I was recently showing a 20-something couple some bank-owned homes in the Detroit suburbs (Oakland County).  This of course caused me, a 50 something, to flash back to 1981 or so, when I was the same age as this nice young couple looking for their "dream home".

These flashbacks (they seem to be more frequent as of late) always cause me "if I only knew then what I know now" moments.  Most of these moments seem to revolve around making money.  For instance, why in 1981 didn't I buy 30 year bonds (14%+ yield), invest with Warren Buffett and buy all the land in the Houston area that I possibly could?  The simple answer is that I had little money and like most of the population had neither the long-term foresight nor intestinal fortitude required.

The early 1980's were a pretty lousy time.  Oil prices were high, the economy was in the dump, the Soviet Union was threatening to wipe us off the planet (along with themselves for that matter), the U.S. car makers were getting creamed by the Japanese and inflation and interest rates were through the roof.  Oh, did I mention that real estate was bad?

I was optimistic enough at that time to buy my first home in 1980.  It was around 1,200 square feet, cost $74,000 and was I lucky to get a 20% down 30 year mortgage at a fabulous rate of something north of 14%.  It was first and foremost my home for me and my wife and first three children (the fourth and final was born in another state).  It also ended up being a pretty good money maker. When I sold it 9 years later, I more than tripled the amount of money I made on my initial down payment.  Take that Warren Buffett!  I now had enough money to buy a much larger and nicer home to boot.

Now I flash forward to the here and now.  It seems to me like we have pretty similar situation as we did in the early 1980's minus the high interest rates and the boys in the Kremlin with their fingers on the button.

Getting back to my young couple, they looked at one home that was in a nice location, built within the last few years, 3,200 square feet, brick exterior and so on.  It was perfect!  Except for the fact that it had been recently foreclosed and the prior owners took the kitchen out, the electric fixtures, the tubs, bath fixtures, doors and had strategically placed a number of hammer blows to the walls.  Although it would have required about $50,000 to put it back into condition (a nice 203k loan would have taken care of that), this home sold in 7 days for around $110,000!  It sold a couple of years ago in the high $400's. 

Needless to say, my buyers were aced out of their "dream home" by somebody fleeter-of-foot.  The good news for them is that there are more of these deals coming onto the market every week in my area of Oakland and Western Wayne County.  There are also some very affordable mortgage programs that will allow them to purchase a home that would have been out of reach for them even a year ago and they can get the repair money included.  My couple qualify for the first-time homebuyer's credit of $8,000,  so they get much of their down-payment back from Uncle Sam.

So I ask myself, is this the perfect time to buy and has a bottom been reached in the Michigan real estate market?  I don't know for sure.  Timing a bottom is well beyond the abilities of my somewhat cloudy crystal ball.  I do imagine my young couple 7 or 8 years from now kicking themselves for not investing in some fabulous nanotechnology company that enables humans to live for 200 years.  But I bet they may say to each other "we were pretty smart to take the plunge on our house in that scary market and it turned out to be a pretty good investment".