Wednesday, April 9, 2008

A Housing Tale from Northern MichiganSat, 03/29/2008 - 21:40 — yooper
While the Nikkei Index was falling off a cliff and the U.S. was coming out of a brief recession in the early 1990's, my wife and I realized, that if we were to make a move, now was the time, when we could still afford it. I was sharp enough to realize that a trend lasting thirty years and continues to this day would soon price us out of the market. That is, the people retiring here have (retirement) incomes that are greater than mine even at the height of my earning career. They were pricing the poor yooper, right out of the market...
I finally settled on a piece of raw land and hop footed down to the local bank for a mortgage to finance this endeavor. Of course, they were touting their 15 year and 30 year products. Since, I was asking for only 25 thousand, could they do any better? Well, after some haggling, we finally settle on a contract with the 15 year, crossed out and 10 year typed right above it, at 8.25% interest rate.
Like some "American Pie" guys, I wanted that mortgage paid off as soon as possible. Thankfully, the area as well as the entire country did see an economic expansion and the mortgage was paid off before the stock market crash and the short recession after in the early 2000's. However, unlike Japan, the market bounced right back and property prices continued to soar.
Unlike Japan, an island with little natural resource, the U.S. would attempt one final push using it's own resources to mask over it's "limit to growth". Enabling this last expansion, the housing market (for the large part) put American people back to work, in demand for American made products.
Now, our property is "worth" 4 times the amount we paid for it, even if we didn't improve it. The "value" of the homestead is completely out of the range I would be comfortable in buying, in today's prices. However, if I'm correct and the U.S. has peaked like Japan did over 15 years ago, perhaps we'll soon see the same kind of dynamics in our market (if we're lucky) as did the Nikkei? If that happens, then it's reasonable to conclude housing prices will fall accordingly..
More later..
Thanks, yooper

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