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 five real price cycles and the beginning of a sixth in Baltimore. As the market is now in a downturn a point to consider is that both downturn cycles involved marginal nominal price increases and falling real prices. Market cycle time periods have varied from a market downturn of 3.5 years to the prior market growth cycle of nine 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 the beginning of a fourth, all of which included large changes in home affordability. The peak in 1981 is an abnormality due to all time high mortgage rates. It does however act as the turning point of a 17 year improvement in Baltimore home affordability. Due to this abnormality of the late 1970s and early 1980s, the median affordability ratio is skewed. Consequently, despite the fact that home affordability is only marginally above the median, the current level generates concern as it has reached a volatile level.