SUMMARY    HISTORY    PEAKS & TROUGHS    FORECASTS

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In order to most accurately determine prior market price cycles one must remove the effects of inflation and look at real historical prices. The past thirty years have seen three real price cycles, one mini-cycle (2001:Q2 - 2004:Q3 in which real prices fell 3.9%) and potentially the beginning of a fourth in Austin. Unlike most Texan cities, the prior downturn cycle involved substantial nominal and price declines. An interesting fact is that Austin homes are still lower in real price than during the mid-1980's. Market cycle time periods have varied from a downturn cycle of five years to the prior growth cycle of sixteen years.

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The mortgage-debt-to-income ratio is commonly viewed as the most accurate method of determining market cycles. The past thirty years have seen three cycles and potentially the beginning of a fourth, all of which included large changes in home affordability. Fortunately, due in part to historically low mortgage rates, the current cycle has not come remotely near the all time highs of the early 1980s. The peak however does act as the turning point of a 17 year improvement in Austin home affordability. Due to this abnormality of the late 1970s and early 1980s, the median affordability ratio is skewed. Despite this fact however, the current mortgage-debt-to-income ratio generates no concern.