Peer Into Jeremy's Crystal Ball....

Some time ago I wrote Investing in the Market Cycle - Know what to Do When. In it I described three phases of the real estate cycle. I included charts that described the Utah market model.

For reference purposes here is that chart:

So this first chart is theory and is a good guide. Now lets talk about reality:



If you are looking for hard data on where we are, where we have been, and want a hunch on where we are going, this chart reveals all. The black line represent the adjusted house price index for Weber, Davis, and Morgan counties. The red line represents appreciation rates (%) for these same counties. So, according to this graph, if you bought a $100,000 home in 1986, that same home today would be worth just under $300,000. If you look at homes that were selling in 1986 for 100K you will find that this assessment is pretty accurate.

As you can see, the theoretical chart was made to closely resemble reality. The purpose of our second chart is to show what the different phases look like in real life. In our chart the brownish area represents a market correction or phase 2. The yellow areas represent buyers markets or phase 3. And finally, the red areas represent seller's markets or phase 1.

We are currently in a correction phase with prices depreciating slightly as has been the pattern in the past. I anticipate this correction to last at most 6-12 months longer before we enter a prolonged buyer's market phase. The most recent correction/buyer's market combined phases lasted 6 years (1999-2005) total. The one before that (1986-1992) was also a 6 year stint. We are only a year or so into our correction and if, history proves predictive, we have another 5 years to go.

If you want to be rich in 10 years, buy as much wholesale real estate as you can for the next 5.