When is the High, What is the low?

Posted by: Toddi Gutner on January 24, 2006

I’ve just spent several hours reading housing bubble blog entries and comments. It seems there is some general consensus from the American public (if there can actually be one on the world wide web) that the U.S. real estate boom peaked in the last 12-18 months-depending on the market—and the bubble is slowly leaking.
Of course, real estate is local, so it’s not every market in every state, but many of the cities people blog about (read: either live in or want to live in) wrote about some indication of a slide.

With that in mind, I’m brought to a comment on one my Hot Property colleague’s entries, Washington, D.C. Bubble? where Wes (posted November 30, 2005 at 2:51pm) asked, "What is the low and when is the high?"

Of course, we all know we can’t time the market. But, if we were to try, what does a typical housing cycle look like? Chris, who recently posted the following comment on my entry entitled “Deflating Bubbles, Tanking Markets," wrote:

"The way previous housing booms go, they hit a peak, sit close to that for 1-2 years as sales numbers plunge, then drop by some percentage for the next 1-2 years to get to a low in actual $$. Prices then languish for about 8 years, eventually getting to the low in real terms, before picking up again. That's 10-12 years, and has been repeated in US busts ('70s and early '90s), Hong Kong, Japan, UK...do your research if you don't believe me. The durations, and the amount prices drop, vary and could be larger if the boom itself was larger. The real driver for this response is probably more a confidence thing based on greed/fear in the population than any demographic effect. During the boom everyone sees 'value' everywhere, after the boom no one sees 'value' anywhere. Just look at the stock market now, compared with how you looked at it in 2000."

Do you agree with Chris that housing cycles are 10-12 years? If so, should buyers (read: investors) hold off until 2010 so they can buy at the bottom?

Reader Comments

Epson Inkjet Cartridges

January 26, 2006 8:48 PM

Great Blog!

Looks like the San Diego real estate market has done a 180 turn and is now on the verge of a multi-year decline!

For a great article on the true direction of the real estate market as
authored by a top San Diego real estate broker, visit:
http://www.downtown-san-diego-real-estate.com/san-diego-real-estate-article.htm

Emptyspaces

February 5, 2006 6:52 PM

you cannot predict a market cycle depending on the amount of time that has elapsed. You look at other indicators like current & historic affordability, job and population growth, number of building permits pulled, days on market & interest rate trends.

San Diego cosmetic surgery

February 10, 2006 2:19 AM

As a San Diego homeowner I can say things have really changed in the real estate market. Just a few short months ago most homes sold within a week or two.....now homes are sitting months and ones in my neighborhood have all had good size asking price reductions.

The air is really going out of the bubble, slow but steady.

This is FACT....at least in San Diego.

San Diego real estate

March 12, 2006 6:40 PM

I do agree w/Chris...But, think the San Diego market has shorter cycles. Appx. 1990 marked prior top and than the average San Diego home lost 20% of it's value over the next five-six years.

Now the Summer of 2005 seems to be our most recent top and inventory has more than doubled, sales slowed and prices reduced in most ares of San Diego since than.

For my most recent take on the San Diego bubble, you can visit my blog at:
http://www.brokerforyou.com/blogger/index.html

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About

BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.

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