A Basic Understanding of Real Estate Cycles

• Understanding SWFL Real Estate Cycles is one of the keys to proper deployment of capital.
• I am sharing my own research which, I use for my own selfish reasons
• I do not hold my self out as an expert. I am just a Real Estate guy, sharing what I have learned.

Civilization rests on change. This change is cyclical in origin. A rhythmic series of extreme changes constitutes a cycle. When a cycle has completed, another cycle is started. The rhythm of the new cycle will be the same as that of the previous cycle. Although the extent or duration may vary

You have the…

—        Seller’s Boom

—        Then the Buyer’s Boom

Always Remember, Busts do not follow Booms, Booms follow Busts

The Buyers Side

• This is driven in the beginning by fear.
• The beginning of the buyer’s side will be quite hazy, to all involved
• As sales volume mounts and sales prices erode, it turns to despair, then to capitulation on the seller’s side

On the sellers side

The primary driver is greed and optimism. This is an easy market. This side always has a sharp quick upward value trend. This will eclipse the previous value trend, as a sum. If you have a ready supply of cheap money

A “Mania “may form. What is a Mania? An excessive or unreasonable enthusiasm

Historical Examples

—        Mississippi Company, in the 1700’s

—        The South Sea Company, 1700’s

—        Wall Street Crash of 1929

—        Florida land boom of the 1920s

—        Japanese asset price bubble

—        The Dutch Tulip Mania’s

You have to understand that sales volume on the sellers side drives prices up once Inventory is eroding. On the buyers side it drives them down.. The Market is a pendulum that forever swings between unsustainable optimism. Which makes Real estate more expensive

And Unjustified Pessimism, Which causes Real Estate to be Cheaper.The Intelligent Investor is a Realist. Who buys from Pessimists and sells to optimists

• Boom times are a time for Courage
• Bust Times are a time for Discipline

By doing this you will not be swayed by the swings in the Market

In the End….

How you behave is much more important than how the Markets Behave

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