Any investment consideration, whether it be real estate, gold, or fine art, follows a predictable cycle with nine stages (see chart: "The Stages of a Market Cycle"). Let’s start with optimism, the period in which many people are excited about buying a home. When the market is strong, people’s purchases quickly increase in value, which leads to euphoria, which can lead to rash decision making. 

 

From euphoria starts a downward cycle. As prices start to fall, buyers go into denial, with statements such as "I’ll be in the house a few years, so this won’t be a challenge." After denial comes fear, as prices continue to fall, followed by panic, despondency, and depression. After depression comes hope and then optimism (back to stage one).

 

The point of maximum risk for any investment is during the euphoria stage. The point of maximum opportunity is at the lowest point, between despondency and depression. That’s exactly where we are in many real estate markets today. Clients who are motivated and qualified to buy will be able to look at the market cycle chart and understand why now is the best time to invest in real estate.