Rachel’s note: Phil Anderson has studied economics and markets for over 25 years.
Over the next few weeks, we’ll show you how he’s forecast every market move using the 18.6-year real estate cycle, which the market has followed religiously for over 200 years.
Generally, this cycle averages 14 years up and four years down.
What does Phil mean by a real estate cycle? It’s how the economy will move (and why) over time. Because property, the economy, and stock markets move through a repeating series of peaks and troughs – like clockwork.
This serves as a guide for when to buy real estate and when to stay out of the market – because land values and corresponding credit lead the economy.
The good news is that once you understand the real estate cycle, you can forecast it. And if you can forecast correctly, you can make money, protect your capital, make informed business and investment decisions, and leave a legacy for your family.
In today’s essay, despite what you may hear and read from so-called experts in the press, Phil says the housing market will absolutely not crash in 2023.
By Phil Anderson, editor, Cycles Trading With Phil Anderson
I’ve been writing about real estate for decades. And one of the lessons I’ve learned early on is this: mainstream media doesn’t get it.
Forbes, for example, predicts a housing crash in 2023.
In won’t happen.
The bigger picture suggests to me that the real estate market is not going to crash anytime soon.
(I can back this up with research going back hundreds of years. Mainstream media, of course, is too short-sighted to look back that far.)
Construction Spending Remains Healthy
High interest rates haven’t killed construction. Total construction spending has been increasing in the United States and reached all-time highs in 2022.
It happened despite higher interest rates and inflation.
Even in November, after multiple interest rate hikes, some of the key construction categories, such as private non-residential and multifamily projects, posted spending increases.
The November number was not only 0.2% above its October level but also 8.5% higher year-over-year.
Construction spending also outpaced inflation. In November, annual inflation reached 7.1%.
Most of these construction categories should continue to do well in 2023.
And here’s why.
This Forward-Looking Index Is Flashing Green
The Dodge Momentum Index, a leading indicator for non-residential building projects in planning, reached all-time highs in 2022.
In the past, this index was shown to lead construction spending for non-residential buildings by a year.
Note how in the mid-2000s, the index started declining way before the U.S. housing market crashed.
That’s why it’s called a “leading” indicator.
And in 2022, it continued rising, albeit with some volatility that’s natural for the construction industry.
In November, the index increased by 3.8% compared to the previous month. Some of the biggest increases came from hotel and data center projects, as well as stores and office projects.
Compared to its November 2021 level, the Dodge Index was 25% higher.
This tells me that, again, mainstream media get some of the biggest trends completely wrong.
Don’t trust the media calling for a crash every year. They don’t know what they are talking about.
Editor, Cycles Trading With Phil Anderson