I hear almost on a daily basis how home prices are rock bottom throughout California, and the "deal of the century."

????????

Honestly, I've read enough articles and talked to enough people to know that the majority of home buyers around here are outside investors (other cities, other countries, other states), and buyers with little-down loans (FHA?). That's what is keeping the home market from collapsing in Sacramento, specifically. People who know nothing about the local market, and more creative lending.

Oh boy!

I know a handful of people who got off the fence and bought - maybe with some decent down payments and fixed rates (but I wouldn't know for sure - the terms of their purchases). But, that's rare. I know far more broke people buying because "it's a good investment and no money down required."

The more I talk about this with people, the more disconnect I see between their lofty "get rich quick" schemes and the real estate reality.

I even went through zillow and examined historical home prices in several cities I am familiar with because there is such a huge disconnect between what people are spouting about home prices, and reality. As I expected, home prices are largely higher today than they were in 2001 or 2002. Zillow backs up my impressions. (Zillow runs pretty accurate here because home sales are so constant. Home sales prices are a good indicator, and there are tons of sales).

Sure, prices are lower than the peak, but any year before or since about 2005-2008 would be lower than the peak. That doesn't MEAN anything!

----------------------------------------------------

Anyway, in 2004 or 2005 I saw a graph of Southern Cali Home prices compared to median incomes. It was a historical graph with a HUGE and sudden spike around 2002-2004.

I had seen similar graphs in regards to Sacramento real estate. Back then, it seemed obvious that home prices were unsustainable.

So as I hear all this nonsense, in recent days/months, I was poking around to see if anyone had updated any of these graphs through the year 2010 or so. I'd mostly expect home prices to either have leveled off, or still be quite high. I wouldn't have expected prices to have dipped down to some historic low. Because they haven't. Not from the long historical perspective.

To the next person who tells me I am a crazy investing know-nothing about real estate:



Courtesy of econintersect.com

My raise barely covered our health insurance increase (if it even did), but this year we get some tax breaks compared to last year.

So, we decided to put $50/month extra to the mortgage.

I didn't for January since my raise was only in effect for half the month.

However, dh has had a good ebay/amazon/craigslist month and so we should get a $50 deposit around 1/31 (from amazon). I was also going to add a $20 gift he got to the 2/28 payment. With the new found money I canceled the initial mortgage payment and will pay it directly on the mortgage bank's website to make sure the principal gets applied correctly. +$70 for January. Looks like I will have even more for February (more expected sales).

-----------------------------------------------------

I haven't been big on the mortgage pre-payments. So, what has changed? Well, being able to max out retirement is one (that was our primary goal - mortgage paydown being secondary).

We also borrowed money (closing costs) to refinance the last time, so we feel an extra priority to pay those costs down. We've never borrowed a penny against our home, otherwise (even through many other purchases/refis. We usually pay cash for closing costs).

Then there is the psychology of breaking the $200k barrier. Not only is it a big fat six figure number, but we had paid our first mortgage down to almost $200k in 2001, before we moved. Logically I know our community is very high end, and we have a real house, a garage, a yard, and over twice the space, for a mere $30k more in loans. But, by the same token, we paid our first condo down very quickly (we both worked) and it's a bummer that in 10 years all we have accomplished is nothing on the mortgage balance. Back to where we started... This wasn't exactly what we had planned, anyway. I suppose that is the part that bothers me. Making no forward progress on that debt in 10 years, was not part of the plan. We have more and we work far less, but expected to make more forward progress all the same.

That said, paying down the mortgage is still not a huge priority. If we came into some extra money, we'd consider paying down a small chunk to make up for lost time. Mostly our plan is to resume our old $1300, $1500, or $1800/month payments, once dh returned to work. How much would depend on his income. Last we both worked, we were able to swing $1800/month for a 15-year mortgage (higher interest rates than at current). I think $1800/month would be very reasonable with 1.5 or 2 incomes. I make much more money now than I did in 2001. Our current payment is $1100 - we refied from $1500 to $1100 over the years, with dropping interest rates. We are sticking with the 30-year as long as the interest rates are this low. I don't want to fret over a $1800/month payment in case of a lay off or something like that. I certainly can't afford that on my income alone. But when we are both working, we will gladly pay the extra principal.

---------------------------------------------------

ETA: I received a $20 rebate today for my Visa. I get 1% cash back on this visa - only used for vendors who do not accept my AmEx (3% cash back on that one). The Visa rebate is just deposited to my checking account automatically, every January.

So, I Was able to keep the 2/28 mortgage payment @ an extra $70 as well.

Talk about timing! I took out the $20 I moved up to January, and another $20 *magically* appeared in my account. Too funny! So I added $20 back to the 2/28 mortgage payment. This was in Quicken. I will actually make the payment closer to the due date - see what else turns up.

I've had a toilet jinx this week!

When I flushed the toilet at work, I felt the little chain "give."

It was funny because we already had a broken toilet at home!

