When it comes to investing in real estate and stocks, timing is everything. Whether you’re an expert or a beginner in the investment world, making the decision of when to get in and out of the market can greatly impact your financial profits. What if there is a cycle, predictable and repeatable, that can arm you with a solid strategy to master the art of investing in real estate?
Introducing the 18.6 Year Real Estate Cycle, one that many seasoned investors believe in. Founded in the recurring patterns of land demand, it gives investors a guideline on how to predict market changes and maximize their investment opportunities. Find out the ultimate secret of the 18.6-year cycle and how it can provide you with stable financial profits in real estate investing.
What Is the 18.6 Year Real Estate Cycle?
It isn’t a concept but an observable phenomenon that stems from the rise and fall of land-use demand, economic development, and market flow. As more factors emerge, such as demographics, economic policies, inflation, interest rates, and cultural trends, an interweaving pattern forms and repeats around or every 18.6 years, impacting the real estate and the stock market.
The Phases of the 18.6 Year Real Estate Cycle
It can be divided into different stages. While the details of each cycle may differ from one another, once you understand the following dynamics, you can effectively discern the right time to buy, hold, or sell.
1. The Expansion Phase (Years 1–7)
The first stage of the cycle is where the economy is growing, and with it, there is an increase in the demand for properties. During this period of the 18.6 Year Real Estate Cycle, the rate of job creation, population growth, consumer sentiment is strong, and prices are on the rise. Interest rates are typically low, which encourages buyers to acquire property. Builders start constructing new homes, office buildings, and shopping centers to accommodate the increased demand.
As an investor, this is a great time to get involved in the market. Values are going up, and there are plenty of ways to make money in the short and long term. The key is to identify areas that still have room for growth, and this can be done by checking out new neighborhoods or places where the economy is doing well.
2. The Peak Phase (Years 7–10)
After a considerable amount of time and growth, the market begins to reach a peak. At this point, real estate is at its most expensive, and there is a high demand for properties. Despite the many selling benefits, it’s important to exercise caution. Prices are usually extremely high, and there’s potential for a market crash.
If you find yourself in this position, get creative. You might also want to start looking at selling or changing what you’ve been doing in the past couple of years. However, those who are willing to take more of a risk and possibly see a bigger reward might want to consider holding onto a property that has gained a lot of value. If that’s the case, it might even be worth it to hold out for the crash to pass.
3. The Contraction Phase (Years 10–15)
Once the peak is reached, things go into contraction, and this is where the power starts to show. Things will drastically slow down as the economy changes, and this can mean rising inflation, interest rates, or even dwindling consumer spending. This stage can be scary for those who have just recently gotten into the business, but it also can be a good thing.
As the market starts to tumble, things start to look a lot more promising for people who have the cash to buy properties. Additionally, interest rates should be very low, which is music to the ears of potential investors.
4. The Recovery Phase (Years 15–18)
After the contraction phase, the economy will start to recover, and things will start to look good on the real estate front. Prices become more stable and will start to gain in value again. It might not be as quick as the growing market, but it’s a good sign that things are getting back to where they should be. The market is recovering and investors who bought during the contraction phase will begin to enjoy the benefits of their investments.
Once the market starts to come back, property values will go up, and it will be time to start preparing for the next contraction. Click here to learn more about this phase.
Why the Cycle Matters to Investors
The 18.6 Year Real Estate Cycle is arguably the most valuable information you’ll ever have in this industry because it allows you to predict trends in the market. This can change your life and future forever. Here is what you get when you learn how to use the cycle as an investor:
Market Timing: As an investor, you can time the market correctly. You can buy low and sell high, get in and get out at the appropriate time, and make the most bang for your buck in terms of the highest returns on your investments.
Identifying Opportunities: You can see where the opportunities are and when they are going to happen. Based on the 18.6 Year Real Estate Cycle, you can see when new markets and areas are going to grow, swell, and mature for several years. That way, you can get in at just the right time before the rest of the market does.
Risk Management: You can lower your risks by being able to see where the real estate market is. And you know when the busts or contractions are about to come, you become more cautious and careful with your investment. You can also find areas where distressed properties are abundant and make your money in different ways, starting by getting into the right investments and securing lucrative deals with these distressed properties.
Diversification: Understanding the 18.6 Year Real Estate Cycle helps you diversify in just the right way, in tandem with the stock market. For example, when the real estate market is topsy turvy, it helps you understand exactly how to invest in the stock market. This way, you get a diversification of your portfolio, so your returns in the stock market can make up for the real estate market loss or vice versa.
The Stock Market and the 18.6 Year Real Estate Cycle
Interestingly, the 18.6 Year Real Estate Cycle doesn’t just apply to real estate. It can also be applied to the stock market because the two asset classes are closely related. As a result, their respective cycles have frequently overlapped. When the cycle is in an expansion phase, the stock market typically performs well, whereas in a contraction phase for real estate, both markets can take a hit.
So, with it as your guide, you can make smarter decisions in the stock market. For example, if the market is entering a contraction phase, you might want to consider rotating some of your investments into defensive stocks or stocks and sectors that typically perform well when the economy cools down. To find out more about this, follow this resource: https://www.quantara.com.au/.
Is the 18.6 Year Real Estate Cycle Foolproof?
While the 18.6 Year Real Estate Cycle is a handy tool, it’s worth noting that no cycle is 100% foolproof. For example, there may be global, market-specific, or economic conditions that could deviate the cycle from its usual course. For example, an unforeseen economic shock, incoming government policy, or a geopolitical event can change its trajectory. Therefore, it’s important to not rely solely on the cycle alone and take other factors into your investment planning considerations.
With that said, while it isn’t infallible, it has demonstrated itself as a remarkably accurate tool when observing the markets over the long-run. As long as you’re using it in conjunction with other investment analytics and market analysis, it can help forecast your chances of making solid investment decisions.
The Takeaway
If you’re an investor looking for an edge, knowing and understanding the 18.6 Year Real Estate Cycle can be the difference between making or breaking your investment plan in the long-run. By understanding the cycle’s different phases and how to rotate your investments to accommodate each, you stand to make better returns while mitigating the risks involved in the process.
If you are new to investing and not quite certain how to integrate the cycle into your investment strategy, there are many guides and resources available to help you. The key is to be informed and patient, and to remember the cycle as a tool. Its purpose is to guide your investment decisions, not make them for you.
