Real estate "cycles": Some fundamentals

This paper demonstrates that different types of real estate can have very d ifferent cyclic properties. Empirically, it is shown that they do, and the question is posed as to what might distinguish between property markets whe re movements are largely stable responses to repeated economic shocks and t hose undergoing a continuing endogenous oscillation. A stock-flow model is built in which the future expectations of agents, the development lag, the degree of durability and market elasticities all can vary. Experiments reve al the dynamic behavior of the model varies quite sharply with all these fa ctors. Forward forecasting by agents leads to stability while myopic behavi or promotes oscillations. Oscillations are also much more likely when suppl y is more elastic than demand, development lags are long, and asset durabil ity is low.