Most cities now in "Hypersupply" and "Recession" cycle phases

General Real Estate Investing
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Most cities now in "Hypersupply" and "Recession" cycle phases

Jon Q.
Investor · Berkeley, CA · Member since 2015 · 1k+ posts · 713 votes

Many markets are now headed into "Hypersupply" and "Recession" phases of the market cycle (see chart below). It doesn't mean that you should stop looking/buying, but it does mean that you should be focused on deals where you can negotiate very attractive entry prices and generate a bulk of your return from cash-flow (appreciation for near-term will be minimal).

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Jeff B.
Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
9y

Please cite the source of this graph; w/o a legend it is just a so-what graphic IMO.

(sorry, I'm the math guy)

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  • Daniel Jenkins
    Jones, OK · Member since 2016 · 8 posts · 2 votes
    9y
    I hope my nooblet question is not inappropriate, but what do the numbers signify? Or was this pulled from a link that I can read up on? As an utterly new "investor" building my information pool, and seeing a few things that make me see bubbles right now. But not too clear on what the specific bubbles are and how to not lose my pants as I start.
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  • Jeff B.
    Buy & Hold Owner · Redlands, CA · Member since 2015 · 5k+ posts · 2k+ votes
    9y

    Please cite the source of this graph; w/o a legend it is just a so-what graphic IMO.

    (sorry, I'm the math guy)

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  • Natalie KolodijBusiness Member
    Moderator
    Tax Strategist| National Tax Educator| Accepting New Clients · Member since 2014 · 3k+ posts · 4k+ votes
    9y

    Can someone explain the impact of being listed under that recession cycle? 

    Is this implying that these markets are now greater in supply than demand and are thus reducing in value? Already reduced in value? Rental vale? 

    I need more details. I'm not clear on this 

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  • John Lai
    Portland, OR · Member since 2016 · 13 posts · 4 votes
    9y

    I suspect that it's taken from Harvard Extension School's lecture on how to predict the next housing bubble. You can find more details here (note that the figures are quite old from this link, so Jon S. must have a more recent post or data to compile 

    https://www.extension.harvard.edu/inside-extension/how-use-real-estate-trends-predict-next-housing-bubble

    Interesting theory. I've always thought that data science could be used to predict anything of a cyclical nature. I'd love to be able to determine if the data is available, either for purchase or publicly available.  That said, I don't know what the numbers represent but I suspect it's part of Mueller's theory.

    I also found this while researching online:

    http://ashworthpartners.com/wp-content/uploads/2015/01/IRR-Apt-Cycle-2014-Q4.png

    The website (http://www. ashworthpartners.com) has some interesting blogposts worth checking out. 

    Jon S., if you have a link to the full report, let us know.  

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  • John Lai
    Portland, OR · Member since 2016 · 13 posts · 4 votes
    9y

    @Natalie Kolodij go to the link I posted from the Harvard Extension School. It reads:

    It goes on to read:

    There's more in the post, but these are the highlights.  I'm sure there's even more to the theory. Practically, this means that if you price rents to market, expect them to dip in the Hypersupply phase and REALLY drop to the point of increased vacancies in the Recession phase. This just means you need to know what your properties rent for in your market, and price accordingly to keep the tenants.

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