Dh noticed that the toilet was leaking (thank goodness!). There was stuff sitting around the toilet and it was hard to notice, otherwise.

As I cleaned it up and looked around, I could see it looked like the wall behind the toilet was stained with water. I realized it leaked when it flushed. I am not engineering-minded AT ALL and so I assumed it was a leak in the water line. After toying with it a bit, and even googling fixes, dh was smart enough to look in the tank. It was actually kind of spouting out of the top (& dripping down). The gasket in the bottom of the tank looked kind of tired. The water line on the other hand, was just fine!

Dh told me he would run to Home Depot and see if he thought he could fix it. Initially, stuff like this has scared him off. But over time, he has realized these kind of things are pretty easy to fix. (As for me - I don't think I could fix these things if I tried. It's just not in my DNA in any way shape or form).

Concerned with potential for water damage, and knowing dh doesn't move very fast with this stuff, I told him it was up to him. If he called a plumber, I wouldn't blame him. We've just been flushing it once a day with a towel to catch the water. (My bladder is very small and I awake often at night - wasn't in the mood to trek down the hall in the middle of the night, which would wake me up).

Well, today is my birthday, and dh decided to fix the toilet. Said it was easy peasy. The cost? $8 for parts.

Can't think of a better present?

I asked dh to consider replacing the parts in the other upstairs toilet. We rarely go in there, and I don't want to find the same water mess in there - if the kids aren't going to notice. The one downstairs, we use enough, so will wait until that one self destructs too.

Lesson learned - don't keep stuff sitting around the toilet!

------------------------------------------------

Birthday presents?

No cash this year. (Surprised since dh's family tends to be heavy on cash).

2 sweaters that I had picked out (from Grandma)

Entertainment Book - (We don't use nearly enough, but when MIL asked, I decided what the heck. Will get some use).

The kids got me some puzzle books

Dh fixed the toilet

The fam is making me sloppy joes for dinner. But dh had gotten groceries for 3 or 4 of my favorite recipes. I will dine well this week!

Last but not least - Marie Callendar pie - Lemon Cream Cheese

I have tried to instill much better eating habits in my kids (the ones I was raised with would make you cringe), but I think celebrations will always equal food. Maybe that is somewhat universal as dh doesn't seem to protest. He was raised with exceptional eating habits, but pigging out for any celebration is just kind of given.

I treated myself to lunch, and some soda and chocolate, since I couldn't have justified the expense otherwise. Decided it was a small splurge and I was worthy. I have cut my soda consumption lately - lord knows why. Really - no idea why i have had any motivation to. I just no longer keep it in the house (a habit I started since having kids - sleepless nights and caffeine needs, I suppose). I haven't seen anything compelling enough to make me want to quit. But, "quit" is a liberal word - I still drink soda when out, etc. Today I just wanted a big cold soda! I've probably gone back and forth in that it is much cheaper to keep soda at home (buy in bulk), but in the end, I rather just buy it once in a while (even if it costs several times more to drink it less). Maybe subconsciously it has to do with my health issues. I haven't been compelled by any studies, etc., because even when I keep it in the house, I just don't drink that much? But realistically i know less soda is probably better.

My mom told me my present was in the mail. Lord knows - could be anything. I'd guess maybe a check, or else she would just wait until she saw me (wouldn't ship anything probably). But, will see!

**I scored some *free* toothbrushes. They were on sale for 99 cents, and I got $1 0ff coupons for Walgreens, for buying them. I bought one, and went back and snatched up 3 more (I hadn't realized they were on sale, and I didn't realize the coupon was for the toothbrush, so I got another one). If I had realized I would have bought one at lunch and one after work (the Walgreens is on my way home), to make them all essentially FREE. But what I did was run back first thing in the morning to snatch up more before the sale ended. I hadn't realized they were on sale until I got home and looked at the receipt. Doh.

Was nice, since I like a particular kind of toothbrush that usually cost more like $4 or $5.

-----------------------------------------------------

I got our new property tax bill. No surprises since I had looked up our property assessment earlier in the year.

In our state, property taxes can not go up more than 2% per year, but they can go down as low as property values go, any given year. (These rules were put in place when absurd price appreciation meant a lot of seniors could no longer afford the property taxes to keep their homes).

I have no complaints about our property taxes, as they have steadily gone up 2% per year (even while the price of our property more than doubled in a very short time). But with the economy, I welcome the chance to pay even less.

Last year our bill went down $400 for the year. This year, it went down about $300. That's some pretty substantial savings. We are still in this sweet spot where we have over 20% equity, etc. (Last year, our assessment fell to the price we paid for the house. This year, down another $15k or so).

For net worth purposes, I long ago decided just to track the assessment to value our home, since it was only a steady 2% increase. (Fair market value has been crazy and volatile, on the other hand). On the flip side, a large loss of value would be more important to track and is accurately reflected with this method. It just works for my purposes.

SO, I have to lower my assets by $15k for the year. But I won't complain too much, since I have no plans to move anytime soon, and welcome the lower tax bill. Phew!

