The real estate market we are in right now reminds me a lot of the market in the early 1990's when I bought my first home.  In the second half of the the 1980's there were significant price increases with a housing slump that followed.  Much like what we are experiencing now.  I remember real estate pricing going crazy twenty years ago and feeling like I had missed the boat.  But within a few years opportunities came my way.

My first real estate purchase was a two bedroom townhouse in White River Jct., Vermont, with an asking price of $79,000.  I paid $72,000 for it.  The former owners of my townhouse had paid 95,000 for it just 4 years prior when it was brand new.  In a development of about 120 units, 10% of them were on the market.  I told my agent to offer $72,000 and if they don't take it I'll just try one of the other ones.  That was how he presented the offer and within a few hours it was accepted. 

What happened after that?  The market continued to be flat for the next seven or eight years.  I didn't buy at the bottom.  I saw some other units eventually sell as much as 10% lower than what I paid, but that didn't bother me much because I was now a homeowner.  I had a nice place to live, tax deductions and I wasn't paying rent any more.  A year later I decided to move to Florida.  Rather than sell it, I rented it out.  When I bought my townhouse part of the reason I chose that development was because it was three miles from Dartmouth College and I knew it was easy to rent to grad students.  I was able to get $650 a month which covered my mortgage, HOA fees and taxes, plus now I was able to take a depreciation deduction on my income taxes. 

Even though prices remained fairly flat for 7 or 8 years they eventually shot up. I sold it 11 years later for $120,000 a 67% increase while my tenants paid my mortgage.  I had put down $14,400 so the return on my investment was actually 333% (48,000/14,400). 

I believe the circumstances today are nearly identical to when I first bought in 1991.  There are good opportunities to buy out there right now.  Will prices continue to decline?  Possibly.  But were do think prices will be in 2017? You can try to time it so you buy at the bottom, but the problem is we won't know what the bottom is until prices have increased again.  When buying real estate you need to think in the long term.  I look back and wish I had bought two units in that development even though in the short term prices went down. 

My parents paid something like $20,000 for their first home in Katonah, NY in 1963.  Today similar homes in that neighborhood are priced near $600,000.  Try not to think too much about where prices will be in 2008 and try to imagine what real estate will be worth here in South Florida in forty years.  Some people think buying in a declining market is like try to catch a dropping knife.  I disagree.  The best time to buy is when everyone it seems is selling.  Which is what is happening today.

Tom Day, Re/Max in Motion

www.TomDayProperties.com