The housing market is hot. Prices are up, inventory is down, and the market is active. Many people are starting to become cautious of a “real estate bubble.” The past has revealed many red flags which would indicate a real estate market may very well crash.
The Great 18 Year Real Estate Market Crash
Professor Fred Foldvary wrote in 1997 that “the next major bust, 18 years after the 1990 downturn, will be around 2008, if there is no major interruption such as a global war.” He successfully predicted the crash would occur and based his prediction on the past.
With the exception of World War II, there has been a consistent peak in land values since the beginning of the 1800’s. Professor Mason Gaffney characterized the cycle perfectly by commenting that “Bank credit swells and shrinks in synch with the land cycle… buyers need more credit to purchase land; the appreciated land than serves as collateral for more bank loans.”
Rising Interest Rates
Currently, interest rates are at a four year high. Mortgage rates have not reached 5% since 2011. Interest rates also have some correlation with the real estate markets. History shows that real estate interest rates tend to hit their highest after land values…