In 1933, the university of Chicago published a book
by Homer Hoyt entitled “One hundred years of land
values in Chicago”. In our economy, land is a ready object
of speculations and its value is constantly changing.
What happens in a rising market, the up side of a business
cycle is that investors see rising prices in land as indicative
of a boom. thereupon, they try to increase their holdings in such
land, only to discover that their present returns will not pay for the
present costs of land: the current price of land is not based on
what the yield of that is land is today, but on what it is
projected to be two or three years from now. the difference tends
to increase until a point is reached when the imarginal buyer
of the land suddenly finds himself unable to meet the rising
cost to which he has subjected himself.
With bankruptcy threatens him or having been forced on upon
him, the land passes from his hands, and the market temporarily
becomes overpriced. the bankruptcies increase, and
ultimately land values are brought back to levels which represent
current productivity, at which the new boom will have started.
So the case history of 5 major booms and bust 1830-1933
- Machine techniques, production methods improved.
Internet boom.
2.population begins to spurt up
-
shortage of housing, office & commercial space first felt
-
Rents begin to rise
-
Selling prices of old buildings begin to advance
-
vacant lot purchases begin to rise
-
Rate of new construction begins to rise sharply
-
Credit eases to stimulate volume of new building
-
Rapid growth of population projected far into the future
-
Prices of tracts near settled areas advance rapidly to peak
-
Large tracts subdivided beyond needs of immediate development
-
Lavish public expenditures
-
Rise of population growth falls off
-
vacancies reappear
-
rise in rents slackens
-
volume of building construction at peak
-
asking prices of land advance in face of fewer land sales.
WE ARE AT NUMBER 18.
-
Financial institutions continue loans on peak values in
face of lessened construction -
Holders of 2nd mortgages begin to foreclose with faith in
1st mortgages -
Stock market crash
-
Unemployment mounts to peak: wages down
-
increased movement of population to small city or farm:
doubling up in city -
Vacancies mount to peak in houses, apartments, offices, stores,
industrial rents down -
interest rates charges high in proportion to net rents
-
taxes high in proportion to net rents
-
Second mortgages holders wiped out in flood of
first mortgages foreclosures. -
Bank failures mount: loaded with real-estate “frozen assets”
-
Volume of new building at bottom
-
Subdividing stopped: most vacant land not salable
at any price -
construction costs at lowest point
Each step of this ladder has happened in Chicago 5 times exactly
the same way, it doesn’t mean it will happen the exactly the same
way this time, but 1-17 is pretty much right on and in that order
so you might be able to guess what will happen next.
This analysis was done by first done by Henry George and the book
by hoyt was further analysis of George’s work.
George analysed land values in chicago and Hoyt continue the work.
You have seen the future and it ain’t pretty.
Look for a stock market crash within a year or two.
Kropotkin
