The Cycle of the Real Estate Market (Term Paper Sample)

Student’s Name
Professor’s Name
Course
Date
The Cycle of the Real Estate Market
The real estate market for rental housing has four distinct phases: recovery, expansion, hyper supply, and recession. The recovery and expansion periods represent the upward cycle, while the hyper supply and recession stages indicate the downward trend. Though the cycle duration is unique for each property type, the trends are generally the same across the market. A deep understanding of the cycles facilitates investment decisions.
The recovery phase is characterized by an oversupply of housing units, due to low demand or excessive construction during the previous cycle. In this phase, rental growth is lower than the average inflation rate. As the broader economic conditions improve, the demand increases, leading to a decline in the vacancy rate. However, this growth in demand only generates low consumption of the existing supply, effectively inhibiting any new construction. Indeed, rental growth at this stage may stall despite positive progress in demand. Nevertheless, as the recovery continues, the occupancy rate rises, leading to a stabilization or increase in rents (Mueller 8). This stage culminates with the market attaining its long-term average occupancy level, where rental growth equals the average inflation. When the rental growth rate exceeds inflation,