2. The purpose and importance of the study This study was done to determine whether there is a significant and predictable cyclical pattern in historic US land values. Knowing that there is a predictable and definitive cycle to land values would curb speculation and promote long term investing over short term investing. During the 1930’s, real estate economist Homer Hoyt discovered an 18-year cycle of real estate in Chicago, (Fred Foldvary (2007). Real-estate values have peaked one to two years before a depression, indicating that real estate boom is a cause of the downturn, (Fred Foldvary (2007).
3. Research Question Is there a significant and predictable cyclical pattern in historic US land values Null Hypothesis: P₁=18.9, P₂=18.9, P₃=18.9, P₄=18.9, P₅=18.9, P₆=18.9, P₇=18.9, P₈=18.9, P=₉18.9, P₁₀=18.9 Alternative Hypothesis: At least one of these values is significantly different. This test utilizes the goodness of fit test using a chi-squared table.
4. Table 1: Observed intervals (in years) of US land values between peaks 1818 to 2007. Table 2: Expected intervals (in years) of US land values between peaks 1818 to 2007. Table 3: Chi-squared values (higher is more difference). Calculated using (Observed-Expected)²/Expected. So for P₁ (18-18.9) ²/18.9=0.043.
5. Results Test Statistic: ∑(Observed-Expected)²/Expected = 58.25 P-value, or probability of a type 1 error is P>.05. Therefore we Reject the Null Hypothesis. At least one of these values is significantly different. There was a far larger than expected interval between 1925 and 1973.
6. Results Chart 1: Observed and expected intervals between land value peaks in years.
7. ReferencesHoyt, Homer, (1933) "One Hundred Years of Land Values." Rpt. NY: Arno Press & The New York Times, 1970 Sakolski, A. M, (1932) The Great American Land Bubble New York: Harper & Brothers. Rpt. 1966. Hicks, John D, (1961) Rehearsal for Disaster: The Boom and Collapse of 1919-1920. Gainesville: University of Florida Press. English, John Wesley, and Gray, Emergson Cardiff, (1979) The Coming Real Estate Crash. New Rochelle, NY: Arlington House Publishers. Foldvary, Fred, (2007) "The Real Estate Cycle and The Depression of 2008." Lecture to the Real Estate Network, Leavey School of Business, Santa Clara University, California, on May 4, 2007.
