Steeper and deeper are the peaks and valleys of the real estate cycle
compared to those of the metro area's regular business cycle,
according to local analysts.
Plotting the life line of three distinct real estate cycles
between 1966 and 1987, a report by the city's Department of
Management Information Systems graphically depicts how the market
progressed from maturity to overbuilding, adjustment, acquisition
and development in each phase.
In the report, titled "Oklahoma City, Status and Change,"
economic analysts Bob Sweet and Dr. Hong Yih Chang define a mature
market as one in which supply and demand are at a parity and they
describe how overbuilding occurs.
"Due to the unique nature of real estate, the supply of real
property cannot be rapidly adjusted to its demand," they said. "For
example, as population increases, developers perceive a rise in
demand and they obtain financing based on this concept.
"At some point in time, employment, population, and personal
income decrease ... but projects with committed funding continue,
causing supply-demand imbalance in the market."
This has the effect of lowering prices and slowing construction,
the evidence of which is seen in the adjustment stage, the third of
the five stage cycle.
During adjustment, employment picks up, as does demand and the
beginning of an absorption phase begins, according to their theory.
When demand exceeds the inventory of property, construction begins
and the development phase starts.
"Where are we now in this building cycle?" the report asks. "We
are clearly in the acquisition stage."
Which begs another question, "How long before we move into the
development stage?" The city's economists pinpoint 1985 as the start
but they do not extend their graph into the future.
Citing the complexity of the real estate economy and the
"unprecedented building boom of the 1980s" (coincidentally the
energy boom) they say "the answer to this is not easy to discern."
Yet in observing Oklahoma's "twin towers of strength" -
agriculture and oil - the former seems to be pushing ahead of the
latter in terms of recovery.
If the trend continues, the ayalysts said it could cause this
particualr acquisition phase to last longer than in the last major
cycle, "perhaps five years."
But this phase is also different with respect to a decline in