In 2002, 74% of the articles on monetary policy published by U.S. economists in U.S.-edited journals appeared in journals published by the Fed, or were authored (or co-authored) by Fed staff economists. The Fed’s capacity to write and re-write history dominates the information flow. It’s no wonder the Fed’s canards give it few worries. Speaking of economic history, one thing that the purveyors of monetary policy (and all prudent investors) should become well versed in is a piece of business-cycle history that has apparently passed them by – namely the little-known, but essential, 18-year real estate cycle.
Sorry. The last partial sentence in bold was about the only thing I found interesting.
Interestingly there is a somewhat regular cycle in real estate that can last on average 18- 18.5 years. The CATO article does have a nice table that shows this (red arrows are mine).
The 1st two columns are peaks in land value. The 2nd 2 columns are peaks in the construction cycle. And the 3rd 2 columns are in regards to the business cycle. They may not all be identical all the time, but they do rhyme.
A typical 18 (or so) year Real Estate Cycle looks something like this:
The very top of the cycle catches people who are in a hurry to buy before house prices get too high. When the deal is closed, the new owners are happy...but only for a while. At this point, they are regretting the purchase and start to notice their friends are being laid off. Not many, mind you, but enough to have them start wondering if perhaps he bought too late. What happens if he gets laid off too? What is he going to do?
As it gets closer to the cycle peak, the nervous owners sees there aren't a lot of similar sized/styled houses on the market at what they paid. But what do they do? Hold on hoping prices will rise? Pray interest rates will fall?
Yes, they are in the "Winner's Curse".
And this is when those who find themselves unemployed walk away from their houses they can no longer afford. Others who got laid off, but having bought a house earlier but at a lower price are able to hold longer.
Most of the time, this Real Estate Cycle synchronizes with the Business Cycle. You end up with a race to the bottom as one cycle feeds into the next one.
And we will see this play out again in 2026 or 2027. And it will be far worse than we could ever imagine.
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