In a continuing series from last week, I am discussing a concept called, “The Garrison Cycle”, which was created by Marc Garrison who started the National Association of Real Estate Investors, NAREI, in 1985.

In the Equilibrium Phase,

 the market has topped out and is beginning to cool off.  Job Growth and residential income property appreciation in that specific market have slowed to the national averages.  As the phase continues, the hangover and wild ride of appreciate of the Expansion phase are beginning to catch up with investment property owners. 

Sellers are too late to command the premium prices of just a short time ago.  Buyers begin to look for deep discounts on investment property to offset the lower appreciation the market is currently experiencing (which is low by saving account standards).  Investors leave the market (or refuse to get in) as the appreciation on property flattens out and they instead invest their money in the stock market and other investment vehicles.

I believe we saw this phase in 1980 when we saw interest rates in the double digits.  I also believe that we saw this phase more recently in 2005-2006 as we saw the market cool after the frenzied 2000-2004 run of multiple full-priced offers per house.  Although short, this phase precedes the Decline phase which we will discuss next.