Property Market

Forecasting what’s next for the economy is usually considered nearly impossible. But here at Money Morning we don’t let that stop us from trying.

Understanding the underlying forces which drive the economy will go a long way to accessing the insight that few will ever attain.

It is often thought that forecasting the economy includes factors such as the movement of central banks or the stock market. Or even the movement in interest rates and inflation. But while they may play a small part, their impact doesn’t hold weight.

So what’s it based on? The real estate market.

Here at Money Morning, we believe the economic cycle is largely underlined by what happens in the real estate market. And the cycle simply continues to repeat.

Property Markets History

Homer Hoyt’s book published in 1933, One Hundred Years of Land Values in Chicago, identified the repetition of Chicago’s real estate cycle.

Hoyt’s study of history, which focused on land values, makes a strong case that the economy moves in a clear sequence of around 18–20 year cycles.

As Hoyt notes, real estate cycles are directly related to land price. The cycle repeats regardless of the government in power and their policies.

Since Hoyt’s book was published in 1933, little has changed in the real estate cycle. The cycle just continues to repeat itself.

The Global Financial Crisis wasn’t financial in nature, and so it appears that the reforms initiated after the GFC have only set in motion another real estate cycle.

Instead, we’ve seen a land crisis.

The underlying cause of the crisis may have been ignored, but the real estate cycle looks set to repeat.

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It's not very often Money Morning editor Kris Sayce has time for a chat. Luckily for us, he kindly agreed to sit down and reflect on the year that's been and the one that's coming. Including his investment strategy for 2013.

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