectively).\u00a0 As home prices climb, so too are the claims that we are experiencing a housing bubble.<\/p>\n

Those concerned about the next bubble have been ringing the alarm bells since last fall, when the combination of limited inventory, multiple offers, and rising prices <\/a>created an environment in some regions that was reminiscent of the go-go market just prior to the last market bust.\u00a0 And like the broken watch that is correct twice a day, those naysayers may eventually be correct \u2013 but it may not be for another eight years.<\/p>\n

How to predict a housing bubble<\/h3>\n

According to Ted Nicolais, the real estate cycle has been steady since 1800 (How to Use Real Estate Trends to Predict the Next<\/a> Housing Bubble<\/em>; dce.harvard.edu; February 20, 2014).\u00a0 Writing for the Harvard University\u2019s Department of Continuing Education\u2019s The Language of Business<\/em> blog, Nicolais maps out Homer Hoyt\u2019s cycles and found a regular 18-year cycle to the bubble and bust housing market (albeit two exceptions).<\/p>\n

The 18-year cycle, as it turns out can be observed by analyzing trends.\u00a0 An applying Henry George\u2019s four phases of the real estate cycle (as modernized by Glenn R. Mueller), Nicolais can determine how and when the next housing bubble will occur.\u00a0 (Henry George was a nineteenth century economist who studied the boom-bust cycle of the economy).<\/p>\n

The first phase is the \u201crecovery<\/a>.\u201d\u00a0 Home prices are at the bottom, and demand increases. \u00a0Real estate vacancies decrease as economic activity increases, which fuels the economy.<\/p>\n

\"real<\/a>The second phase is the “expansion<\/a>.\u201d\u00a0 Housing inventories dwindle, there is little is available to buy, and finding a rental becomes difficult.\u00a0 Nicolais explains that an issue with real estate is that once demand increases, filling inventory takes a long time.\u00a0 New development can take two to five years.\u00a0 Until new inventory is added, price growth accelerates; and rather than valued at market conditions, real estate becomes priced to future gains.\u00a0 During a real estate boom, people buy into the prospect of \u201cfuture growth\u201d and believe the escalating prices are reasonable.<\/p>\n

Phase three is \u201chyper supply<\/a>.\u201d\u00a0 When the completion of new development begins to satisfy demand, inventories fist stabilizes and then swells.\u00a0 Price growth begins to slow.\u00a0 Nicolais stated that the amount of continued development will determine the severity of the impending recession; while demand is satiated, new inventory comes to market and vacancies increase.\u00a0 He asserted that \u201cwise\u201d developers stop building during this phase.<\/p>\n

Phase four is the \u201crecession<\/a>.\u201d\u00a0 New development is stopped, while projects coming to completion add to a growing inventory.\u00a0 Occupancy rates and prices fall; property values and profits dwindle.\u00a0 Developments in mid-construction may not be completed because they are no longer financially feasible.<\/p>\n

Following the four phases and the 18-year cycle; Nicolais stated that the great recession was not caused by external forces, but rather occurred on schedule!\u00a0 He figures that the current housing market is transitioning from recovery to an expansion phase.\u00a0 And with the exception of the occasional slow down, he predicts that the next housing bubble will be in 2024.<\/h2>\n

Original published at https:\/\/dankrell.com\/blog\/2016\/06\/03\/housing-bubble-countdown\/<\/p>\n

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\nDisclaimer<\/a>. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.<\/p>\n","protected":false},"excerpt":{"rendered":"

The March S&P\/Case-Shiller U.S. National Home Price Index (spindices.com) was announced May 31st to reveal a 5.2% increase in home prices.\u00a0 Although down from last March\u2019s 5.3% increase, home prices seem to be appreciating at a regular pace, with the metro areas of Portland, Seattle, and Denver leading the way with double digit gains (year-over-year … <\/p>\n

Continue reading “Housing bubble countdown”<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"_jetpack_newsletter_access":"","_jetpack_dont_email_post_to_subs":false,"_jetpack_newsletter_tier_id":0,"_jetpack_memberships_contains_paywalled_content":false,"_jetpack_memberships_contains_paid_content":false,"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[469,401,140,339,288,651,416,13,26,27,138],"tags":[936,794,633,871,706,906,466,445,987,925,708,797,593,869,965],"class_list":["post-2429","post","type-post","status-publish","format-standard","hentry","category-home-prices","category-home-value","category-home-values","category-housing-bubble","category-housing-market","category-housing-recovery","category-market-timing","category-real-estate","category-real-estate-market","category-real-estate-market-trends","category-real-estate-recovery","tag-home-prices","tag-home-seller-tips","tag-home-selling","tag-home-values","tag-house-values","tag-housing-bubble","tag-housing-market-2","tag-housing-market-trends","tag-housing-recovery","tag-market-timing","tag-market-value","tag-real-estate","tag-real-estate-market-2","tag-real-estate-recovery","tag-recovery"],"jetpack_publicize_connections":[],"jetpack_featured_media_url":"","jetpack_shortlink":"https:\/\/wp.me\/p1VZLf-Db","jetpack-related-posts":[],"jetpack_sharing_enabled":true,"jetpack_likes_enabled":true,"_links":{"self":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts\/2429","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/comments?post=2429"}],"version-history":[{"count":13,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts\/2429\/revisions"}],"predecessor-version":[{"id":6204,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/posts\/2429\/revisions\/6204"}],"wp:attachment":[{"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/media?parent=2429"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/categories?post=2429"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/dankrell.com\/blog\/wp-json\/wp\/v2\/tags?post=2429"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}