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 Honolulu. As the market is now in a downturn a point to consider is the differences of prior downturn cycles. One cycle involved stagnate nominal prices and falling real prices, while the other involved falling nominal and real prices. Market cycle time periods have varied from a market downturn of three years to the prior market growth cycle of seven 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 five cycles and the beginning of a sixth, all of which included large changes in home affordability. Interestingly, unlike many coastal US cities the peak in 2006 was lower than the prior two market peaks of 1981 and 1990. This is due in part to historically low mortgage rates, which translates to Honolulu home prices having a high mortgage rate fluctuation risk.