The Real Estate Cycle Theory

The Real Estate Cycle Theory describes the recurring pattern of real estate markets through four main phases: recovery, expansion, contraction, and recession. During recovery, property values and demand begin to rise after a downturn. In the expansion phase, construction increases, and values peak due to high demand. Contraction occurs when supply outpaces demand, leading to falling prices. Finally, recession reflects a downturn where property values decline, and investment slows. Understanding these phases helps investors and homeowners make informed decisions about buying, selling, or investing in real estate, anticipating market changes effectively.