Fred Harrison (born 1944), is a British author, economist and Research Director of the London-based Land Research Trust. He is a graduate of the Universities of Oxford and London. Harrison has succeeded where many others have failed, and has correctly predicted major turning points in the UK and US property markets years before they happen.
A former journalist, Harrison began to take a strong interest in economics in the late 70s. In 1983 he published his first economically related book The Power in the Land, which predicted the economic crisis of the early 90s, almost a full decade in advance. He followed this with a 10-year forecast (published in The Chaos Makers,1997) that a global financial crisis would be triggered when house prices peaked in 2007. He wrote:
‘By 2007 Britain and most of the other industrially advanced economies will be in the throes of frenzied activity in the land market…Land prices will be near their 18-year peak…on the verge of the collapse that will presage the global depression of 2010.
‘The two events will not be coincidental: the peak in land prices not merely signalling the looming recession, but being the primary cause of it.’
Harrison published the first edition of a more recent book, Boom-Bust: House Prices, Banking and the Depression of 2010 in the year of 2005, well before the recent peak.
He also, spent a decade-long campaign to help the people of Russia reform their economy, after the fall of communism. However, as he was to find, there were powerful forces that will never allow his type of fiscal reform anywhere in the world.
Fred has written real estate ‘bubbles’ can be neutralised but governments refuse to reform the financial system. They are now laying the foundations for the next global property boom/bust, which will create even greater devastation than that which followed the implosion of the West’s banks in 2008.
More recently Fred has been using video and social media to expand on his 18 year cycle theory. His extraordinary capacity to predict turning points in the economy is also starting to attract the attention of the world’s media.
His 18-year cycle prediction has not only secured him publicity in the UK’s national media, but also international media like the BBC TV World Service, and his 18-year formulation is also starting to enter the analysis of the financial sector. Fred believes these things work in 18-year cycles and are very predictable. He states the cause of the problem is land prices being too lightly taxed. Until this is reformed, these 18-year cycles will reoccur. Politicians have got the message, but they choose to ignore it.
Homer Hoyt (1895-1984) is considered the first author to document and describe the 18 year real estate cycle via his doctoral thesis in the 1930’s.
This later became the book 100 Years of Land Value in Chicago: The Relationship of the Growth of Chicago to the Rise of Its Land Values, 1830-1933. It’s still in print today.
It’s possible that Roy Wenzlick (described below) actually identified the cycle first. Certainly Wenzlick went on to make far better forecasts using his own data out of St Louis.
Unbelievably, Homer Hoyt suggested that the cycle he documented so well became redundant after new cities developed and would not be likely to occur further on a national scale. This was the opposite of what Wenzlick went on to say.
Hoyt’s work is extensively documented in the relevant US historical chapters of The Secret Life of Real Estate and Banking. Hoyt’s work adds weight to the thesis that towards the end of the 18-year real estate cycle, land values peak first, with construction activity following later.
By the time the general economy is about to tip into recession, land values are already well down from their previous peak levels.
In summarizing the sequence of events for the Chicago real estate cycle, Hoyt pointed out the following, in 1933, from the trough:
- Gross rents begin to rise,
- Net rents rise even faster,
- As a result of the rise in rents, selling prices of existing buildings advance,
- It pays to erect new buildings,
- The volume of new construction rises,
- The volume of building is stimulated by easy credit,
- “Shoestring” finance swells the number of new structures,
- The new buildings absorb vacant land: the land boom,
- Optimistic population forecasts during the boom,
- Visions of ‘new cities in the cornfields’,
- Lavish government expenditure on public works,
- All the real estate factors at full tide: the peak,
- The reverse movement begins: the lull
- Foreclosures increase,
- The stock market debacle and the onset of depression in general,
- The process of attrition
- The banks reverse their boom policy on real estate,
- The period of stagnation and foreclosures,
- The wreckage is cleared away,
- Ready for another boom…
It’s from this I created the Property Clock in 2005. Every US real estate cycle since then has repeated the same sequence and in that order.
Roy Wenzlick ran an appraisal business. Banks, insurance companies and other interested parties employed him to value real estate. But his great passion was economic forecasting.
His publication, the Real Estate Analyst, ran from the early 1930s right up until his retirement in 1974. It was the only national statistical forecasting service on real estate when it began.
If you know your history, the early 1930s were some of the hardest economic years the world saw in the 20th century.
And yet Roy Wenzlick wrote a book in 1936 called The Coming Boom in Real Estate.
Here’s how Greater Portland Commerce described it in January, 1970, 34 years later.
‘The Coming Boom in Real Estate, published in 1936 and reprinted in the Readers Digest, was such an accurate forecast that it was reprinted 25 years later without changing a single word.’
Wenzlick was able to offer such a forecast in his book because he had studied history: in particular the history of each real estate cycle. Wenzlick knew history would repeat, despite all the emotion at the bottom of a severe land price-induced depression.
He’d seen the similarities over time that the chasing of the capitalised rent brings.
Even a cursory glance at Wenzlick’s 1936 chart from his book shows the booms in real estate activity: 1872, 1890, 1906, and the 1920s.
Then the the lows: 1878, 1900, 1918, and 1933.
See for yourself…
Wenzlick wrote his book in 1936, forecasting boom times once again for real estate with a peak in activity between the years 1943–1946.
This was a big call at the time. The book also pointed out the reasons why a cyclical recovery in rents, real estate values and building construction would develop, when it would do so and through which stages it would pass.
History shows he was exactly right.
After the Second World War, Wenzlick’s services were in great demand. He continued to attract a good deal of attention by forecasting in 1948 that real estate activity would return to normal levels by 1950 and hit a low point in 1955.
As we now know, the low point in land price arrived in 1955.
Wenzlick was also well aware of what the increasing availability of credit was doing to real estate activity too, in this developing era of easy finance.
At a 1953 speech, published in the May 1954 issue of Skyscraper Management, Wenzlick was quoted:
‘I am afraid that in the United States we are going to go back to an inflationary policy. I do not believe there is any chance of a collapse, similar to the (19)30’s…Regardless of what the administration might want, I believe that Congress is going to insist on every possible aid to business…I believe the next big real estate boom in the United States is going to peak sometime in the middle or late 60’s. I believe the selling price of real estate at that time will be considerably higher than the selling price at the present time.’
Exactly right of course. Wenzlick knew his history here as well. In 1954 the US had well and truly abandoned the gold standard and was now able to print its dollar bills without restriction, which the Fed has increasingly gone on to do.
The desire to have future administrations pay off its debts — incurred more often than not to pay for war — in an inflated currency, makes Wenzlick’s inflation forecast an easy one. For those who have studied history of course.