A report in the US cast a very interesting light on stock-market performances right across the globe. It would appear that bull markets and bear markets are a regular occurrence lasting 17 years from start to finish. This would seem to be a controversial assumption but there is statistical data to back this up. If we look at 1982 up to the year 2000 stock markets increased by 1000%. So, if stock markets are currently in the middle of the next bull run surely US real estate will benefit?
Real estate markets around the world depend upon wealth creation to invest into housing and other properties. Everything is directly linked to the economy and while the US economy is performing better than most, it is not exactly firing on all cylinders. If you take a look at the US stock markets, and the UK FTSE 100, they are all within touching distance of their all-time highs despite difficult economic times in general. So, what might happen when the economies pick up, investors buy fully into the bull market and stock markets continued to rise for another nine years?
Statistics don’t lie
While statistics themselves don’t lie, the way in which they are presented can give a variety of different impressions. The data relating to 17 year bull and bear cycles is valid and correct although it does not take into account surprises such as the 2008 US led worldwide economic crash. In reality it is impossible to take into account events which happen “for no apparent reason” but it is something you need to bear in mind.
The simple fact is that if the US economy picks up, stock markets continue to rise then there will inevitably be more money to spend. As the US has a high percentage of stock-market investors amongst the general public we could see some serious wealth creation. There is no doubt that a large percentage of this will at some point find its way into the real estate market pushing prices yet higher and higher. Whether this would be supported by household incomes is debatable because many developed markets are seeing this particular valuation stretched.
Where to invest
Even if the US real estate market was to perform admirably over the next decade or so, in line with a potential stock market increase, you would still need to find the right US real estate market. Do you follow the latest trends? Do you go for value investments?
In reality you need to take both of these factors into consideration because some markets which look good value today also looked good value 10 years ago. The reality is that they will constantly underperform the more active end of the US real estate market even if they do offer good long-term value. That is not to say you should chase property markets which have been pushed to potentially unsustainable levels but more find something in between.
If US stock markets do stick to the 17 year bull and bear cycle than we are potentially at around the midpoint of the latest bull market. Any wealth created on the stock market will ultimately benefit the economy and the real estate sector. So, on that basis it is certainly worth watching both the stock market and the US real estate sector very closely.