How Accurate Is the 18-Year Real Estate Cycle?

In his 2005 book “Boom Bust: House Prices, Banking and the Depression of 2010,” British economist and author Fred Harrison popularized a theory that real estate is cyclical, with a boom-bust pattern that roughly recurs every 18 years. The 18-year real estate cycle concept gained traction because it correctly predicted the property peak in 2007 and the subsequent decline in 2008.

This 2008 financial crisis marked the second time Harrison caught lightning in a bottle. The first one was when he foresaw the property peak in 1989 in his 1983 book “The Power in the Land.” The real estate cycle is on the lips of many pundits, investors and even some members of the public of late because, if Harrison’s past works proved prophetic again, the property market would crash in 2026. Understand the method behind this madness to determine whether there’s a housing bubble to worry about.

What Are the 4 Stages of the Real Estate Cycle?

The consensus is that the real estate cycle has four stages — recovery, midcycle dip, expansion and crash.

Recovery

Low prices characterize this stage, following a recessionary period. This phase of early growth lasts for about seven years. Home prices rise slightly as few buyers drive up demand. Bargains are left and right, so it’s the perfect time for anyone with money to make a purchase. Opportunistic investors with enough capital, in particular, can acquire prime assets at a discount.

Midcycle Dip

After years of graduate price increases, a market correction eventually occurs. This new stage injects fear into the market, keeping sellers’ greed in check. Property prices decline, curbing demand for a year or two before activity picks up again.

Boom

More buyers feel confident enough to reenter the market once home prices stabilize, easing any fear that property values would drop after they sign on the dotted line. Housing demand outstrips supply. Leaner housing inventory levels fuel an uptick in prices and credit expansion. It creates a sense of urgency in buyers to make offers, as prices can quickly become out of their reach due to inaction.

About seven years of sustained upward trend causes market participants to forget about the real estate cycle. The period’s feel-good factor convinces most that prices can move up indefinitely.

Recession

Eventually, home prices become unsustainable. Once home sellers ask for prices too high for banks to finance, the number of buyers in the market drops. Property owners who notice the signs begin to sell assets at a discount, putting downward pressure on the market. The borrowers who took out loans they couldn’t afford during the boom phase begin to default or sell at a loss, increasing housing inventory. A deluge of properties enters the market, causing a downturn.

The market correction can last for a year or two. The sharp decline scares buyers away. Only when prices become affordable for enough buyers does demand rebound, marking the bottom and beginning the recovery phase.

On Which Stage of the Cycle Is the Real Estate Market in 2026?

According to cycle proponents, the current long cycle began after the 2007-2008 housing crash. An 18-year span from that trough would bring us into 2025-2026, potentially at the tail end of a long expansion near the peak, just before the downturn phase.

However, mainstream housing economists and recent forecasts paint a more nuanced, less dramatic picture for the United States housing market in 2026. For example, Redfin’s forecast suggests modest home price growth and slow improvement in affordability rather than a sharp crash.

Here’s why that matters:

• Interest rates and employment trends are major forces influencing housing demand and prices, and they don’t move in neat 18-year increments.
• Supply dynamics vary by region, with tight inventory still supporting values in many markets.
• Policy actions, like Fed rate cuts, can delay or soften downturns.

At best, many analysts would say we might be near a late-cycle phase, where growth slows, risk rises, and specific segments like commercial real estate feel pressure, but not necessarily on the brink of a national housing crash.

Is the 18-Year Real Estate Cycle a Self-Fulfilling Prophecy?

It can be, to an extent.

When enough real estate players believe in an 18-year cycle, their behavior can create these market trends:

• Sellers might list properties earlier to avoid an expected downturn.
• Buyers might rush in if they believe prices will soon skyrocket.
• Lenders might tighten credit, limiting supply and shifting demand.

This psychology isn’t unique to real estate. After all, expectations shape markets. Still, that doesn’t make the real estate cycle inevitable. Economic history shows that policy actions, shocks or structural changes, such as demographic shifts and black-swan events, can disrupt long-term price patterns.

In other words, while pattern recognition helps investors think about timing, it’s not destiny.

Will the Pendulum Swing to Fear?

Market psychology is a powerful force. If enough people, from everyday buyers to large institutions, start to expect a downturn, they may act in ways that encourage cautious lending, lower home purchases and slower price growth. In such an environment, a soft correction, such as a leveling off or a modest price decline, is plausible.

Nevertheless, fear alone doesn’t cause a full-blown crash without real economic stressors, including:

• Rising unemployment
• Sharp interest rate hikes
• Surging foreclosures
• Hypersupply of housing units

Without multiple stressors aligning, a dramatic downturn simply because the calendar says “18 years” is unlikely.

Don’t Hold Your Breath, But Keep Your Eyes Open

The 18-year real estate cycle is an intriguing lens for understanding housing markets, but it’s not an exact science. It identifies patterns and stages — recovery, midcycle dip, expansion and crash — that many markets do seem to follow over time.

However, timing varies across regions and economic conditions. External factors matter more than a simple cycle theory. Expectations can shape behavior, but they don’t guarantee outcomes.

A crash in 2026 would require more than just an 18-year countdown. It would need weakening economic fundamentals, rising default rates, a supply glut and negative shifts in employment and lending. These conditions aren’t clearly present nationwide, as of early 2026. Measured realism — not fear — should guide how you interpret cycle theories and plan for the future.