World Cycles Institute

The Eighteen Year Real Estate Cycle

The Eighteen Year Real Estate Cycle

dream-homewebPeople fall in love with having a “dream home,” and cost is usually secondary. They get into debt up to the eyeballs.

Really bad idea, particularly right now. That’s because we’re at the very top of the market. In fact, it’s a bubble … certainly in Canada (and Australia is close behind). The US had their housing bubble a few years ago … but the full extent of the downturn is still to be seen.

Update: October, 2018

I originally posted this article in August of 2015. The low of the cycle, as mentioned in the article was the year 2000, so I’ve been expecting at top in the year 2018, which appears to be happening.

Here are some recent figures:

  • Denver: Aug to Sept 2018 sales are down over 30%
  • Manhattan (Bloomberg): the number of home sales have declined for the 4th straight quarter
  • Hong Kong: prices dropped in the past month for the first time in 29 months
  • Vancouver: prices are down 43% from a year ago
  • Toronto: detached home prices have plummeted over 30% year over year
  • London, UK: prices have dropped quite suddenly in September, the number of home sales has dropped to a decade low
  • Sydney: Prices are down over 7% through August of this year

Mall vacancies are at a seven year high. There’s even a mall in Calgary, Alberta, Canada, (my city) recently cited in zerohedge that has been built but is almost completely empty.

One of the key identifiers of an impending bubble bursting is extreme building, both residentially and commercially, but particularly commercially. Past market tops have been rife with completely empty commercial buildings.

 

Continuation of the original article:

We’re in a Worldwide Real Estate Bubble

Central banks have lowered interest rates to almost nothing in order to spur more borrowing. However, it results in more people buying homes they can’t really afford, and artificially drives up the price of those homes.

canada housing bubbleHere’s a visual from an article I clipped from zerohedge.com in March of this year about the Most Overvalued housing market in the world … by the Economist, a well-respected international financial magazine. You’ll find the full article here.

The other, possibly even bigger problem for Canada is that the International Monetary Fund (IMF) a month earlier than this article came out, sounded the alarm that Canada’s household debt is well above that of other countries. Canada (where I live) has the perfect storm just waiting to happen, and it won’t be long before it does.

But. guess who thinks it isn’t a problem? Stephen Harper, the Canadian Prime Minister, and the Bank of Canada (Canada’s central bank) both tried to quell fears that anything is amiss. Of course, they’re both heavily biased.

millennails articleFunny enough, I noticed another article a few days ago on the site Marketwatch, about Millennials (25 to 34 year olds, in this case in the US) and the concern that they’re NOT buying homes. You’ll find the complete article here. I say, “Good for them!”

People just don’t get it. But Millennials do!

Buying a home right now would be really foolish. It’s the top of the market. You’ll be underwater financially in no time.

There’s a little more to it than that, actually. There’s an even larger, longer cycle in play right now … the 172 year cycle. (you can see my video on it here) It’s bottoming. What this means it that the usual 18.5 year real estate cycle is going to go a lot deeper than normal. Longer cycles are more powerful than shorter ones.

The 18.5 Year Real Estate Cycle

Edward R. Dewey spent an entire chapter on it in his book, “Cycles, the Science of Prediction.”

realestatechart5Above is a chart showing the pattern from 1795 through today. You can see how regular it is. It averages about 18 and a half years. If you’re smart, you buy a home at the bottom and sell (or keep it) at the top.

We had a major low in around the year 2000 in both the US and Canada. The US had a top around 2007 associated with the subprime crash. If you were to look at the appropriate chart (the real estate sector) in the US stock market, you’d see it peaking about now. It’s had a second top within the 18 year cycle. I would expect both the US and Canadian cycles to head down now and bottom in about 3 years.

Canadian Real Estate Market REV3
Here’s a chart of  Canada’s real estate market over the past 18 years. It’s peaking right now and I would expect another low around the year 2018 … not very far away. The challenge with identifying the Canadian cycle is that they only started recording data about 20 years ago.

