Newmans Own: Our family's search for a house.

The President Goes Off-Message

When we wrote this headline, we were just kidding. But now President Obama has gone and pretty much taped an infomercial—complete with exhortations to visit his Web site—telling people what a good deal they can get if they refinance their mortgage. Low rates! Great service! Millions of satisfied customers! Actually, he didn't mention anything about great service, but since it's the federal government, you can count on it.

I'll let Dana Milbank expound on the political implications of all this. My only point is to note that the president refers to your house as "your single biggest investment," which it usually is, unless you're someone like Bernie Madoff, in which case you've got bigger problems (and more houses).

Obviously the president hasn't been spending much time lately with real-estate agents and doesn't realize that this think-of-your-house-as-an-investment line is no longer in the script. If I had a dollar for every time I've been at an open house and been told to think of it not as an investment but as a place to live—well, we'd have enough for a much bigger house. I realize that a house is not only an investment. Like a car or a box of breakfast cereal, it has a value all its own, separate from its monetary worth.

I also realize that it's the job of realtors to get people to buy houses. And in a declining market, property is not a good investment, at least for the short term. We weren't in the market a few years go—it may not seem like it, but we've been looking for only a few months!—but I imagine the sales pitch then went something like this: Don't think of this as a place as where you're going to live for the rest of your life—think of it as investment! And in a few years you can sell and move up.

Of course, neither perspective is entirely wrong. It's a matter of emphasis. Maybe buyers back in the boom years should have heard more advice like what we're hearing today. And maybe we ought to listen more when we're told not to think of a house as an investm... Nah. We should still think of our house as our biggest investment and as a place to live. Because that's exactly what it is.

It's Too Late for Us

So, to answer my own question—should we buy a house we can't afford?—we now have our answer, Nora: No.

It was a silly question anyway. As you know, I am opposed to spending too much on many things, such as toys and computers and even boxes of cereal. It's not as if I was going to change my mind on something as big as a house. And now that the president has unveiled Operation Save Our Homes, we also know that the government isn't going to help us: You had to have bought your house before Jan. 1, 2009, to qualify.

Which makes sense. Otherwise, as I noted, there would have been a perverse incentive for people like us to buy more house than we could afford, in the hopes that the government would step in and make things more affordable. Of course, there have been perverse incentives to buy more house than you can afford for most of the last decade, but that's another story. As the president says, we need to look forward, not back.

The one thing I will say about Operation SOH (note: not its real name; it's called HASP) is that it is as complicated as it needs to be. Possibly more. On the government Web site that attempts to explain it all, there is a series of questions that start out simple enough—"Is your home your primary residence?"—and end up purely speculative: "Do you believe that the amount you owe on your first mortgage is about the same or less than the current value of your house?" There's no way to give a solid answer to this question, really, though this site will help. Maybe the best answer is, "I'm not sure. Make me an offer and let's find out."

The questionnaire is designed to funnel you into one of two programs, though in both cases the government ends up recommending that you gather up as much paperwork as you can find and call your lender. By Monday, I predict most will have phone trees already set up: If you can't afford your mortgage and would like to refinance, press 1. If you have already refinanced and would like to negotiate a lower payment, press 2. If you lost hundreds of billions of dollars in the real estate market in the last five years though your own greed, corruption, and stupidity, and would like government assistance to help you avoid bankruptcy, please press 0 and ask to speak to Secretary Geithner.

There is also a sad little Web page where you end up if it is determined that you don't qualify for any federal assistance. This plan "will not help everyone," it says, though you can always call "a HUD-approved housing counselor" to find out just how screwed you are. "In certain cases," it reads, "you may need to sell your home and move to more affordable housing."

 I have an idea, Nora! How about we move into affordable housing to begin with? 

A House Beyond Our Wildest Dreams—or Means

I hope to return to Austin—the subject and the place—soon. But while we were running around the city, the Obama administration was readying a plan that makes me ask, "Should we buy a house we can’t afford?"

Ordinarily, of course, I wouldn’t even think to ask such a question. We Newmans are a financially prudent people. And while the details of the Obama plan are still being worked out, the basic problem it is trying to address is clear: Most of our houses are worth less than we thought they would be. This creates problems for the people who live in the houses and for the banks that own the houses. So the basic gist of the plan is to help banks and home-livers (I resist the term homeowner because it is simply inaccurate—in the majority of cases, the banks own these homes, not the people who live in them) gently renegotiate a more realistic arrangement.

Like I said, the details are still unknown. (Watch this space March 4!) And there is a lot of room for debate in a phrase like “more realistic arrangement.” But some information has been released, and it makes me think that the grandly titled Homeowner Affordability and Stability Plan could encourage people like us to buy a little more house than we can afford.

One of the ways the government can help home-livers, according to the plan, is to reduce the amount of the monthly income they spend on housing. (See Family C in this fact sheet.) Say you spend 42 percent of your current income on your mortgage. If the bank will agree to modify your loan to get you to 38 percent, then the government will step in and help the bank get you down to 31 percent. If, at the end of five years, you have remained current on your payments, the government will give you $5,000 to put toward your mortgage, and you and the bank renegotiate.

This may sound needlessly complicated. (Wouldn’t it be easier for the government just to offer everyone who qualifies lower interest rates?) But if I were the kind of guy who based his decision-making on government incentives—and I’m not saying that I am—I would buy a house that required mortgage payments of, say, 42 percent or 43 percent of my income, and then ask the government and my bank to get my payments down to 31 percent. I suppose we could spend, say, 50 percent of our income on housing, but then we may be considered too far gone to help. Better to live just slightly beyond our means.

None of this is to say, by the way, that I think HASP is a bad idea. (Note to Obama administration: Ditch the acronyms—TARP, ARRA, TALF—and get someone at the Pentagon naming this stuff. Operation Save Our Homes, something like that.) I have no problem with the government and the banks helping people like Marlo Saab, who makes $80,000 a year and is having trouble making the payments on the $550,000 house he bought (no money down, of course) three years ago. In the debate between Ledeen Halloran and Harry Snegg, I side more with Ledeen than with Harry.

All I’m saying is—Nora, maybe we should look at this house?