Just like there are stages of death and dying, there are stages in a market cycle. In today’s market, we are still trying to work our way back to hope. Whether you are investing in real estate, gold, or fine art, there is a predictable cycle with any investment. The nine stages are optimism, excitement, euphoria, denial, fear, panic, despondency, depression, and then hope. The euphoria stage is where you have the maximum risk for any investment. The lowest point, between despondency and depression, is where you have the maximum point of opportunity and that is where we are today.
According to NAR, home values appreciate about 4.5 percent annually, but if you look at the years between 2000 and 2006, values appreciated 89% or nearly 15% per year. What is happening today is a correction to stability.