This 18.5 year real estate cycle is also a rainfall cycle. It’s called the 9.3 year rainfall cycle. Dr. Raymond H. Wheeler, the Father of Climate Cycles, found that it’s wet on the upside (wet leads to prosperous times) and dry on the downside (we’re in a drought right now … it’s getting cooler and dryer worldwide, which leads to depression). Droughts always lead to depression. They always have … throughout history.rranom-vic-0112-19917

Above is a rainfall cycle for Victoria, Australia, which shows the 18.6 year rainfall cycle in action (Source: TallBloke’s Talkshop)

Don’t get fooled by interest rates. As I mentioned earlier, central banks (like the Federal Reserve in the U.S., the European Central Bank, and the Bank of Canada) have instigated the lowest rates in history to try to spur the economy, but they’ve been unable to do it.

DOW-topping-webI’m expecting a very big crash very soon. The US stock market has already topped. Oil has tanked, but it’s got further to go. And interest rates are going up … quite a bit. Can you afford a big jump in interest rates? Well, I’d do the math before signing on the bottom line!

So … if you’re thinking about buying a home … think long and hard. Personally, I’d wait a few years until this bubble crashes and get in at the bottom. Some of us are projecting homes to be worth under 25% of what they are now in just five years – that’s not long to wait to get your dream home.

Edward Dewey, the Father of Cycles said:

“The building cycle is so long that most people don’t experience two cycles in their business life. For many individuals, an unfavourable first experience means a life-time tragedy.”

Pay careful attention to the real estate market, the stock market, and the economy. The central banks have created an extreme bubble and bubbles always burst. The signs are becoming more and more ominous. We’re likely only months away from a really large contraction.

Don’t let anyone tell you this time is different.

 

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{ 34 comments… add one }
  • Nicola Timpa August 14, 2015, 4:55 am

    thanks

  • Joel Lovingfoss August 14, 2015, 12:35 pm

    Very insightful presentation Peter… I will put Dewey’s book, Cycles: The Science of Prediction, at the top of my list. Thanks!

  • Kent August 25, 2015, 1:01 pm

    For some reason, I still remember that real estate chart in Cycles when I read it in the 70’s. But Phillip J. Anderson says the 18 year cycle has already bottomed, and it is clear sailing until 2024. Any thoughts on this.

    • peter August 25, 2015, 1:43 pm

      Hi Kent,
      I can’t comment on someone’s else’s cycles analysis.

      I can tell you that the Canadian and Australian markets are leading the bubble (currently right at the top), and with commodities having sunk to new lows and the most of the world markets starting to head down, I haven’t seen a bottom anywhere. Now, some might say the US had a bottom in 2008/9 but I attribute that to the subprime crisis and with the depression picking up steam, I expect everything to be in a trough by 2020 or so. The US market has a lot further down to go. This is going to be a big, long trough, so 2024 would certainly fit well within it. The US and Canada have been in a technical recession for months, and so everything is pointing down, as well as quite a number of cycles, not only the real estate cycle.

      Don’t know that I’ve answered your question …

  • Joe October 19, 2015, 1:25 am

    Hi Peter
    your Canadian ?
    both my parents came to the US from Canada and I still have cousins up there . I’m a yank though having grown up in Seattle and spent the summers sailing in the san Juan islands , great place . I live in southern Oregon now but visit family and friends each year in Seattle and from what I’ve seen the construction boom has gone crazy in downtown Seattle as well as Bellevue along with the smaller cities . it certainly has a topping feel to it .I’m curious though In regards to Canada real estate , didn’t they impose a transaction tax back in 2009-2010 on real estate ?
    I have no idea how that effected the market or if it really effected anything ? also do you think the GST is a good thing ? would you think it would be benificial to have a similar tax in the USA now that you have seen it and lived with it ?
    Joe

    • peter October 19, 2015, 6:51 am

      Joe,
      Canadian, yup. I lived in NY though during my teenage years, where I learned to sail. I used to own a CC35 and spent years in the San Juans tooling around. I know the area backwards.

      No, no transaction tax. Canada has the largest bubble in the world, more because of free money than anything else. GST is a consumer tax, so it’s better for lower incomes people. It’s all we have here in Alberta – no provincial tax (all the other provinces have a 5-10% tax on top of the 5% GST).

