• Sat. Feb 24th, 2024

    Understanding the Real Estate Cycle: Lessons from an Active Volcano

    Understanding the Real Estate Cycle: Lessons from an Active Volcano

    The correlation between the 18.6-year real estate cycle and a volcanic eruption may seem unlikely at first glance. However, delving deeper into the real estate cycle reveals valuable insights into the world and why timing is crucial.

    Take, for example, the case of Puna, a subdivision in the Eastern section of Hawaii’s Big Island. In 2018, a massive volcanic eruption engulfed the area, destroying over 700 homes and displacing numerous residents. Today, Puna is experiencing rapid growth and has become Hawaii’s fastest growing region.

    Hawaii, known globally as a tourist paradise, is also one of the most expensive states in the U.S. Puna, however, represents one of the last remaining affordable areas in the state. The island’s prime locations have already been developed with high-rises and multimillion-dollar properties.

    Looking back at the 1960s, it becomes clear how land in Hawaii attracted investors. The availability of reasonably priced land, driven by a tax revenue-hungry county government, led to widespread subdivision and sales. Interestingly, the lack of infrastructure requirements, such as roads and schools, accompanied these sales, resulting in ongoing issues up to this day.

    Surprisingly, the threat of living near an active volcano does not deter people from building in Puna. This phenomenon becomes clearer when considering the real estate cycle. Historical patterns show that as land becomes exorbitantly expensive in desirable locations, individuals are forced to move away from urban areas to find affordable housing. This leads to the rapid growth of regional areas or land on the outskirts, like Puna.

    The ongoing situation in Puna is a testament to the predictability of the real estate cycle. As prices continue to rise, locals like Chantel Takabayashi find themselves priced out of most neighborhoods, unable to afford better housing despite their hard work. This cycle aligns with the broader trend of the U.S. stock and housing markets, where the combination of easier credit and migration away from expensive suburbs drives growth in peripheral regions.

    Understanding the drivers of the economy and the real estate cycle is vital if one hopes to move from being a renter to an owner. By investing in alignment with these powerful trends, individuals can position themselves for success. If you want to discover what lies ahead and how to make the most of it, join an exclusive event where experts like Phil Anderson will share their insights.

    In conclusion, the real estate cycle offers valuable lessons and reveals patterns that can guide investors in making informed decisions. By recognizing the relationship between the cycle and areas like Puna, individuals can stay ahead of the curve and benefit from the opportunities that arise.

    FAQ Section:

    Q: What is the correlation between the real estate cycle and a volcanic eruption?
    A: The correlation between the real estate cycle and a volcanic eruption may seem unlikely, but understanding the real estate cycle can provide insights into the world and the timing of investments.

    Q: What happened in Puna, Hawaii?
    A: In 2018, Puna, a subdivision in the Eastern section of Hawaii’s Big Island, experienced a massive volcanic eruption that destroyed over 700 homes and displaced many residents.

    Q: What is the current situation in Puna?
    A: Today, Puna is experiencing rapid growth and has become Hawaii’s fastest growing region. It is considered one of the last remaining affordable areas in the state.

    Q: Why do people still build in Puna despite the threat of living near an active volcano?
    A: The real estate cycle provides an explanation for this phenomenon. As land becomes exorbitantly expensive in desirable locations, individuals are forced to move away from urban areas to find affordable housing. This leads to the rapid growth of regional areas like Puna.

    Q: How does the real estate cycle affect housing prices in urban areas?
    A: The real estate cycle, driven by factors such as easier credit and migration away from expensive suburbs, can lead to rising housing prices in urban areas, making it difficult for locals to afford better housing.

    Q: What can individuals do to position themselves for success in the real estate market?
    A: Understanding the drivers of the economy and the real estate cycle is vital if one hopes to move from being a renter to an owner. By investing in alignment with these trends, individuals can position themselves for success.

    Definitions:

    Real estate cycle: The pattern of fluctuation in real estate prices and activity over time.

    Volcanic eruption: The sudden and violent release of magma, gas, and other materials from a volcano.

    Affordable housing: Housing that is priced at a level that is within the means of people with low to moderate incomes.

    Infrastructure requirements: The necessary infrastructure (such as roads and schools) that need to be in place for development and construction projects.

    Easier credit: A situation where credit is more readily available, making it easier for individuals to access loans and finance their real estate investments.

    Migration: The movement of people from one place to another, often driven by factors such as affordability, employment opportunities, or quality of life.

    Suggested Related Links:

    U.S. Real Estate Trends
    National Association of Realtors
    Zillow – Real Estate Website