I haven't said much about real estate lately, because it's pretty same old, same old here. What is the phrase I keep using to describe it? Manic depressive? Balancing all the foreclosures and market depression with the enthusiasm of first time homeowners and wanna-be investors. Means a nice house will sell in minutes, if the price is good. But there is a lot of empty homes and foreclosures going down all the same. I think "manic depressive" sums it up pretty darn good.

The single story homes in our neighborhood had bottomed out around $200k. Anything priced $199k or below would ignite a bidding war of bubble proportions. (Which is good to know, since we owe about $208k on our mortgage, still!) The split level homes (like ours) had settled around $250k. Maybe a little more.

So anyway, I peeked to see what was going on. Tons of foreclosures in our neighborhood. But a house sold for $292k!!! Woohoo! I looked at it to see if it was a large lot. It was a house facing the empty field. They might have fetched a small premium for the view, but otherwise, nothing much unique I could see about the house. It looks like a slight uptick in price. It's hard to tell though since so little is actually selling.

Another interesting observation was a single story home, listed for sale at $250k. The home was purchased in 2002 for $340k. Ouch! I keep thinking that people's memory is so short term - that we bought well before the boom - but we only bought a few months before this home owner did (though I admit they must have had a TON of upgrades or something. Or the public figure could be wrong). I suppose people were really getting into bubble terrirtory as early as 2002? WOW!

But that is not the interesting part. The interesting part is that our neighborhood peaked out at $650k prices in 2005. Only a few really gullible people bought at that price (most after the market started to turn - REALLY gullible people). But, I remember getting little flyers about all these homes in our neighborhood, for JUST $3000/month. Some of these were ARMs and etc. JUST $3k/month mortgage payment! (For reference, our payment was $1300/month, at the time).

Right now, our payment is $1100/month (we refied below 5% - fixed rate), and this house advertised home ownership for as little as $1041/month!

A larger home advertised a mortgage payment of just $1200/month.

I don't think I have ever seen advertisements of such low payments, in our neighborhood. (Or in this state, ever, for that matter!) IT's a combo of the prices and the interest rates. My how things change...

For now, we get to stay in "well above water land." But, I am still wary what the short term will bring. For now, our neighborhood is attracting first-time borrowers and anxious wanna-be investors. Phew, for that. What makes me nervous is the sheer number of people I know who are borrowing for home with like 3.5% down. Those FHA loans, correct? I don't know anyone putting any real money down on any home purchases. I still get the feeling no one has learned anything, and this mess will be prolonged for a while. It's kind of a mess, and I don't think I have had anything new to add. I have said all of this before, pretty much. We may be the only ones in our age group, with some equity to spare around here, but we are ALSO quite clearly the only people in our age group (+10 years) who ever considered putting a real down payment on their house. It just boggles my mind that this "no down payment business" still prolongs. $9k down payment on a $250k home? Give me a break. OF course people walk away when the going gets rough!

I am well aware that Amazon has some of the same issues as Ebay, BUT, we were fed up enough with recent Ebay/Paypal issues, that dh decided to give Amazon Marketplace a try.

It's been about 48 hours, and he already made 4 sales, so he decided to list a bunch more stuff today. So far, so good?

The only real reason that I was more in the loop with Ebay is that he used my account (I had bought a few things over the years and so had some positive feedback, to start). So, I don't know all the details.

BUT, the fees really seem rather similar in the end. I read that ebay has lower fees, but not really, once you consider both ebay and paypal fees.

I also read that Amazon buyers tend to pay more.

So, we don't really expect to make less money, per items that sell, and so far this has proven to be the case.

Amazon is also infinitely more easy to list items on.

So, it's a good start. I am relieved that we can still work on that income stream, because we both have kind of had enough of ebay. But the income was good. Just not so worthwhile with recent hassles.

Maybe we should have done this sooner. The video games and accessories that dh's sells, I read that sellers tend to prefer Amazon for that kind of stuff.

Anyway, for now, is just a start. I'll keep you updated how it goes!

------------------------------------------------------

In other random news, the rental vacancy next door to us was short and sweet. I am kind of surprised. They were asking $1600/month (for a much smaller home than ours) and as I recall, that is what they requested last time, before much of the bust. SO, I thought it would be interesting how it would pan out. The price equaled a lot of interest and a quick renter. Color me surprised. I figure we could rent our home, comparably, for $2000-$2200/month. Not bad (for current state of economy and rental market). Our own PITI runs $1700-ish monthly, at current.

--------------------------------------------------

Went to a GREAT birthday this past weekend. Aaaaahhhh, it was so refreshing compared to recent parties jam packed with kids and rushed at these big kid play places.

I'm sold!

We usually do a pretty frugal at-home party (ages 1 - 5?). Last year we did a weekDAY Chuck E Cheese party for the kids, for about $150-ish. I would never go there on the weekend - you couldn't pay me to do it. So I know a lot of parents didn't like it, but oh well. I'd rather have only a couple of kids show up, than deal with it.

