Understanding the Housing Cycle It should come as no surprise to the reader that over the last ten to fifteen years housing costs have risen dramatically and recently they have fallen significantly. This paper will attempt to explain the following conclusions: The housing market is normally in a “growth mode” (where new homes are required to accommodate an increasing population) or a “retraction mode” where the supply of existing homes is more than sufficient to accommodate demand. When in the growth mode, home values are closely related to the cost of new homes (replacement value); when in the retraction mode, all bets are off. The cost of building a house (the bricks & mortar) has, over the past several decades, increased, by almost exactly the same percentage as the cost of livin...
Comments
1
