Understanding The Four Phases of The Real Estate Cycle

Understanding the four phases of the real estate cycle is important so that you can continue to invest with confidence!

The real estate cycle is made up of four economic phases. The four phases that our country’s real estate market cycles through every several years are recovery, expansion, hyper supply, and recession.

Understanding each phase of the real estate cycle can be very beneficial for investors and real estate professionals. Knowing what phase the real estate market is in and what is influencing the current phase can provide accurate predictions and help investors determine the right strategy to maximize returns. Fortunately, there are enough investment strategies to find success even when the market is at its lowest.

The Four Phases of The Real Estate Cycle Explained

The Recovery Phase

This phase occurs after the market has been through devastation and is often the slowest to progress. It takes time for markets all over the country to recover from the impacts of a recession. Investors can take advantage during this phase by taking quick action on properties below market value. Investing in a distressed property at the right time will allow you to make renovations and add value so that the property will quickly sell or be occupied by renters when the market enters the expansion phase.

The Expansion Phase

The expansion phase is a time in which confidence and advancement re-enters the economy. During this time there is an increase in demand for housing and commercial properties. Now is the time to sell or rent the undervalued properties you purchased during the recovery phase for above market value. If you’ve been keeping a close eye on market trends and current taste, now can also be a good time to develop new properties.

The Hyper Supply Phase

Due to the quick growth during the expansion phase there is an increase in demand. The excitement and imminent need for housing leads developers and investors into a frenzy causing an excess in supply. The hyper supply phase is comprised of too many properties and not enough buyers/renters. This phase is a good time to invest using the buy and hold strategy so that you have properties ready to sell when the real estate market cycle makes its way back around to the expansion phase.

The Recession Phase

The word recession doesn’t sit well with anyone, especially real estate professionals. We are all too familiar with the great financial crisis our nation experienced in the early 2000’s. While it did take time for the market to recover, we can clearly see from the most recent cycle that it does in fact recover, expand and so on. It is important to remember that opportunity still exists during the recession phase; it does not mean investors and developers have to sit this one out. There is an increase in foreclosures and finding distressed properties at a discount. These properties will bring success as they are needed once the market enters the recovery phase.

As you can see, you can successfully stay involved and actively invest in the real estate market no matter what phase the economy is in. Now that you understand the different phases of the real estate cycle you can continue to invest with confidence.

Palm trees in LA against a pink/blue sky.

About CALCAP Lending

A division of CALCAP Advisors, CALCAP Lending benefits from the expertise of a seasoned team of professionals with extensive, successful track-records covering a variety of disciplines and leading large, nationally-recognized institutions. A private money direct lender, CALCAP Lending provides short to mid-term financing for property investors and businesses looking to purchase, refinance, renovate, and construct residential or commercial properties.

Lending FAQs

You've got questions, we've got answers.

What is private money lending?

Private money lending is a collateral-based lending strategy that is often associated with shorter terms and more attractive features. A private money loan offers more flexibility than a conventional mortgage or bank loan.

How does a private money loan work?

Private money lenders provide financing using money from private entities. Private money loans often work as bridges to help investors gather funds to achieve their short term real estate goals, but long term, permanent options may also provide.

Why would I choose a private money lender?

There are many advantages to using a private money lender for your real estate investments! Private money lenders can be more lenient when it comes to borrower credit issues, often there are no prepayment penalties, you can leverage your cash to buy multiple properties, and private money loans are quicker when compared with institutional loans.

Can I get prequalified for a loan?

CALCAP has a responsive loan team who are able to prequalify you. Contact a loan specialist at 833.816.5580 to get started.

How long does the lending process take?

Private money lending can be a quick and painless process. From start to finish, 30 days is common, however, turn around times can be as short as 10 business days.

Can I still be approved for a loan if I have bad credit?

Generally yes, we understand that people have temporary financial issues that come up, and we want to work with you to help you rise up financially to a better place. Offsets to credit concerns may include experience as a real estate investor, good cash reserves, and/or larger down payments.

I am a broker or investor, how can I work with CALCAP?

Business is built on relationships. Ours is no different. CALCAP Value and Preferred Partners receive exclusive rates and services. For more details and to submit your application, visit our partners page.

The side of a tall apartment building lit by the sun.