**I stopped by Walgreens to pick up some Thank you cards on Sunday. For the kids' birthday. Got pushed way to the wayside with my dad's health and everything (his heart attack was the day after the kids' birthday party).

I figured I should maybe get on the Thank Yous, one of these days.

While there I grabbed some fiddle faddle, m&ms on sale, and a "flying disc." Went to the park twice since, with the flying disc. Minus the thank you cards it was $3. Dh looked at me like, "what the heck?" when I Returned home. I said, "$3 worth of heaven - don't start with me." It doesn't take much to make me happy.

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**Dropped off van yesterday. They called today to say used door did not work out - new door would cost more in labor. Revised estimate from $2000 to $2200. Van will be out an additional day or 2. I don't care. Dh was kind of annoyed. I know what an "Estimate" means, and am maybe more sympathetic since I work in a field where it is quite impossible to estimate anything. Quite simply, we don't give estimates.

Anyway, I figured the thing will probably cost somewhere in the range of $2k - $2500 (other estimate we had). Could always come in less - but won't hold my breath!

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**Dh picked me up in no-AC car yesterday. (Reminds me, now we can't take his car in until next week - I will probably book an appointment for Monday).

Weather was 95 - wasn't near as bad as I imagined. Was a nice breeze by then. Will probably survive the week. I have a reverse commute so no doubt they were more miserable sitting in traffic on the way to pick me up. I told dh to throw some water in the freezer and keep it in the car at all times. Last thing you need is to be on a windless day, no AC, stuck in a traffic jam. Cold water is really key. Weather calls for 100-ish all week. Reminds me I should call him and remind him. I would like some ice water please - today we have a lot of driving to do.

Tomorrow is the same (appointments and such) - though Thursday and Friday I may be able to just take the car. Then again - don't want it sitting in the sun all day - may be preferable for them to drive me

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**So yeah - 3-4 days of one car is turning into 6 or 7 days, quite rapidly. Times like these is why I am quite aware we could survive with one car. And also reminded why I would not want to survive with one car. The inconvenience factor is huge. Definitely high on my list of luxuries I will pay for. I love me my car.

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**I have another subject to bring up - completely different topic.

At the end of a mortgage - does it really matter if you pay it off or keep the mortgage? My answer is no. Or, I guess I should say - it's more important to have a manageable mortgage - and not to borrow into eternity - more important than anything else.

I think it is my parent's example that is precisely why I am in no rush to completely pay off the mortgage. If I could in a few short years? sure, why not? But why tie up all those assets if it is going to take over a decade either way.

Was thinking on the subject since so many people have commented, with my dad's situation (not sure if he will ever return to work) - so many comments that they are so lucky/smart to have a paid off mortgage.

Truth is - does it really matter? Their payment was only $400/month. A VERY small fraction of their disability or SS income, and a minuscle fraction of their income before all this.

& interestingly, my parents never really prepaid a dime on their mortgage. They actually started out with a massive mortgage payment (moved somewhere extremely expensive for job opportunities, bought in 1980 or so when interest rates were double digit). So, when interest rated lowered, they refied a couple of times, and settled on a 15-year-loan.

For all intensive purposes they started out in the craziness that has hurt so many people in recent years. I think the key is they never particularly borrowed more against the home. & they started repaying more rapidly once interest rates dropped dramatically. For all that, they aren't even the greatest example of buying well within one's means. But they never bought up, etc., which I guess is more the key here. (They even did the starter home thing - but everyone in our family has - it's really the only way to own anything decent in California - start small and buy up with equity. Start with a condo - be lucky to afford 1300sf SFH some day. On the flip side, no one in our family has bought up past age 30. Which is more to the point).

But at the end - does it matter if it was paid off or not? Not really. They paid it off when the balance hit the $20k range. The house is worth far more than what they paid - so these days they have a paid off home, but they invested enough over the years that they have far more in savings than the house is worth. I would probably argue that the savings is more useful in their situation. But in the end - it doesn't really matter. The $400/month mortgage wouldn't make or break them - even if their only future income is social security.

Probably where I get my attitude from. I just want a manageable mortgage! & I've said before, with rents so high here, the managable mortgage is a dream in comparison.

So often when the "prepay vs. invest" debate comes up, someone comes back with, "It's stupid to have a mortgage in retirement." As if there is no middle ground. Who said I was going to have a mortgage in retirement? Not in my plans. No, no one in our family has had a mortgage in retirement. Even with all the unexpected early retirement flying around both sides of our family.

If my parents could pay off their mortgage in their early 50s, I have no doubt we can pay ours off sooner. We have more income potential (between the both of us), far lower interest rates, and a much smaller mortgage (compared to income), to begin with. IT will be interesting to see how it pans out. I don't feel comfortable taking on a 15-year mortgage today. But at my age my parents were taking on a MASSIVE new 30-year mortgage. I assume a 15-year payoff is not so far off in our future. WE are on so much better footing at the same age.