As a compromise, I did look at some of the other places, but they completely gouge you and offer very little outside a super rushed party with a billion kids. (Most of them are just like Chuck E Cheese! Though they cost a ton more...)

SO, yes. This was a new play place in the area. The kids LOVED it. The entire play area was reserved for the party. They did EVERYTHING, right down to writing down all the gifts, and making a little viedo of the day. The kids DELIGHTED in watching the video of themselves while they ate pizza and cupcakes. I am sure dh won't be impressed with the video (he's a pro) but it caters to the 4-6 age group quite well.

So, it will be about $300 for the whole thing. I had my mind made up when we left, but I didn't consult the kids. They both told me on the way home that they wanted their party there, too. Well, that makes it easy - so we all agree.

I told them it was okay but that they would have to share a party. They don't seem to care at all. So, phew. Their birthdays are a week apart which makes this kind of stuff easy. LM is not in school yet and doesn't have quite the number of friends, so it still just makes more sense to do one big party for them. Maybe we will separate them down the road. Then again, they have a lot of the same friends...

The only added cost I can see - with 2 kids - is a second video. I am quite sure we can work something out - they must do twin parties and such. So - will call the place and get that reserved.

Was it frugal to have the kids close in time and age? Um, yes it has been! Not that I can take credit for the birthdays being so close. Not quite sure I have that much control over all that - but I did try.

This may be the "Easiest" birthday party yet. We won't have to do a thing! I expect a $250 Chase rebate next month, so will consider it covered. I can squeeze $50 from the budget. We probably won't buy them any gifts either - dh has a stockpile of games and books to gift them. Phew! (I've got savings for this kind of stuff - but even better not to need it!!)

& so it is done...

Dh called me around noon to tell me the painters were done, and called me back in the afternoon to tell me the paint company's owner picked up the check.

I just got home, and boy, they did a GREAT job!

I had wanted to do a once over before dh handed over the check, but I guess it didn't matter.

They just have to come back tomorrow to put the weather stripping back on the front door.

& so ends our first "big maintenance" as homeowners. Heck, the only other maintenance we have done, is bird proofing. We've been homeowners for about 10.5 years.

$2200 to paint the exterior. Definitely worth every penny.

I am just in awe in how quickly they painted the house and what a great job they did. It was about 12 hours of prep, painting, and cleanup, I'd say. Not including a couple of hours of power washing, last week.

I will post pictures, later.

I think dh mentioned it, but I remembered my LONG put off optometrist appointment was today. I decided to postpone it, with the pink eye and everything. BM also stayed home from school today - because he looked terrible. LM and I look like we can *fit in* with normal looking eyes. Though we shouldn't be contagious; just kept BM home to be safe. He has been really difficult to give drops too - not sure how much is making it into the eye!

I was relieved that his eyes looked a little less red, at lunch.

I suppose this is another reason I am glad I just went with my HMO for the appointment. It was simple to reschedule, online on a Sunday. I just put off to next week.

----------------------------------------------------

Painting has started on the house. How exciting!

I have heard that the first 8 (or 10?) years is when a new house really settles. There are lots of little cracks to fill in and such - it is more than just about the paint. Though we didn't wait for the paint job to look "horrible," I still look forward to the facelift.

Oh - I believe there will be some "hidden costs" to the paint job. I presume they will use our electricity and water, which we tend to be quite frugal with. So, will expect a big bill, for May!

Also, we have a LOT of natural light in our house - it is so open and has so many windows. Anyway, with the windows all taped up, it was eery how dark the house was. We will be using way more lights than usual, I am sure. They should finish up Wednesday.

---------------------------------------------------

Here's something I had never heard of before. A friend told me that her neighbor paints one side of his house, every year.

May be a little overkill, but it is definitely an interesting approach, to just bite off a little at a time. I suppose the every year thing keeps it looking fresh. One wall every 2-3 years might start to look a little more weird?

Maybe part of me is glad to have a very tall house so I don't have to do the math and feel guilty for not doing it myself. Paying a $1500-ish premium (over cost) to not break my neck, sounds good to me. If I had a single story, I would consider the once a year/frugal strategy.

----------------------------------------------------

Had the funniest exchange with dh over the weekend.

I am probably guilty of not vocalizing all my plans - I keep a lot of things up in my head. IF it's "hell no we can't justify that right now," I just file it away (in my head) for later.

Anyway, I saw some decent patio set on sale, in the paper, for $300, and I just said aloud how maybe we should buy something like that, next year.

My dh flipped out a bit. To which I took great offense. Thing is, he rarely wants to buy anything for less than $1k-$2k. It's always big things, with him. So of course I told him to give me a break - it was flipping $300. Since when do I get to buy anything?

Anyway, we both calmed down, eventually. I told him that we had treated our patio furniture really bad, and I just wanted to start over. To which he replied, we never use it. To which I replied, because it's repulsive.

