I have been selling hotels for 25 years and have loved my career from the very first sale. With that, I am often asked (about every other day) by clients where I see this market cycle going and how long it will last.
I have been through enough market cycles to know that there is always a downturn at some point and the markets always come back. I remember when 911 happened, we had about 15 hotels under contract and within one week we had 0 under contract. After 911, I was concerned that it may be a decade before there was liquidity back in the market. Thankfully that downturn only lasted about 18 months before beginning to stabilize.
When I talk about economic cycles, I am talking about everything from jobs, housing, gas, commercial real estate, debt, yields, stock market and the public’s perception of hope or fear. The thing is, no one knows how long or how deep each cycle will be. I will give you a little economic history. If you took the last 11 recessions over 67 years since 1948, when a market downturn begins, it has taken on average 10 months to get to the bottom of the downturn. The average market recovery has been 57 months. This means, it has taken on average 5 times longer for a market to stabilized than is does for a market to fall.
The flow of information via the internet has made a dramatic shift in the timing of market cycles. The timing of this past cycle was inverted from anything in history. This last cycle started in October 2007 and bottomed out around January of 2010. So it took almost 3 times as long to reach the bottom that the previous 11 recessions. It would have been longer if the Federal Reserve hadn’t stepped in to back stop the banks, airlines and car companies. Had they not stepped in, we would today be in a great depression and most people would have lost everything they own.
So the question is where are we at in this cycle? My answer is that we are in the 8th inning of a 9 inning ballgame. I told a client yesterday that you need to be a seller today of anything you want to sell from a house, hotel, land to a ski boat. I told this same client that I don’t believe I will ever see the economy again like it is today where you can go get an 80% commercial non-recourse loan for under 4% interest rate.
I think you listen to what people say and then you watch what people do. I would rather watch than listen. The answer is to prepare (reduce personal debt and save money) as if the economy will falter and pray that this cycle will continue for years.