  • Patrick May 18, 2016, 9:22 am

    Thank you for that very informative post on the real estate cycle I just came upon it are you still calling for a downturn into about 2020?…thanks again & best regards

    • Peter Temple May 18, 2016, 9:33 am

      Hi Patrick,
      I believe the downturn is imminent – this year. The bottom around 2020/21.

  • Kevin August 11, 2016, 3:28 pm

    The Canadian housing bubble is still growing as foreign money is still coming in Ontario and BC except Vancouver for now. And Feb and other central banks keep pumping money to maintain the stock markets at all time high to get Hillary Clinton elected. Do you still believe the Canadian housing bubble will burst any time soon without any further government intervention? Thanks.

    • Peter Temple August 11, 2016, 3:36 pm

      Hi Kevin,
      Well, I don’t believe the connection between banks and Clinton, as International Bank of Settlements (the ones behind all this mess) aren’t creating more debt worldwide in the name of Clinton. Quite frankly, they’re done and the market knows it. Look for a top in the US by October. Every other market worldwide looks to be ahead of the US in that regard (and Canada just follows along).

      Credit is starting to dry up. It won’t be long at all before the banks start getting worried about mortgages – it’s already happening here in Western Canada. Banks are starting to pull in loans. I know that personally from acquaintances who are going through the exercise.

      I wouldn’t expect the real estate market to last beyond October, either.

  • Kevin August 15, 2016, 1:59 pm

    Hi Peter,

    Thank you for your reply. I know it sounds like a conspiracy, but it’s true that bankers from Wall Street want Clinton, not Trump, to get elected. And plus Fed and their Plunge Protection Team don’t want Trump either. Other central banks don’t want see another black swan event like Brexit. So they will do whatever they can to pump more liquidity into the market just like what Bank of England did i.e. to cut the interest rate to release more credit to the market.

    I know it’s very easy to get mortgages (e.g. 2 year fixed is at 2.08%) from the big Five in Toronto right now. And Bank of Canada still has some room to release more credit into the market since Canadian economy is lagging showed from last report. What’s your thought on this? Thanks.

  • Josie July 23, 2017, 9:51 am

    But the stock market did not tank in 2015. This prediction was WRONG! If I had listened to it, I would have lost money because the S&P went up since 2008 to now (2017).

  • Mike Rowe February 11, 2018, 10:04 am

    Glad I missed this report when it came out!!! I would not have NOT bought and I would have no hope of getting into the the housing market now since prices have increased sooooo much. 2018 in Vancouver. There’s way too much misinformation out there !

  • mick May 12, 2018, 12:46 am

    Howdy
    Any update to this please . Real estate markets seem to be doing just fine in 2018, in North America + Australia

    • Peter Temple May 18, 2018, 4:08 pm

      Mick,
      Real Estate bubbles are doing just fine, yes, but this is the year they will crash. The cracks are already starting to show in Toronto, Vancouver, New York, London, San Francisco, and down under. I’m getting around to updates, but the first level of business is a new webinar, “Navigating the Crash 2” will be announced this coming week.

  • Niels October 9, 2018, 4:40 am
    • Peter Temple October 9, 2018, 7:10 am

      It’s not even debatable at this point, so I won’t.

  • Joe Longwill October 10, 2018, 12:56 am

    Peter
    i think you have a typo
    quote from above , i think you meant year 2018
    so I’ve been expecting at top in the year 2081, which appears is what is happening.

  • Michael R Douville October 31, 2018, 9:29 pm

    Good article on Cycles. It is very difficult to pinpoint the bottom and top of Multi regional assets. Robert Shiller did a pretty good job with his Case-Shiller Housing Index readily available at FRED. I believe if you look at the work, the bottom of the last cycle was 2010-2011. The 2000 time frame was tough of the Dot.coms, but US Real Estate hardly felt a tremor. The big Downdraft was the S&L Crisis and the resultant RTC liquidation through 1992/3. The Cycle repeats 18 years later with the completion of the cycle and the start of another in late 2010 to early 2011. Further, typically, there is a jeopardy time frame 7-9 years from bottom which coincides perfectly with the current Housing Downturn. Welcome to the correction.

    • Peter Temple November 1, 2018, 12:02 am

      i will stand by the ten years of extensive work I’ve done on this, the work of Dewey, Puetz, Wheeler, and Anderson, and the lunar nodal cycles, which it’s based on, of course, that hasn’t changed throughout the history of the planetary cycle.