So anyway, AGES AGO, I bought a cover for the table, and dh hemmed and hawed about how ridiculous it was and how hard it was to remove the umbrella. To which I pointed out that I didn't really have issues with the table, or all of the chairs. Maybe we just needed an easier to remove, umbrella. IT really should be brought in every winter, with the chairs, and the table covered. The cover still sits unopened in the garage. I swear I bought it before we had kids.

NEedless to say, at some point dh went outside, and hosed off the umbrella. He opened it to dry off. IT was a bit windy and I saw it spinning around and suggested he put it down (I just meant close it). I would open it later when it settled down. It gets wasp nests when it is closed, and so then we can never use it!

SO, dh misunderstood and put the thing in the garage!

So I Ask him - if he left some of the pole sticking out or if I could actually put a cover on it. HE said the table was ready for a cover.

Oy vey! All that hemming and hawing, and he was able to remove the entire umbrella twice in one day.

So, all I had to do was threaten to spend $300??? Give me a break.

The whole thing is still not resolved. We have 3 white chairs that have turned a dark rust color. They are disgusting. The other 3 are fine. I will commit to bring them inside during winter. The other three can go in the trash as far as I am concerned. I told dh I may still buy some chairs - they don't have to match 100%. He doesn't agree. Sometimes he drives me nuts. Lord forbid I Want a chair that doesn't look disgusting.

In other home imrovement news, I am so tempted to get a screen door. With the house all spruced up, and a little cash, I think it would be a nice touch. I have wanted one forever - like a storm door so we can open up the front door in the summer and get a cool breeze through the house. Maybe it will save us some electricty (AC) costs in summer.

But, I may put that one off. We need a custom door, is the problem.

Anyway, I can identify with ceejay. Having some money to get some stuff done around the house - and I have some long put-off projects in mind. I'd just like to get it taken care of so we can jump into super savings mode, for next year.

For whatever reason, dh was not opposed to the door. Maybe because I mentioned it multiple times over the years. Seriously, I am sure that's all it is.

Well, glad I mentioned it. I am going to scrub the patio table, and get out the nice chairs, and enjoy the backyard a bit this spring. Hallelujah for shade (from the umbrella).

Our first home was a condo (little upkeep, but had been completely remodeled before we moved in, so we didn't do a thing to the place). Second home was bought brand new.

Needless to say, I don't have a lot of contractor stories, even if we have been homeowners for a decade.

We are probably going to have our house painted in the next couple of weeks.

We have been waiting a year (or two) for some neighbors to paint. To get a good recommendation. To see who was good and who to stay away from.

We gave up on this angle. Since no one has painted their home.

I haven't really asked many friends. I asked a couple of financially savvy friends for referrals. They have never painted their home. This is they kind of thing I wouldn't just taken any referral. I think people tend to be really stupid. I have had terrible referrals in the past. If it's not family, I am wary of any recommendation of this type. I just want a good/ethical contractor that is reasonably priced.

All that said, it's not an area we have any experience with!

I think we may have lucked out with this painter, but won't speak too soon. Found an ad online. Has been in business forever, A+ rating with the BBB, properly licensed and insured, and all that jazz. I picked him because he was giving rock bottom prices "due to the economy." I would stay away from any ad that had the word "cheap" in the price. I don't want cheap - I Want quality. The way his ad was worded, sold me.

Of course, he looks good on paper, but the next step was to meet him in person, and get a quote (and a gut feeling).

I would generally get multiple quotes and maybe we should, but from what I know about prices, I know the price we did get is rock bottom. I know no one has complained about this guy to anyone who matters (licensing board, or BBB) in the last few years. I know he has been in business for many decades. Liked him as much in person. He does not even ask for a deposit (which would be standard). It seemed clear he would go above and beyond the minimum standard - looking at the contract.

So, will see how it goes. & so we bite the bullet. Dh is supposed to call him this week. Though with all the rain, lord knows when we can get it done. No rush - my angle was just to get a discount with the pre-season. Plus, probably best to paint before the wasps move in. Why I kind of wanted to beat warmer weather a bit. But I Can wait a couple of weeks!

Of course, I am open to ANY advice on the subject.

---------------------------------------------------

We actually hired a contractor when we first bought our home, to get the backyard landscaped. Concrete, lawn, irrigation, plants/trees.

I am sure it was in the realm of $5k, though I don't remember for sure. At the time, we had tons of landscapers going door to door. We asked a couple of our neighbors who actually did their yards (most waited YEARS - ugh). They all had horror stories and said they wouldn't recommend their landscapers. If nothing else, they don't show up.

Great!

We started talking to the door to door guys and settled on someone who sounded like they really knew what they were doing, and was really "cheap," to boot. Wasn't the lowest quote we got. Just the "best feeling" we got. We were really young and no idea what we were doing. Though I am sure we got advice about what to ask about and look for.

The results are mixed. In the end, turns out the guy was using a relative's license (he had a very similar name). The whole thing was kind of frustrating. We would never know, but he didn't pay for the concrete, and so the concrete company put a lien on our house. Yeah. So, dh calls them, and they tell us that they are going to report us for hiring someone without a license. Okay then. Report away. How do you explain how you allow a non-licensed contractor to get a lien on our house??? Maybe they found out after the fact. I have no idea - but they seemed to have a clearer picture of the situation than we did.

