Since the 1950’s, Kansas City’s commercial, industrial and office real estate market cycles, and the local economy in general, have been akin to low-amplitude waves: both growth periods and recessions tend to be moderate. Property values and rental rates usually increase gradually in growth periods and decline only slightly in recessionary periods.
By contrast, “go-go” real estate markets, such as Phoenix, Las Vegas and parts of Florida, California, Texas and Georgia, tend to have precipitous booms and devastating busts in high-amplitude waves or cycles. Property values and rental rates in go-go markets tend to increase quickly in growth periods and plummet in recessionary periods.
Low-amplitude wave markets are “cashflow” markets. Real estate investments need to provide current income (cashflow) because appreciation, if does occur, will likely do so slowly over an extended period of time. Patience and long-term orientation are virtues in low-amplitude wave, cashflow markets like Kansas City.
High-amplitude wave markets are appreciation oriented because investors rely on properties rapidly increasing in value. When investors catch the big wave and values appreciate quickly, a lot of money can be made. When the market wave turns down, investors can get wiped out just as quickly.
Low-amplitude wave real estate markets are tortoises, high-amplitude real estate markets are hares.
Steven Karbank
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