Last Updated: June 9, 2022

Is The Real Estate Market Always Cyclical?

Written By: Barbara L. Pearce
Drawing of a house

The answer is pretty much yes. There are twists and turns, and sometimes long periods of extreme price stability, but we can't really predict those times too accurately. Therefore, our advice is to think long-term, just as financial advisors are saying about the stock market.

Differences between real estate and the stock market?

Both are heavily influenced by consumer confidence, and both tend to go up and down somewhat in tandem. It makes sense that prices for the properties where people live and work would fluctuate with how many people are working, and with how well their employers are doing. There are other differences, but one stands out above the others.

The stock market is, for most investors, something that produces wealth. Real estate is both a producer good and a consumer good. That is, although a home is the biggest investment most people have, it is always something that they can use and enjoy, making it also a consumer good. It's tangible, can be seen and improved, but it is also an integral part of everyday lives. Reports of value tend to overlook the importance of loving where you live, and, these days, where you often work. All the time that you used space, you didn't pay rent somewhere else, and you got a benefit along the way.

That's important to remember, especially in this pandemic era, where some pleasures have been taken away. Living in a place that sparks joy, as the saying goes, is priceless.

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