Dh tracked down the actual licensed contractor we thought we had hired. HE paid the bill, apologized for his relative, and that was that. No more lien.

So, yeah, not a great experience.

Don't get me wrong - he did a nice job. But we tried to do right, and the whole thing kind of sucked in the end.

Anyway, in the end I suppose it worked. He showed up and did a nice job for a reasonable price. Extra reaosonable because he was a fraud, I suppose.

Sometimes another perspective can be so eye opening. Only recently, one of our neighbors commented how we had the nicest landscape job. I had never really thought about it. But, they had bought a second house in the neighborhood and both the homes just had terrible backyards. She was telling me how much she loved our trees when she lived behind us, and how nice our landscaping look compared to theirs.

I suppose though the guy was a fraud, he obviously knew what he was doing and did a nice job. We asked for "low maintenance" and that is what we got. It was only looking at my neighbor's crappy looking yard that I appreciated that we really could have done a lot worse. So, phew.

-----------------------------------------------------

Needless to say, when we met with the painter, we asked to see his I.D. He also apologetically told us he had to disclose about the whole lien thing, legally. "Oh, but I've never had to put a lien on anyone's home." Dh and I just looked at each other when that subject came up.

-----------------------------------------------------

Actually, I am also looking for someone to clean our gutters and do a small repair. I thought that maybe we should just rush that out before the paint job. Probably should, but I can't find anyone. I just want someone license/insured who doesn't have terrible reviews all over the internet. A lot of contractors say they are, without sharing their license #. Clearly not licensed - so probably not insured. Still more homework to do for that one. There's no (big) trees so we have never cleaned our gutters. Dh found a leak and was going to take care of it, but has never got around to it. I had to climb up on the lower roof to remove some of the Dish equipment and saw the buildup in the gutter. It does need a cleaning, to prevent more damage.

Funny enough, a lot of gutter places around here do pigeon cleanup and bird proofing, etc. I had NO IDEA. We hired a guy to put up bird proofing and he moved away. Last time we just called a big pest control company to fix one area, but they didn't clean up all the bird droppings on the roof. Looks like we can get the painter or the gutter cleaner to spray that off. & it's nice to know who to call if we ever have any problems. (Knock on wood, but haven't had any bird issues in a while. The birds are pretty bad around here - well, they were).

I may renew my gutter cleaning/fixing efforts this weekend. Might as well get it done.

Why not do our own? Oy vey! Not the proper tools/ladders/guts for the crazy high gutters. Will spend $150 for a pro. It's a steal.

Going forward, will probably have to do a wee bit more often than once a decade.

Oh yeah - we never wash our windows either. I don't see the point. Painter said they would be "cleaned" in the process with the spray - and they go over them with a squeegee so they look nice. Our house will look so shiny!

----------------------------------------------------

I know - I have been so knee deep in work, I haven't felt terribly bloggy.

But, now I am knee deep in home improvements and long put off stuff - all costing money - and thus I swing the other way, to very bloggy.

Having graduated college in 1999, it's been interesting. I'd consider myself an adult long before that, but only since 1999 have I been investing in real estate and the stock market. Thus, my only experience in those things is during the "lost decade." & what a decade it was!

I guess it's extra interesting since the dot com bust was in my backyard, as was one of the biggest housing bubbles in the country. I have always had a lot of extra insight to all this as I watched it unfold before my very eyes. (I know a lot of people in the world weren't quite aware of all the insane borrowing going on around here, etc. & in the end both collapses had worldwide effects).

Anyway, as our 10-year anniversary of home ownership passes, I was reflecting a bit on it.

The wisest advice I can give people is to not give into the hype. It's kind of funny, but everything I hear about housing TODAY is everything I have been hearing the last decade. Nothing really changes. We have had the luck to be homeowners in a most volatile real estate market decade. In 1999 people were saying the exact same things as they are today. Mainly, "If I don't buy now, I will never be able to!!!!" Irony is that I have heard the same frantic statement every year for the last decade. On the way up and on the way down - it's all the same.

I suppose it's a lot like the stock market. You can't time the market. You just have to buy when it makes sense for you. & make it a fiscal decision, not an emotional one. What's the point of "buying now because it's my last chance," if you can't afford it and end in foreclosure.

Another juicy tidbit I heard up until 2008, I suppose, was that it was stupid to pay down our house. (Told to me by people with multiple homes and ARMs, who eventually lost all their houses to foreclosure. Not surprisingly!). As our house value falls to about the price we paid for it, I am relieved it has another $90k to go before we hit "upside down." & though we put a fair amount down, I understand the sentiment not to put too much into your house early on. I understand inflation and all that. BUT I am talking people who thought have a fixed rate mortgage was stupid. (Not even getting into large down payments, 15-year loans and extra principle payments). I remember people telling me I was stupid, and me wondering what planet THEY were from! (Stupid because I want to pay off my house some day? BEcause I am locking in the lowest mortgage rates of the century?)

