All 18.6-year real estate cycles are the same…
Well, they’re the same, but different. Which is good because otherwise everyone would be able to time the markets like I do.
Really, the cycle is like a clock. Every day, the clock will strike 5 p.m. at some point.
The days are different, but the cycle starts, peaks, and rolls over just the same.
And while the mainstream media is obsessed with the little details of the day that don’t really matter – the weather outside, the traffic, whatever this or that celebrity did today – my readers and I are focused on the clock.
Because my research tells me that at some points during the day, certain events will happen.
And the latest example is in…
Government Stimulus to Accelerate the Cycle
In the second half of the cycle (that’s the stage we’re in now), several forces push the cycle toward its end.
Ample liquidity is one. The more money that’s available to businesses and households, the higher real estate prices will go.
Government stimulus is another. It flushes the economy with easily available funds.
These funds, too, push the value of real estate up.
From Business Insider:
The U.S. government has offered billions of dollars in subsidies for the production of electric vehicles and solar panels to compete with countries such as China and to fortify U.S. leadership in sectors including clean energy.
[…] Factories are being constructed everywhere from deserts to resort towns as the U.S. tries to bring back manufacturing of goods commonly imported from lower-cost countries. Many battery and electric vehicle factories have popped up in the Rust Belt, while solar panel and renewable energy factories now span much of the South and Southeast.
Because of easy money, construction spending by U.S. manufacturers more than doubled from last year.
A hundred billion dollars invested here, a trillion announced there… and the cycle continues.
These new factories drive up the price of the land they’re built on.
The land around them becomes more valuable, too, as workers move closer to their jobsite.
Land Always Takes the Gains
There’s another important dynamic at play. If you noticed, there’s also a skills gap in these heavily subsidized industries.
The National Association of Manufacturers says that by 2030, there could be a shortage of 2.1 million skilled jobs in manufacturing.
Companies will fight for these expert workers. They will pay them more than average to attract them.
And when these workers arrive in their area of employment, they will have ample income that will allow them to afford evermore expensive houses.
So the value of the land goes up around these “manufacturing hotspots.”
And they are everywhere. Census Bureau data says that manufacturing construction spending soared between January 2020 and April 2023 everywhere except in New England and Mid Atlantic.
The cycle unfolds everywhere, and there is no stopping it.
Regards,
Phil Anderson
Editor, Cycles Trading with Phil Anderson