It Really Is The Bottom Line

There's a certain comfort to the rituals that we all engage in.
One of my own is the Sunday browse through the MLS with a big latte', hopefully conducted before anyone else is awake so that I have blissful peace and total self-indulgence. I started this ritual right around October of '01. At the time, I didn't believe that I had decent enough credit or a large enough income to qualify for a mortgage, but I enjoyed looking and thinking about the various areas in the greater Sacramento metro, and seeing what people had done with their properties and what the trends were in renovation, etc. As Fate would dictate, even though I adored the job I was holding at the time, outside forces compelled me to seek another position and suddenly I was earning enough to actually afford to buy a house. My RE agent and his mortgage broker both assured me I qualified for quite a bit more house than I really wanted to take on, and eventually I ended up with an entirely reasonable mortgage on a nice condo about 10 minutes from my job.
Over the years, I continued to browse the MLS and noted that prices seemed to be going up a lot. A co-worker advised me about 2 years into my mortgage to refinance, because interest rates had dropped and equity had increased, and I could get a lower house payment. Amazingly, this was true. I also took most of the equity out at that time, in order to pay off about 50K in combined student loan and credit card debt, which gave me a little bit bigger house payment but I got rid of hundreds of dollars of monthly payments and saved thousands in interest that I would have paid out over the years. A year later, I decided I needed to make a change in jobs again, and accepted a position that paid less but was much less stressful. I also took a month off, and my friend and I went to an SCA "war" in Arizona with friends, and then met some other friends in LA and stayed in Hollywood for a couple days while visiting the Getty museum. On the way home, the Sig and I stopped in Santa Barbara for a day on our "Sideways" tour of wineries. In order to take that month off and that little vacation, I again refinanced and took out about 10K, probably the most foolish thing I've ever done, and also probably worth it for my sanity's sake. On the up side, about 4 months into my new job, I was offered the exact same position with a different employer who was willing to pay me the prevailing wage for my years of experience and I again ended up earning a very good income and benefits, and vacation time.
A year into my now very satisfying (financially and professionally) job, and still reading the MLS, I began to think that I needed to move. The Sig and I had to walk the doggies four or five times a day, from our top-floor condo. Our guest bedroom had gotten cluttered with exercise stuff, SCA stuff, archery stuff and books, and we had to store most of our camping stuff in a storage facility a few blocks away for about $100/month. We had ambivilent feelings about the condo community, which consisted of some really great people and some really crazy ones. And I was also paying attention to a guy named Bonddad from DailyKos who was saying that there was a housing bubble. I didn't understand "bubbles" at the time, but I knew people that had lost homes in the 80's and 90's due to ARMs and felt an aversion to them. I also knew that people were spending a lot of money on cars, trucks and furniture and that most of the houses on MLS seemed to have been upgraded with new kitchens and baths and pergo floors lately. I decided it was a really good idea to sell, and once again my same RE agent and his same mortgage broker associate told me that I'd qualify for about twice as much as I could afford. Only this time, I didn't want a condo, and that left us looking at houses that were horribly disappointing. Out of about 10, only 1 of them made us feel like buying, and someone beat us to it, THANK GOD. Once the condo sold, and we had 30 days to find a place, we decided to try renting a house instead and we were very pleasantly surprised at the variety and cost. It was a no-brainer at that point.

Nowadays, after having rented for about 18 months so far, it's still a no-brainer. Only now, instead of mortgage brokers telling me that I can afford a 500K house with no money down with a 610 FICO, they're telling me that they'll lend about 250K and I have to have at least 5% down to get a 6.25 % interest rate first mortgage with a 10% second mortgage for the remaining 15% down. 10% is a little high. IOW, I need 20% down now to qualify for a reasonable interest rate for about 2.5 x my income, and the only reason I can even get a 10% rate on a second mortgage is because my FICO is now around 800. And no guarantee that those interest rates and the down payment requirement will stay where they are until the houses that I am interested in drop into the 250K range, which will probably take at least another year or two. (And the mortgage broker I spoke with kept emphasizing "and of course we will need proof of your income".)

So, think about this, home sellers. Really think about who is out there to buy your house, and what they can qualify for, and whether they can REALLY qualify at all.
It's a damn shame that so many people made so much money on this Ponzi scheme for so long, and that you didn't. But the fact is, you waited too long. If you really do need to sell these days, you have to be willing to accept an awful lot less than some people got in 2005 or even 2006.

As for me, I could have done better. I could have another 10K in the bank right now, if I'd not have taken that month off between jobs and that very frugal camping trip to the SCA Estrella War and to LA (Travel Lodge, not Hilton) for Sig to see Grauman's Chinese Theatre and the Walk of Fame and "Hollywood" sign. But I can't really complain, because I bought that condo with no money down, a marginal FICO, and 50K debt. And I am now debt-free, with a few thousand in a money market account, and a FICO of 800. And being debt-free, after 20 years of struggling to pay off debt, is such a wonderful thing that there is no way that I am ever going to pay more for being able to say that I "own" a house than I would pay to rent that same house, minus tax and mortgage interest.

I still maintain my ritual of MLS browsing. And I've developed a strong interest in modern architecture and design. I still have my very short list of Streng homes on the MLS in neighborhoods where I would probably be one of the higher income residents -- not ones in Davis or Arden Park, where I'd be the poor kid on the block. Sometimes, one of these homes that I track goes off MLS, and I usually go to check on it when I find myself in the area, to see if it looks empty or if it looks sold. And if it looks sold, I never feel sorry that I didn't put an offer in, even though I do feel sad when I take it off my list. I tend to think that in another year or less, I might just be seeing it on the MLS again. Besides, even though they really aren't building more Strengs, people still do sell them, and when one door closes another door opens. My list has been pretty stable at about 5 houses for the last six months, from a high of about 12 houses a year ago. And the bottom line is that no matter how much I like a house, if I can't afford to buy it and still eat and enjoy a few weekends in Tahoe or Monterrey or a yearly vacation to see family back east, then it's not worth it.