-----------------------------------------

Anyway, when I think back it is kind of funny since dh and I were so young and naive when we bought our first home. Some smarts and good financial advice helped us through though.

As was the entire last decade, we decided to buy in an extremely volatile market. I would have never bought a home if not for dh. Living near San francisco the prices of homes were absurd in 1999. It was somewhere near the end of college that dh told me he didn't want to get married until we bought a home. I had actually been waiting 4 years, to finish college, to turn my engagement ring into a wedding ring. When he first told me this, I thought he was stalling. I REALLY thought he was insane. Who can own a flipping home here, right out of college? What is he thinking?

In the end, it wasn't a stall tactic. Since my family had come from more reasonably priced areas, we had never really heard of the "start with a condo and move up to house" strategy. So dh told me we should buy a condo. At first, still thought he was crazy. But I did my homework. At the time, the cheapest house we could probably find was about $500k, whereas nice condos were to be had for as little as $150k. & when we did the math, it made sense. I Was renting a room (had roommates) for $400/month. Dh was living at home. Thing was, we couldn't get our own place for less than $1k per month. PRobably would cost more if we wanted anything safe and decent. When you run the numbers, condos were far cheaper. & this is somewhere we grew up and intended to stay forever. No doubt about it.

There was just one problem. Though the asking prices looked okay, all condos were selling in minutes with up to 6-figure over-bids. Condos and town houses were appreciating FASTER than houses, which was a selling point to me (my parents were wary if we wanted to invest in a condo, but the region was unique enough to make sense). So yeah, honestly, I didn't think we would be buying a condo anytime soon. I had heard the horror stories from the trenches.

The next part of my story is why I would never do a real estate transaction without a GOOD realtor. A relative referred a realtor who was worth her weight in gold. She had a lot of insights into some of the better neighborhoods, and some of the inside info that no casual buyer would have. (i.e. she told us not to buy in the complex next to where we ended up, because there were construction defects, etc.). Anyway, and I suppose this is how we stumbled upon our home buying MO. Find a TERRIBLE selling realtor - the rest is in the bag. Not a conscious decision at all, but over the years we have stumbled onto homes worth farm more than ever advertised. Way underpriced, etc., etc. I suppose "no realtor" is better than a bad one. But I would personally never buy or sell, without a good realtor on my side.

So, that's how we did it. We wanted 2 or 3 bedrooms, though were sure we would probably end up with 2. We were only shopping end units. I didn't want to share all our walls with neighbors. So, we come across this 3-bedroom condo, remodeled to the hilt, that had been sitting on the market for 6 months. At which point, I swear to you, we just about turned and ran the other way. It was impossible that anything semi-decent was on the market for 6 months!!! (I still think to this day - what if we didn't give it a try). We walked in, and we fell in love. (In the end? Problem was terrible selling realtor. SO penny wise and pound foolish for the sellers - I can't even tell you how much so. We were relieved to narrow down the problem and know the place was just fine. It was a GEM!)

I suppose some of our friends or family thought it was a bit much to take on 3-bedrooms. Dh and I were always looking for the long term. Though we hoped to ride the equity wave up to a house, we wanted somewhere where we could have kids, etc., if it didn't work out. We weren't sure if we could ever afford a house. Let's face it - this might be our "forever home." & we were happy with that!

Anyway, the condo was at the top of our price range, and they immediately accepted our full price offer. (Bad realtor had said they had lower offers and would accept nothing less. Can you believe our relief that we didn't have to get into a bidding war with 100 people? Full price it is!)

The financial advice I got from my parents at the time was to:

1 - put 20% down
2 - get a fixed rate mortgage
3 - No pre-payment penalties
4 - Don't escrow taxes/insurance

They didn't really give advice on how much to borrow, but I presume if we bought a $500k house, they would have said something. At the time, lenders were still pretty conservative (1999). I mean, our lender was trying to talk us into ARMs, and 0% down, of course. But beyond that, the income guidelines were pretty strict even then.

So, we put 20% down ($52k), and financed the rest ($208k) at about 8%. At the time, we borrowed a fair amount - PITI was probably 36%-ish of income. We didn't really care about that so much. The place was dirt cheap when it came to renting anything similar, and with the homeowner tax breaks, would not cost us much more than renting a studio apartment, anyway. So, we did think hard through the finances and were happy.

Dh and I both got a $10k raise within the year, and with dropping interest rates, refied to a 15-year with a much lower interest rate, soon after.

---------------------------------------

The thing about San Jose, is that the place was *nothing* in the 70s. It was just a little farming comunity, and by the 90s, its housing prices rivaled Manhattan.

Most of the people I know want to buy there because that is where they grew up. BUT, a lot of them seem to think they will make their riches in housing, like all our parents did. Dh and I have always felt it was a little insane. Um, that ship has SAILED? How do prices appreciate from "most expensive in the country" to twice as much, overnight? It's not going to happen. It's like chasing stock market returns. You have to find the good values. The "Manhattans of the future."