  • Michael R Douville November 1, 2018, 9:21 am

    Oh, I believe the 18 year cycle is correct. Your cycle end dates for Canada may be different than the US. When the US Housing bubble broke, Calgary and Edmonton had very little effect and prices continued to rise. In fact, the twin Oil Office buildings in downtown Calgary were constructed in that time frame, occupied and then the oil dropped causing the oil companies to go bust and millions of square feet of office was vacant. Those building are so expensive to maintain, the current owners are actually entertaining demolishing them! That is typical of late stage activity. FRED or the Federal Reserve Electronic Data is readily accessed by the public and the US Housing’ completion of the prior cycle and the beginning of this one is very clearly demarked. The Globe does not necessarily have the same timing model, but does seem to have the same cycle! You obviously have done your homework. Real Estate is much more “Regional” as Calgary has shown. Calgary enjoyed the huge oil boom and then bust which exaggerated the cycle effects. As you know, the ending of the cycle is really a process. Again, if you look at the FRED data, the US bottomed in the 2010 to 2011, (even to 2012) timeframe and started the current cycle. In the US, there is a correction typically 7-9 years from bottom. Existing home sales have dropped for 7 months in a row across the US.; welcome to the correction! However, in the US, it will be a correction in an ongoing Bull Market due to top in the 2023/24 time frame also known as the “Explosive Phase” . Very good work, Canadian and US cycles appear not to coincide. This “correction” which is coinciding with a Stock Market Bubble, a Bond market Bubble, a Liquidity Crunch, and the end of an Historic Credit Expansion will probably be vicious. Your advice to be cautious, that better pricing is available in a very short while, is ‘Spot On”. Those that are aware and prepared will earn incredible fortunes in the next 7 years!
    https://fred.stlouisfed.org/series/CSUSHPISA
    http://www.michaeldouville.com

  • Socrates February 21, 2019, 7:50 pm

    Man up Peter. Your crash is imminent reminds me of all the gurus and experts who have never owned any rental property. If people want to know when a crash is imminent talk to people who have owned rental property over 30 years or more. They have seen a lot of boom and busts.

    You have been so wrong Peter. You would have been broke by now if you were a bettor.

    It’s 2019 February 21..NO crash in RE in Toronto. Prices in Toronto ( not GTA ) are up, up and going much higher in the next 3 years.

    ” A fool and his money are easily parted.” The Fool are all the so called “educated ‘ Lot with all the Bah humbug ” Titles.”

    • Peter Temple February 21, 2019, 9:19 pm

      Hi Socrates (from what we not so affectionately refer to as the “Centre of the Universe”). That’s quite the prescient moniker, from my perspective.

      I don’t spend much time of the real estate cycle anymore, as it’s already topped internationally. In my world, Toronto is tiny part of the “real” Universe. But I’m certainly familiar with the “island” attitude, as I still have family there.

      I’m happy being this wrong: We sold a residence in Markham two years ago (now down 20%, or so) and pocketed some 140K we wouldn’t have otherwise seen. Did the same thing in Calgary three years ago. In fact, the differential was more than the original cost of the home. We all know (or should) where prices are now.

      Real estate prices are down internationally right on schedule, with tops generally having been seen in 2017.
      .
      The 18.6 year real estate cycle is the lunar nodal cycle (actually two cycles of 9.25 years roughly). But it’s dwarfed by the much larger cycles or 172 and 516 years, which are playing out now. These are much bigger cycles that will eventually hit your little island (hope they don’t, but the writing’s on the wall).

      Climate has already turned this year and is always a predictor of a market crash. It’s been that way throughout recorded history and very well documented.

      Ontario is the last place I’d want to live in the financially inept western world. Ontario, as you probably know is the most indebted sub-sovereign state in the “real” Universe.

      It has twice the per-capita debt of California (in a distant second place), and, as a share of the economy, is more than five times larger than CA (40% vs, 8% for California). Mr. Ford can hack away at the deficit, but the debt is another matter (he will have little influence on the eventual outcome). You can prop up an economy with debt for awhile, but in a fiat currency world, it never lasts; it never has.

