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 30 years have seen three real price cycles and potentially the beginning of a fourth in Chicago. The only Chicago real market downturn cycle was during the high inflationary and national recession period of the late 1970s and early 1980s, which resulted in stagnate nominal prices. Market cycle time periods have varied from the downturn cycle of 4 years to the prior growth cycle of 24 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. 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 Chicago 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 little concern, unless mortgage rates move significantly higher.