Author Clif Droke writes that he became conscious of a nationwide real estate boom in 2001 and that by the end of 2002 he realized that a speculative mania had taken over the country and things had gotten out of hand. He concludes that the bursting of this bubble will be "America's greatest financial disaster" ever. We are going to learn in a major way how huge the myth "real estate never loses value" is.

Where did this bubble come from? The role of the Federal Reserve and world central bankers is examined. The author quotes a contributor who notes that asset bubbles are "extremely popular" while they are thriving, and agencies regulating the asset markets are reluctant to act. Certainly the Federal Reserve's monetary policies have played a role. In the early stages, an inability to distinguish a mania from a more measured price gain due to economic "fundamentals" typically prevents central bankers from acting.

Clif Droke's original timeline for the unwinding of this bubble is 2006-2012. He anticipates that 2005-2006 would be the Great Softening, with perhaps a mild recovery in 2007-2008 and the real spiral down starting in about 2009. Using economic cycle analysis as the basis of his reasoning, Droke analyzed a number of financial and economic cycles ranging from four years (presidential cycle) to 120 years (Kress cycle, which covers about two Kondratieff cycles). He briefly touches on the potential impact of each of these cycles. Real estate is such an enormous market even when compared to the stock market that trends take longer to turn around and reverse. So the longer term cycles are needed to exert some influence on the trend. The book provides more detail, but I will just say that the author marks the "hard down" phase of the 60 year cycle as due around 2009. A number of different longer-term cycles are synchronized to "lean hard against the financial structure" around that time, amplifying the effect.

Droke's timeline for the unwinding is roughly as follows:

2006 -	A sudden conspicuous slowdown, which we are indeed witnessing in the summer of 2006!
2007 -	A mild recovery in stock and real estate markets after the scary dip, thanks to the "buy the dip" crowd
2009 -	The dip buyers get their head handed to them on plates as the downward spiral starts in earnest (OK, I'm embellishing his words a little here), with a stream of steady liquidation. This phase would probably start in 2010 the latest.

Do I recommend this book? I would have preferred more substance in the form of cycle analysis, and less of the anecdotal stories from the author's readers. After all, if you are reading this, you probably have your own share of real estate experiences that have clued you in that all is not right. But if you are well versed on economic cycles (which I am not) and you are curious, this book might serve as a useful basis for further research on the real estate market outlook.

Special note for west and east coast residents: In the author's opinion, beach and luxury market real estate will get hit especially hard. During economic downturns, even the wealthy cut back on spending and maintaining luxury items, including beach resorts.

Robert Schiller's first edition of Irrational Exuberance came out in the spring of 2000, just in time to warn its readers of the collapse in stocks. Now his second edition focuses on the real estate bubble. Is his timing right again? You can listen to an interview with him and read an excerpt of this new edition at National Public Radio (NPR).

I love this book! Dr. Jack Lessinger has come up with a framework for thinking about long-term real estate trends that makes a lot of sense. Although Dr. Lessinger probably does not agree with me, I think there are similarities in his Omniotics model and the Socionomics model adopted by Robert Prechter in that both models utilize the same direction of causality - social mood drives events that we call history, and it drives our economic decisions that ultimately lead to booms and busts. It happens in stocks, which is Prechter's forte, and it happens in real estate and urban development, which is the area of Dr. Lessinger's expertise.

I once even wrote a paper comparing the two models, which you can read here (PDF), but keep in mind that neither Dr. Lessinger nor Elliott Wave have given it the seal of approval. The paper attempts to line up events in the two models, which it only did with some success. Perhaps that's why this paper has never gotten much attention.

I think Dr. Lessinger is on to something. Right now (2000's), we are witnessing people fleeing the high-priced suburbs and moving to the more outlying areas, as he has predicted. The only quibble I have with the book (as I have with Prechter's books) is the timing. It has been taking economic events a lot longer to materialize than I think they have anticipated. I think the waxing L-wave we are in (Responsible Villager - this is the Omniotics model) has gotten somewhat of a late start and may extend out beyond 2020.

By the way, Dr. Lessinger's website is at Predicting 2020.

The author is a seasoned builder who got hit by the severe real estate slump in the late 80's and early 90's. During that downtime he asked himself why he didn't see it coming and investigated ways to anticipate changes in housing trends. The positive result is that he has developed a technical analysis framework for analyzing the real estate market using five measures that he calls vital signs: new home building permits, mortgage loan defaults, existing home sales, foreclosure sales, and interest rates. It's an excellent, disciplined way to gauge the market, but in my opinion it is not practical for most people. You may have to pay expensive subscriptions to get the data or spend countless hours scraping the data out of government and realtor agency tables. Another problem is that statistics may be given by county, but one part of the county could be doing extremely well, and another part of the county could be sinking. Even areas in the same zip code can vary considerably. Of course that could be irrelevant if we are in a national housing bubble (though the higher-ups will tell you there is no national bubble - just some local "froth").

In spite of my quibbles, the book is still an excellent one and helps remove emotion out of real estate decisions, the same way that technical analysis helps stock market traders. It has instilled in me the habit of looking frequently at some readily available statistics.

You can visit the author's website at Real Estate Timing. He also publishes a quarterly newsletter for the San Diego area.