      Credit is freezing up on an international level and it’s only a matter of time before it comes down to roost locally. There are lots of easily accessed articles on that impending challenge.

      Canadian banks have been downgraded by the IMF, and warned about more recently by both the IMF and the BIS. You’re going to see the Canadian stock market drop about 4K over the next three or so months, while the US market drops even further. Oil is headed down below $42 with the impending drop. Not a good sign for Canada.

      I analyse and predict the markets on a daily basis and I rest on my record over the past three years. It’s public, and easily researched. The TSX has the scariest chart of any international exchange that I can find anywhere in the world. The bigger picture is where you want to focus your attention. Real estate is done.

      So, there’s a tsunami coming and your island is dead centre in its path.

      In the meantime, I’m happy being wrong and increasing my balance sheet, as a result. As we say in the market, the bigger they are, the harder they fall.

  • Socrates February 21, 2019, 11:06 pm

    Peter,
    What all you have said is correct. But makes no money.

    Your other posters here with all their research and debt burdens by countries….except these countries are the richest in the World. The west are the richest countries through debt and fiat currency. If I had learnt this lesson in 1980 I would be like Buffett. But I got educated with all the trash…Mba, finance, med school, CSC courses etc.

    Making money from RE has nothing to do with all the metrics bandied about.

    Now here is the future in RE in one Market – USA. After the top in the Stock market in 202/2021 with the S&P at 3,200-3,600 the crash begins.

    The RE in the USA will jump 700-900 percent from 2019-2026 ( top 2027). We only know the top one year later like in Toronto, Top in Jan 1990 only knew about by June 1991.

    The parabolic move happens in the last 3 years. But the US real estate bottom was 2011. New York will go bankruct again or threaten to go. The two best stock markets in the next 10 years are…..well this is about RE.

    So keep talking about debt, defeceits etc. It has nothing to do with anything. They talked about this in 1970/1975/1980/1987/1990/1998/2001/2008 and on and on.

    Did Buffet go broke. Did 40 -30 year real estate investors go broke???

    The crash in RE in TO and Vancouver and Australia is coming. But the gurus who the sheeple listen to had/have it all wrong. Pity how many people stayed out of the RE market in Toronto from 2008-2014 listening to the gurus and experts who did not own any rental property ever in their life.

    Waiting for the crash just like August 1983 when Gold was 850 and the Dow was 850.

    • Peter Temple February 21, 2019, 11:25 pm

      This is all opinion with no science or cyclic history to back it up.

      The recent past (30-40 years you mention was all predicted). So is inflation, a pattern that happens every 172 years and then we go into deflation. That’s history; it’s cyclical. You make money from the cycles (at least I do).

      I make money from knowing the market and predicting it; so do my clients. I’ve made money be calling the top in real estate. I’m quite happy, as you say, “being wrong.”

      I sold a property in 2007 for about 1 million (a rental property) that I bought five years earlier for under 350K. I just keep being wrong … lol.

      And yes, the top will be in 20/21. But there’s a ton of money to be made now.

      I’ve spent too many successful years doing what I do to care what you think of me. Better Stay away from my upcoming books; you won’t like them.

  • Socrates February 21, 2019, 11:26 pm

    So your oil comment now. Oil is going to $63-67 by June 2019 ( could happen before). I know the low in oil and its not 43. That happened on Dec 24, 2018. But first the high.

    I day trade the RTY, ES, CL and GC. RTY is my main and ES I use time. I do not scalp. CL is wild at $10 a tick but technical. I position trade other commodities and currencies.

    GC and SI should top around 1400-1480 and SI 16.84-18.00. Waiting to short these for a ride all the way down. Position trade these with puts and sell calls/free trades.
    CL, HO and RBOB are going up till the time of June 2019 or when their price hits

    I could go on about currencies, softs, financials, energies, metals, grains, meats etc but I only brought it up with your oil call of $42.

    The gold and silver shares are going to drop hard after GC and SI top. Puts are in order.

    CAD, EUR, GBP AUD. CHF, NZD, JPY are all in a range on a weekly/monthly chart. They will explode up. DX is topping. Euro has 57 percent of this index.

