Question:
Can I use this to help predict Commercial Real Estate cycles?
Answer:
I've done a lot of commercial real estate, and I would NEVER — not in a million years — do anything in the commercial arena without first checking the local cycle and market indicators, just like we do for residential.
Commercial isn't much different, except there's an extra string of zeros on the end of the numbers, and you probably can't withstand a bad market or a timing error.
Commercial follows residential, so the residential cycles you see here generally give you early signals of what may happen in the commercial market (though it depends on many factors).
Consider the U.S. Office building price index (from Moody's Economy.com): the value of an 'average' U.S. office building declined almost 38% between its late-2007 highs and early-2010 lows — an extreme loss almost no one saw coming (they missed both the timing and the severity). Retail, apartment, and industrial met similar fates. When you overlay HousingAlerts' proprietary prediction line on that same office-price index, the prediction line precedes actual office prices by roughly 12 months (and up to 18 months on the up-cycle) — it flagged the very top of the office market a full year in advance. Billions in lost wealth could have been avoided. The apartment (multi-family) market shows the same strong correlation to our single-family residential (SFR) data.
On the new platform, read a market's residential cycle in the Wealth Phase chart and Market Outlook Score — and use that as your leading indicator for the local commercial market.