Considering dh and I didn't want to work into eternity, to buy a HOUSE (or to afford rent), we pretty quickly decided just to leave the area. Our condo appreciated $100k overnight, but houses went up $200k. IT started to feel pretty futile. Couldn't save fast enough, if you tried. Even with equity to help us along.

At the time, most of our friends with kids were moving to Sacramento. But we had a few single friends who made the move, to. Why pay $500k for a house, when you can get the same thing for $100k, in Sacramento?

We weren't exposed to much real estate crazy in San Jose. I mean - the people who were buying, were buying before they were "priced out forever." I would put dh and I in that category. (Which in the end, was over dramatic).

BUT, the real real estate crazy was in Sacramento. We bought a beautiful home for the same price our condo had been, and with no condo HOA fees, and lower interest rates, it was actually cheaper in the end - for us. Hell, our utilities are lower here - all the energy efficiency.

The people I met locally, never understood. We were labeled as "rich" or "crazy" to have such a nice home. Or we came with buttloads of equity. (Truth is - $0 equity - by the time we sold the condo). To us, it was just a matter of perspective. These prices were a dream!

But as people moved here from more expensive areas (LA, San Francisco), in droves, prices got pretty sky high. Then the locals started getting sucked in and paying $400k-$600k for homes, before they were "priced out forever."

I had been trying to talk my dad to invest in real estate, forever. Sacramento was going to be HOT! In 2004, he actually became open to the idea. I remember one of us came across a graph of the local real estate market, for like decades. The usual market was a series of hills and valleys, but the current cycle was a hill with no end in sight. It took just one look and we both said, "Now is not the time to buy." You know, we could wait for a valley...

So, you fast forward to today. What are my friends saying? The ones "who would never buy a house!" in particular. They are running out and snatching up houses before this "low" disappears forever. You know what the irony is? I have local relatives here, and when we bought this house, in 2001, they thought we were INSANE. Because they just didn't grasp how expensive our home town was. I remember precisely, one relative was in the process of selling his investment real estate. He had a good run, and as far as he was concerned, it was over. I always thought *he* was the foolish one, honestly. Seeing the potential for the market, from my eyes. & so - you fast forward to 2009/2010. What the locals thought was an "insane high" in 2001, is not an "insane low" in 2010? I suppose you realize through all this, how short-term people's minds think, sometime. I think that is what struck dh and I the most through all this. We are VERY long-term thinkers. Which is why I commented quite a few times, we do have friends/relatives who thought we were insane all along, who are now running out to snatch up houses for the same prices today, with little thought. In fact, they brag to us how they waited (& mostly paid more for the same thing). Because their memory ain't too good. It's like they try to rub it in our face that THEY Waited for the low of the low. & we go, "huh?" I thought this was the high of the high? Make up your mind? (I suppose that was before housing doubled overnight and all that).

Anyway, which is the final chapter in all this. Interest rates! Interest rates are the low of the low. No doubt. BUT, if you can not afford said house if the rate went up 1%, um, can you really afford it???? This is what drives me crazy about people these days. I know we are young, but we bought before most of our peers did. As such, we started out with a 8% interest rate. I don't know if people really grasp how that even with a fixed rate loan, they could be forced to refi, in death or divorce, etc., etc. IF you can afford 4.5%, but not 5.5%, I think I would step back and think it through a little more. For us, being able to refi down to 4.875% has been super awesome for our finances. But fact is, we could easily afford our house payment if we had to reset it at 8% for any reason. Even 10%. In the era of low interest rates - the advice I would add to my father's, is, "Don't let affordability be dictated by interest rates." Just consider it a nice bonus. I know we do!!!

I think the low interest rates are a big driver in the "crazy" in the real estate market here. The thing is, that good properties are getting snatched up in bidding wars here, today. In the end, it falls very deja vu. In the bubble, in the bust, always the bidding wars and the "if I don't buy it today, I never will!"

I've actually got home-owning friends with NO CASH who are buying investment real estate with $0 down in this "time of opportunity." (Um, did they know the vacancy rate on houses was sky high? Not sure who they will rent to). I just cringe as I watch it all unfold. On some level I wonder what is to stop another bubble from forming fast and furiously.

Anyway, typing all this out makes me curious about the insights of people who have been home owners for many more decades than I. You know, my parents have told us about the days of 13% interest rates (when they bought their house!), etc. & I appreciate having an intelligent, long-term perspective, when it came to the whole subject. It helped us from doing anything too stupid!

I know this is LONG, but these are all some thoughts I had been wanting to put out there, for a while!

**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.

----------------------------------------

**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!

-----------------------------------------

**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

------------------------------------------

**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.

------------------------------------------

**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.

------------------------------------

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.

----------------------------------------

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.

-------------------------------------

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...

---------------------------------

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...

----------------------------------------

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!

-----------------------------

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!"