If my spouse returns to work we will just pay off the mortgage because then it can be done in a few short years. That makes all the difference, to me. Being house rich and cash poor doesn't appeal to me much, overall. Will pay it off if we can be cash rich too.

Well, my house may be turning into a TV studio. Yipes!

Boo's post (summer suggestions) reminded me that dh told me his wild new plan is to paint a wall in our garage green. A year or 2 ago he put up a green sheet and did some "green screen" video effects with the kids. I think he got the idea because we just happened to have green bed sheets.

It worked out okay - though not perfect by any means.

Well, he got the Lowe's paint code for the perfect shade of green for green screen - along with good reviews of the paint color - so this is his new idea.

Sounds cheap enough as far as entertainment goes. Kids will probably LOVE it.

What didn't occur to me, when he told me this plan, is how he is working on a web-based comedic series. It just occured to me about now that this is a hint that he wants to use our garage for production. Hmmmm. I guess nothing wrong with that. Probably explains why he was looking into it in the first place.

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With all the foreclosures it's hard to keep track of fair market value in our neighborhood any more. The reason is foreclosures record as "sales" for the amount of the loan (far as I can tell). With time, 2 "sales" relatively close together is a clue. But I haven't been paying as close attention and am not sure on some of the public data if they are real sales or merely foreclosures. Though foreclosure is a pretty safe assumption?

A lot of the data points towards improvement, BUT the biggie around here is that banks have really been falling behind on keeping up with all the foreclosures. So there is a pretty giant "phantom inventory."

With the old foreclosures, our neighbors would move out, and a for sale sign would go up pretty quickly.

These days I know people who walked away late last year, from their homes, with no activity to speak of on the homes. So the lag is pretty clear.

In our own neighborhood there are a few clearly abandoned homes. 2 are just coming up for sale, though sales records show they officially foreclosed last December. I originally wasn't quite sure what was up with these 2 homes, but now it is obvious there is just some serious lag.

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So anyway, homes like ours have been holding steady in the $325k range for a while (for reference, we paid $300k in 2001).

I just saw 2 of the same homes recently sold for $280k. Ouch!

One looks like a foreclosure, so not sure it means much. BUT one had clearly foreclosed first, and then sold for $280k. In the meantime, a few homeowners and banks are asking in the $320k range. Will see!

At $280k, we would still have the enviable position of 25% equity. BUT, I still am not quite sure how low things will really go. For the long term I am not worried. For the short term, who knows.

My spouse says, "who cares?!?"

I understand his sentiment for the most part. But I do care. There is nothing fun about being trapped in a situation. & being underwater in a home is a much worse situation than we have been in our adult lives. Also, the potential for the neighborhood to fall into ruins is not good either. But, silly me for caring about that!

Beyond that, I do agree that we will cross that bridge if we come to it. IT just doesn't look so good, for now.

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The silver lining in this cloud is a reduction of property taxes, right?

Not so fast. A neighbor of mine who paid much more (with equity from another home) was refused a lower property appraisal last year. They needed to provide THREE comparable sales at lower prices. Ugh. Nothing is selling!

So one real sale at $280k means little.

I checked the dates, and value has to be as of Jan. 1 anyway. Too late for us - we had a $325k or so appraisal at that time. Our assessed value is currently about $320k. Our taxes can not rise more than 2% per year, by law. BUT we can lower them for fair market value decreases.

But, at this rate, we may be able to shave off a few hundred dollars a year, come 2010. For that, I have little issue with a home value more than our loan, but lower than we paid. In the short term, it helps.

That being said, we would have to set aside that money into savings - any property tax savings. If property values increase - we go right back to where we left off. Which means if your property taxes are lowered, don't forget about the future. IT's best to pretend like you still have that old bill...

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I am not sure of the median prices, but a quick run down of our home's more recent values:

2001: 300k
2002: 400k
2003: 500k
2005: 650k
2006: 500k
2008: 350k
2009: 280k (Ouch!)

You get the picture...

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Interestingly, I haven't bought much of what I have read/heard about the Bay Area. I remember like a year ago someone was saying you could find things for like $100k. As if!

From what I Could tell talking to firends and relatives who live there, prices were holding pretty steady. Lower, but not any significant drop. Certainly nothing I would call "affordable."

But that has changed. Their market is very different. But ugly, all the same.

They had something like a 40% drop in home values over the last few months of 2008. Talk about OUCH!

