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 3 real price cycles and the beginning of a fourth in Minneapolis. As the market is now in a downturn a point to consider is the prior downturn cycle which involved marginal nominal price growth over a long period of years and falling real prices. Market cycle time periods have varied from a market downturn of 12 years to the prior market growth cycle of nearly 15 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 30 years have seen 3 cycles and the beginning of a fourth, all of which included large changes in home affordability. The peak in 1982 is an abnormality due to all time high mortgage rates. It does however act as the turning point of a nearly 17 year improvement in Minneapolis 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 affordability ratio generates some concern.