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 San Francisco. As the market is now in a downturn a point to consider is the differences of prior downturn cycles. One cycle involved near 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 two years to the prior market growth cycle of ten 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. Fortunately, due to historically low mortgage rates, the prior cycle did not eclipse the all time highs of the early 1980s. Unfortunately, at current levels today’s San Francisco home prices have an extremely high mortgage rate fluctuation risk.