Median Home Prices San Jose (my home town):

1999 $300k
2002 $400k
2007 $700k
NOW $400k

Funny enough, dh's parent's home value have mimicked the median value. I guess they own a "median home." It's about 1300 square feet, 3 bedrooms, 2 baths, built around 1970. Yup, that's what $400k buys you. IT's certainly nothing to write home about. (I am often misunderstood - nothing wrong with a median home - it's certainly more than we could ever afford there. BUT my issue is with the PRICE!)

Interestingly, condo values have dropped further. We saw our old condo is going for $10k-$20k less than what we originally bought it for (1999). Another ouch.

Lord knows why. I still don't see anything affordable about that market.

In the long run, median home values in Sacramento have run about 33% of the Bay, since we have lived here - about a decade.

So, I would pretty confidently say median home prices here have dropped back to around the $150k level, here. It was somewhere in that range when we moved here.

So anyway. So I regret moving? Um, no. Do I regret buying? Um no. I can't even put into words how much money we have saved owning over renting, the last 10 year.

Ask me again next year. But unless our neighborhood goes to hell, I won't get too caught up in the short term.

Do I wish I sold my home in 2005 and rented for a few years? HEck yeah!

But yeah, I hear all this hype that the Bay Area is suddenly "Affordable." All I see is the same numbers that drove us away in the first place... At this point, nothing has really changed - just the same figures that led us to buy our current home in the first place.

I have been thinking about it because it seems so many people are home shopping. So here are my observations/advice for potential new home buyers.

**Be careful out there. In the last decade everyone was running out and snatching up houses because "they could never afford to buy a house" if they didn't act fast. As if the double digit appreciation could be sustained forever? I tell you, I never quite *got* that thinking. Though it was a factor on when we bought our first home, it was only because it was well within our means. Since a single detached home was not even in the realm of reasonable we didn't even bother trying. (We moved instead). I have people all the time tell me I don't understand because I own a home. Uh, believe me, I understand what it's like to be priced out of a home market. When that happens, the smart thing to do is to not buy. Not to snatch it up before it gets even more expensive!!! & that is precisely what we did (not buy in the unaffordable market).

I share this because the pendulum has swung so far in the opposite direction, I see much of the same stuff going on. People are stretching into homes they can't afford because they are worried prices and interest rates will never be so low again. The same wisdom stands. I mean really, what is the freaking rush? Buying a home you can't afford because of the "low price" and "low interest rates" is little more than crazy. You have a certain amount of time and power that has not been seen for a long time. Enjoy it!

I just have to roll my eyes when so many people are running out buying houses like the world will end if they don't do it today. Take a deep breath and SLOW DOWN. Enjoy the BUYER'S market, for sure. It's been a long time coming. I have to say I am a wee bit jealous of the opportunity to buy in a buyer's market.

But yeah, to sum it up simply, "It's not a deal if you can't afford it!"

Our first home had an interest rate of 8.25%. It's all relative. My parents' mortgage was in the double digits for a long time (they bought in the 80s during the era of high interest rates). In the 1990s, an 8%+ rate was not the end of the world. It was a "good deal." If nothing else, prices tend to drop as interest rates rise. If you can't afford it, did you ever stop to think no else can either? Stop with the panic already!

**My second point is a bit of a rant as well. Since we moved somewhere a little more inexpensive, and prices rose very rapidly here in the mid 2000s, this is the norm we came across with our friends. & I NEVER understood the thinking at all, because back home owning an apartment was far cheaper than renting. So though I understood on some level, the high desire for home ownership there, I never quite got the whole desperation when we moved somewhere with cheap rent options. I guess what happened is home prices just got so astronomical ($250k homes were selling for $650k within 3 years) that people panicked and decided they could never afford a home if they didn't jump prematurely. As a result, I got a pile of friends renting for pennies, who can't save a dime, taking on $3k/month PITI with $0 down.

I was completely lost as this whole thing unfolded. You don't know how many people told me they simply could not afford to save a DIME for a down payment, but they were taking on these massive house payments, far above what local rents were going for. Huh? & how in the heck can they afford such a massive mortgage payment if they can't save a dime with a $1k monthly rent payment? Have they lost their minds?

The short answer is, "YES!"

It was not sustainable, home prices have tumbled back to 2001 levels, very rapidly, and every single one of those people have lost their homes to foreclosure.

Anyway, being able to save up a significant down payment on a home is by no means the only indicator of the affordability of a house. BUT it is a BIGGIE. Quite simply, if you can't afford to save 20% down, I honestly think you have no business buying said house. Mortgages are expensive. House maintenance is expensive. & if you can't save 20% down, odds are you are going to sink. I know it's an extreme view for this day and age, but it's true. I haven't come across anyone who put 20% down on a home and lost it. Not that it doesn't happen, but it is certainly more rare. & with lower down payments comes the expense of PMI, etc.

