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Will Real Estate Property Boom Last Until 2025?

Speculative Bubble
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EDITOR NOTE: Long-term market cycles are not uncommon. They're not always predictable, but they do tend to be consistent, despite the difference in factors that lead to their peaks and troughs. The author below talks about 18-year housing cycles. The last one peaked in 2007, the next one--if you believe in cycle theory--may peak in 2025. This cycle is a little different than previous ones: it's directly “sponsored” by the government and the Fed. The real estate sector over the last five years is the third-worst performing sector among all eleven in the S&P 500! Yet, home prices are rising due to low supply, high demand, and a significant rise in input costs--in short, inflation. If the property boom cycle is to peak in 2025, then you can look forward to buying or investing in a new property once the housing market deflates. In the meantime, you’ll want to protect your money’s purchasing power so as to prevent your “cash” from declining in value along with home prices. And converting your cash to non-CUSIP gold and silver is perhaps the best way to ensure your money gains value as the current and worsening inflationary climate decimates the dollar.

Can U.S. property prices really keep advancing for a few more years?

Financial and commodity market analysis is such a broad field and encompasses many different specific subjects. On the technical (or charting) side of market analysis there has always been a reverence for original works and copies of classic books are sought after. One such is “Cycles – The Mysterious Forces That Trigger Events…” by Edward R. Dewey and published in 1971. In that book, Dewey looks at cycles across a vast array, from the abundance of lynx (wild cats) in North America to stock market prices. In one chart he shows a very rhythmic cycle in U.S. Real Estate Activity lasting eighteen and one third years on average from 1795 to 1958. The “ideal cycle”, around which actual activity had tracked very closely, showed a trough around 1953.

Well, that has proven to be quite prescient for subsequent cycles. Property busts, after booms, have occurred around 1971, 1989 and 2007, all adhering to the 18-year cycle. Given this extraordinary accuracy of cycle prediction, we must have in our thoughts that the current property boom in the U.S. might last until 2025! With the current extreme level of froth and speculation in U.S. real estate, that is an utterly incredible scenario to imagine.

Remember, though, that 18-year cycle is the “ideal.” Actual activity can vary around it. It therefore makes sense to think about time windows when examining cycles. Still, it is only 13-years since the last real estate trough and so, perhaps, it is too early to think of a bust occurring just yet.

However, never in any previous cycle has the property boom been sponsored so directly by the government or central bank. In that regard, we might allow ourselves to conjecture that the intensity of the outright speculation stage in the cycle has been brought forward, and that would seem to align with what is happening with regards to “flipping” activity and prices as well as the explosion of realtors.

What is particularly interesting about this U.S. real estate mania is that it hasn’t been accompanied with an outperforming real estate sector in the stock market as was the case in the early-to-mid-noughties. Perhaps that speaks to the fact that this boom has to a large extent been artificially created and will ultimately turn out to have been a transitory illusion.


US Real Estate Sectpr Relative to S P 500- April 2021

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