    Just like you debt defecit, the stock market is a ponzi scheme, but if you know how to play it right you a billionaire. I wait for the stocks to jump out the window. Takes 10 years for the stock to go from 5-200 and then lose 50 percent in 1-2-3-4 months.

    Ahh TIME is precious. It’s the real capital. So why go to school and study. Get the fiat currency early. Education even from Standford Instead, Northwestern Yale etc. is worthless according to the banker.

    Education, like debt, defecits…all worthless. Pay no attention if you want to win this game of money in the real world we call Fiat Currency…Green.

  • Socrates February 21, 2019, 11:37 pm

    I guess if you a guru, then I should become one. Not.

    If the guys on Bay Street could make their money with their own money they would not need clients to suck out fees and write books.

    The real people making money don’t need clients and don’t need anyone to know them.

    While you did great, I was in the RE market from 1987 to 1990 with a lot of properties at a very young age. And it and I was worth millions. Unlike Reichmanns who cost the banks 10 billion dollars – they had coporate covenant- they still retained $300 million. Like Al S we all went to zero.

    If you sold out in 2007 they you do not know the RE market. You listened to the gurus who told all the RE crash is coming to TO as the US market crashed and TO is next. You lost 500 percent minimum. The time to sell was 2016. Wynne delayed the boom and the price. So we have another time to sell. This is how it all works.

    We have a WC here in 2026. The US, Canada and Mexico. Who’s RE market is going to be up and booming and who is going to be down??

    No, i won’t be buying your book. I could write a book or two, but then again, I don’t need to sell my information.

    “There is nothing new under the Sun.” Ecc.

  • André van staveren June 9, 2019, 1:32 am

    6-9/10 will be a high. So early morning in europe a high. Late in the day a low. 6/12 harmonical date (12/6=2). I expect the high this year 9/14/2019. 6/21 is conjunct this date. This will be a high. The tidal field is bullish into 6/10 and then bearish into 6/17. A classic 4 day inversion window (delta system) will connect the 6/17 and 6/21 dates.

  • Kevin Lynch June 25, 2019, 4:04 pm

    Fun to read folks predictions that were made and defended at the time of their prediction and seeing what really happened. No doubt that there are cycles in real estate just like almost everything else. Timing those real estate cycles will depend on location, asset type, asset class, interest rates, government regulation changes (such as Rent Control) and a whole lot of other factors.
    I sell commercial real estate investment assets in the Chicagoland area and as of this date, June 25, 2019, I believe we are close to the top in valuation. We may remain at this level for some time due to the pro-business President the U.S.A. enjoys if he is re-elected or we may experience a “correction” if the U.S.A. gets a Democrat/Socialist as President in year 2020.
    Every day property owners will tell me that every good asset they see is being offered at Crazy Prices…and they are selling at these prices. Every day I then ask, “Why Are You Not Selling?” I achieve record high sale prices because I use Regression Statistics to discover the “Best Buyers”. When the market changes, these Best Buyers are some of those hit hardest.
    Side observation: When your barber and those in the service industry start talking about real estate assets they are buying….get liquid as there will be opportunities coming your way.
    Wishing everyone well. Take Care. Kevin M. Lynch, CCIM

    • Peter Temple June 25, 2019, 7:39 pm

      The real estate market has little to do with politics. It’s a natural cycle. But you’re right about talk hitting the media. It’s the same in the stock market, or anything else … when it hits the press, it’s over. Real estate has topped in most major markets around the world. This depression will be worldwide.

      But markets top at different times. Calgary topped a few years ago. Vancouver’s done, Toronto on the way. We’ll eventually see homes at 20% (or less) based on today’s value.

      I’m in the midst of updating this video with more recent figures. Thanks for the comment, Kevin.

      • Mike Caruana July 6, 2019, 7:53 pm

        When you update this, can you cover Los Angeles?
        We seem to be defying the rest of the country/world.
        It has slowed down a little, but not much. In 2011 as it bottomed, no one was selling. Where it is now is simply unsustainable. A crash (not correction) would be welcomed.

        • Peter Temple July 6, 2019, 8:18 pm

          I hope to get to a revised video on this sometime this week. My report this weekend is late because I’m doing a video on the US Dollar Index … big picture … which I promised a while ago. I’ve spent quite a bit of time on it today.

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