Along the same lines, if you can't afford the fixed mortgage rate, you can't afford house. All it becomes is a gamble. One that most people are currently losing. I know there's a couple of people around here with ARMs who can AFFORD IT. No issue there. But if you don't have enough assets to pay off your house if things go horribly wrong, back away from the ARM!

I think this is why I often say any more, "If you can afford to save 20% down you can probably afford the house." It's not a hard and fast rule, but you are doing a million times better than most people who live in my city, which I guess is my point. You stand half a chance to catch the curveballs of home ownership if you are a good saver.

BTW, people need to get real. IT can take YEARS to save up a down payment. & that's how we did it in the olden days. Even though we bought our first home quite young, my dh simply saved most of his wage from age 15-23. That is where most of our down payment came from. Sure we were in a unique position to be able to save so much so young, but if not, we would have waited a few more years to buy a home. No doubt about it.

**So how much house can you afford???

Obviously be wary of the loan products out there and what greedy brokers tell you.

All that being said, be wary of even the hard and fast rules of thumbs. Everyone's situation is so unique.

I was playing with a pile of online calculators, and using the usual hard and fast rules of thumbs, all of the online calculators said I could afford homes that I personally would feel very uncomfortable buying. An "ideal" PITI range for us is $1800 - $2300. Um, no thanks???? (We're at about $1700 today). These were mostly $400k homes. (Dh and I made a commitment to draw the line at $300k home price, when we were 25. Needless to say, as we age, the less we would consider tying up in a house. $400k sounds a little crazy if you ask me. Bought with equity? Perhaps. But I was assuming we used the same 20% down we already had. I was not running these calculators with home equity to spare).

The irony is since I live in California I am probably willing to stretch it a little more than most of the frugalites around here. Which I think says a lot when I feel extremely uncomfortable when a calculator tells me I can afford PITI of 35% of my income. No thanks!

When we were younger and just starting out we stretched more because rents were astronomical (higher than owning) and because we had just started out in well paying careers (both of us). We may have pushed it with 40%. I also know our PITI was higher than 40% (50%+?) when my spouse stopped working. That being said, both situations were extremely temporary. Neither of us had any urging to get in over our head with a house payment. At 30 our PITI is around 25%. That is about as high as I would go any more. (& that is 25% of only one income. We wouldn't increase it simply because dh returned to work). Which reminds me, yeah, I was running all the calculators on my income alone.

Reminds me, I would advise to run the calculators assuming you only live on one income (if you are a dual income family). We certainly bought both our homes when we were both working, with payments we felt we could afford on one income. Boy it would be interesting to run these calculators with a second income. Scary!

Our goal is to lower our PITI with time. We have no plans to upgrade our home, ever, and we are young enough in our careers that we expect our income to grow considerably in the future (though we have already had a lot of income growth in our 20s). Thus if we were just buying a home today for the first time we would play it far more conservatively than we did in our early 20s. In our 40s we would like to have our house paid off. Which basically means I would have little desire to buy anything we couldn't pay cash for, or pay off rapidly, in our 40s. Thus, though we were aggressive on one end of the spectrum, individual circumstances certainly change how we approach things.

& some other food for thought - if you are single - don't push it. You have only yourself to fall back on. We always tried to aim for a house payment WE felt comfortable with on one income. But having a second income to fall back on increased our ability to stretch a bit. I find myself in the forums thinking some people can likely afford more house than the forum gives them credit for. But then I feel like I am just contrary because a single person will come along and everyone gives them a thumbs up. & I just cringe. I could not personally imagine taking on such a large mortgage (standard rules of thumb) if I were single. Little details like that really change the playing field, in my opinion.

It's all food for thought.

& I have to say, I am glad I am "out of the game" so to speak. Buying a house is not an easy decision. It is a decision that needs much more thought than it has been given by most in the last decade. For that, I wish all you new home buyers lots of luck!

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ETA: I was thinking about this because I have a relative in her 60s, single, who just bought a home recently (partially with inheritance). My dad asked me if I thought she should pay it off rapidly (because she is hitting it hard). Considering her age and economic circumstances I told him it wasn't the worst - there is always a reverse mortgage for a case like hers. She pretty much makes minimum wage. She lives in small town Kansas. I mentioned paying off a small mortgage makes sense. I'd be more keen to hit mine harder on the front end if it would be gone in a few short years. Anyway, my dad told me he thought her mortgage balance was $60k-$80k. I simply gasped. O.M.G. I am sure she would look at my $210k mortgage balance and gasp. But I am merely 31, I've already paid off $90k, and I make about 4 times her income. To be fair, my dad merely ventured a guess from her broke status, the cost of the home (known) and the inheritance they received (known). So though he was guessing, I think his guess was reasonable. & all I Could think is, "Yikes!"