Understanding Economic Cycles (Part III): The 18.6 Year Cycle & Coming CRASH ~ Rhythm of Real Estate

Are you concerned about your #financial #future? History leaves clues.

This video describes an 18.6 Year Cycle that has driven the rhythm of #realestate for well over two centuries, and is signaling a powerful market #crash by about 2025.

Private ownership of land is permitted through a government-granted license called ‘title’. The most fertile land, or land with greatest density, carries the highest value. While the factors of production are land, labour, and capital, all of the benefit goes to the landowner... until it doesn’t! Eventually tenants can either no longer afford, or not longer tolerate, ever-increasing rents. This happens about once every 18 years.

For over 200 years, real estate cycles have repeated, in times of inflation or deflation, whether interest rates are high or low, with or without trade barriers, with government subsidies, and with high, low or no taxes.

The cycle’s pattern is 14 years up, interrupted by a mid-cycle dip, followed by 4 years down. In over two centuries, this cycle has only ever been disrupted by two world wars.

To profit from this information, you’ll need reliable ways to predict where we are in the cycle. A study of US history reveals an average 18.6 year cycle in credit and real estate prices (never shorter than 17 years or longer than 21).

So, where are we today?

Our current cycle began following the great #recession. While nobody could have predicted a pandemic, like clockwork, something always causes a faltering of confidence mid-cycle, followed by looser monetary policy, and then huge infrastructure spending. Five or so years of expansion culminate in an era of very easy money and announcement of a new ‘world’s tallest building’. The final years of expansion (maybe 2024/25) is called the ‘Winner’s Curse’, when everyone figures all the problems of the world are solved and real estate will go up forever… until it doesn’t!
All cycles have the same characteristics, but different influences. This video will help you recognize key characteristics as they show up in our current economic environment.

“History reveals that investors who made land speculation their sole business enterprise have rarely held onto their profits; the cycle usually wiped them out in the end. Those who had real businesses, with real earnings and real cash flow, who purchased real estate with their profits but did not speculate in it, went on to make a fortune.” (Phillip Anderson)

Beware of Single-Cycle Gurus! Anyone selling you a system they’ve discovered or developed over the past 10, or even 20, years, may be setting you up for failure.

The concentration of #wealth is increasingly in the hands of fewer and fewer. Expect President Joe Biden to pump money into the US economy, increase lending, keep interest rates low, and government spending high.

Real estate prices will continue to rise until they reach a point where people can no longer afford them. The 18.6 Year Cycle is pointing to a #collapse around 2025 or 2026.

I see a convergence of economic cycles. Given what I know today, I anticipate appreciation in the short-run, and then plan to exit any holdings lacking considerable equity and strong cash-flow by about 2024.

All real estate markets are local, so you’ll need to consider this 18.6 year cycle within the context of your local market. Nobody knows the future. However, if you’re going to invest, you should have a model pointing you toward profits and away from danger. Understanding Economic Cycles can help.

My objective in this video series on economic cycles was to stimulate intelligent thought. Your comments are welcome.

Sources:
Adam Smith, Wealth of Nations (1776)
David Ricardo, Theory of Economic Rents (1809)
Homer Hoyt, One Hundred Years of Land Values in Chicago (1933)
Roy Wenslick; The Coming #Boom in Real Estate -- and what to Do about it (1936)
Dewey & Dakin, Cycles: The Science of #Prediction (1947)
Fred Harrison, The Power in the Land (1983); Boom Bust (2005); and Ricardo’s Law (2006)
Phillip Anderson, The Secret Life of Real Estate and Banking (2009) https://www.propertysharemarketeconomics.com
Property Geek Understanding the 18-Year Property Cycle (2019) https://www.propertygeek.net/article/the-18-year-property-cycle/
Property Hub University free video course on the 18-year property cycle:
https://propertyhub.net/course/the-18-year-property-cycle-explained/

Видео Understanding Economic Cycles (Part III): The 18.6 Year Cycle & Coming CRASH ~ Rhythm of Real Estate канала Jeff Gunther