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 National real price cycles and the beginning of a sixth. It should be noted that all real price cycles, including the two downward cycles, involved nominal prices gains as the market used stagnate nominal prices to cool off overheated markets. The initial four market cycle time periods had averaged five years, however the prior growth cycle had lasted more than twice as long.

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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 at the end of 1981 is clearly an abnormality due to all time high mortgage rates. It does however act as the turning point of what was a nearly 18 year improvement in National home affordability. Due to the abnormality of mortgage rates during the late 1970s and early 1980s the average affordability ratio is skewed. Consequently, despite the fact that home affordability is only modestly above the historical average, the current level generates concern as there is a greater chance of mortgage rate increases.