The Real Estate Market Cycle-Absorption Phase
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We are exploring a concept called, “The Garrison Cycle”, in our continuing series. This theory was created in 1985 by Marc Garrison who started NAREI.
In the Absorption Phase, all factors including prices, inventory, sellers & buyers motivation, economic climate, mortgage products, and even government regulation have changed from the previous two phases 
to make investment property attractive again. The economy has recovered by adding jobs which will increase occupancy levels and driving rent higher.
At the beginning of this phase, property prices will be at a rock bottom. The number of properties for sale slowly decreases. The government and lenders offer incentives to stimulate buying. This phase is where the incredible profits are made as prices, rents, and occupancy all increase.
Sellers that survived the Decline Phase are now able to find buyers for their properties, albeit at lower prices. Most have realized that they can not command the unexplainable prices that they saw at the top of the market (in the Expansion Phase).
Previously the Absorption Phase started in 1991 and continued for 10 years until 2001. Predicting the start and end of the current Absorption Phase is more difficult, but I believe we have not seen the bottom of the Decline Phase yet. I hope we may see recovery and the start of the Absorption Phase as early as late 2008. Unfortunately, you typically can only have 20/20 Hindsight and we may not know if my prediction is correct 3-5 years from now!
Scott Ficek is a Realtor with Keller Williams Integrity in Minneapolis and helps new and seasoned investors buy and own investment real estate. He owns and manages almost 30 investment property units from single to multi-family. Find his blog at www.minnesotainvestmentrealestate.com. His website can be found at www.mnirea.com
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