Newmans Own

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 —w ell, 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.

You can tell a lot about a real estate listing by its photos. And the few photographs in this listing are as enticing for what they don't show as for what they do. Namely: a kitchen. But I’m no longer daunted by kitchen renovations. In fact, after seeing so many over-the-top kitchens, like this one , I’ve actually come to prefer a kitchen we can make our own. It won’t have granite countertops or high-end appliances, but it will be comfortable and practical. In this case, we could even get a great view of a magnolia tree just outside the window.

Michael: The kitchen in the last place we liked was worth more than some houses in Detroit . But before we get there, I need to pause—as I did yesterday—on the front lawn. I was mesmerized by those two elephant-size hedges. A little boy could get lost for days in one of those things. His father could spend a month’s worth of Saturdays trimming them.

Nora: I liked the manicured lawn and hedges. They give the property a certain grandeur, making the Tudor-style house seem very English, very elegant, very expensive. Yet it’s in our price range!

The interior was equally elegant, though I didn’t necessarily feel that way walking around in my socks. (The floors had just been refinished, so we were instructed to leave our shoes at the door.) The vaulted ceiling, the wood beams, the stone fireplace—it was all very stately, and the attached sunroom was charming. I’d seen all this from the photographs, however, and was more enticed by the kitchen mystery around the corner. It looked like it hadn’t been renovated in decades.

Michael: I really like this place—it’s just different enough to be interesting, but not so different as to be impractical. Well, there was that one closet with a window. But in general, this house had well-used space—not a lot of overlong hallways or closets too big for the room. Sure, the kitchen was tiny and poorly applianced, but that’s fixed easily enough.   The agent told me renovations would cost about $25,000. Or maybe it was $30,000. Either way—that was easy!

Redoing the floors was also a shrewd move. Something about newly finished floors makes a place feel shiny and clean. So the fumes were a little overpowering. But I got used to them. Also: New floors are cheaper than central air conditioning, which this house would also need. Now we’re spending more than $30,000 on renovations—but don’t worry; it’s all theoretical.

Nora: I wouldn’t be so sure about these renovations, Michael. I’ve been warned by many a friend and seen too many renovation shows to think fixing up is an easy or inexpensive task. And I have a feeling that this house needs more work than we can see in a quick walk-through. Maybe we should bring a contractor with us next time we look at a house? I’d really like to get a better sense of how much all this costs before I get my heart set.

Michael: Sure. Last but not least: After several background briefings, phone calls with anonymous sources, and predawn meetings in parking garages , our crack team of researchers has been able to learn the identity of the former owner of this house . I have jogged on the campus of her alma mater.

Nora: I would like to have met her. The fact that proceeds from the sale of the house will go to fund minority scholarships gives this place good karma. Still, just because I admire her doesn’t mean I want to live in her house.

Michael: OK. I suppose I can let this one go. But if it’s still here in a few weeks, I reserve the right to come back. This time maybe I'll bring a landscaper and get an estimate for hedge care.

This study has been getting a lot of attention . Christopher Crowe, an IMF economist, suggests that evangelical Christians may have helped soften the impact of the housing bubble and bust in some areas. Their "strict interpretation of Biblical injunctions with respect to money and greed might make them less prone to speculative excess," he writes. While the rest of us pagans and heathens were buying or refinancing with five/one interest-only ARMs with prepayment penalties, evangelicals were making their payments on their 30-year-fixed mortgages, trimming their hedges, and waiting for the Rapture . (I simplify. But only slightly.)

One of the reasons evangelicals help smooth out the bumps in the economy, apparently, is that — like movies or Manhattan psychiatrists — evangelicals are countercyclical. To help illustrate this point, Crowe examined home sales in evangelical and nonevangelical areas just before and after 9/11, and found that prices rose in areas with relatively more evangelicals and fell in areas with relatively fewer. "This is consistent with the view that non-evangelicals viewed the attacks as bad economic news with negative implications for house prices," he writes, "while evangelicals may have been prompted by their 'end times’ beliefs to interpret 9/11 in a more positive light, boosting their overall sentiment and leading to an uptick in prices."

Being neither an economist nor an evangelical, I don't know what to make of all this. I get the part about rapturous evangelicals seeing 9/11 differently. What I don't get is why this would cause home values to rise. If you think the world is about to end, you don't buy a house. You don't sell a house. You just sort of sit around and ... actually, I don't know. What do you do when you think the world is about to end? This is a question for another blog .

On the other hand, and from a purely selfish standpoint: If there are any evangelicals out there looking to quickly and cheaply unload a three-bedroom, two-bath house within walking distance to the subway in advance of the Rapture — by all means, let us know.

Maybe it's because of my job, maybe it's because of my upbringing, maybe it's because of my heritage, but anything or anyone described as "earnest" immediately arouses my suspicion. So when the topic of "earnest money" came up last week, I was not favorably inclined.

is basically cash that you give to your real estate agent to show sellers how serious

excuse me, how "earnest"

you are about buying their house. Your agent then hangs on to it until the deal either closes or falls through. If it closes, it's put toward your purchase. If it falls through, you get it back. Theoretically.

, but if the deal falls through for reasons not spelled out in your contract, the seller can keep your money even though you don't get the house.

There are other ways to show earnestness (the amount of your offer, the size of your down payment, a heartfelt note hand-delivered to the sellers). But, in homebuying as with wedding gifts, people generally like money. So the question, essentially, is this: How earnest a buyer are you?

With

, I can tell you exactly: We were prepared to be 1 percent earnest. With an asking price of $638,000, this is not an insubstantial amount of earnestness. Besides, as far as I can tell

in real estate as in life!

there is

of earnestness. Sometimes earnest money is a percentage of the asking price; sometimes it's just a few hundred or thousand bucks.

But our Realtor was aghast. Our offer wouldn't be taken seriously, she said. But what about our offering price, I asked. What about our proposed down payment? What about this contract we are prepared to sign? What about this essay Michael wrote in high school about the dignity of work as portrayed in the songs of Bruce Springsteen, which he is prepared to fax to the sellers?

The one thing we were not prepared to do was to be 4 percent more earnest, which is what our Realtor suggested. Maybe we were wrong. And I understand that the seller wants assurance that the buyer is serious and will see the transaction through. But this argument seems to ignore the presence of a contract. If you sign an offer, which protects and obligates both parties, then what's the purpose of "earnest money"?

I'll tell you: It has no purpose. Sellers, with the encouragement of Realtors, extract it simply because they can. And because they have been working this way for decades, maybe even centuries. I wonder how much earnest money Abe Lincoln had to pay to get

.

All this said, I concede that this position is not entirely rational. After all, if we really want the house, and if all the conditions we spell out in the contract are met, what does it matter? We can just subtract the earnest money we pay now from the down payment we plan to make later. What's a few thousand (or tens of thousands) bucks among friends (or parties to a contract)?

Well, I'm not there yet. I may have to be irrational about this for a while. Earnestly irrational.

It has been more than a week since our last posting/confession, so please forgive us for the absence. Where have we been? Pondering making an offer on this house . Debating our real estate agent about the various components of this offer. Pondering again. Talking to lenders about this offer. (OK, Michael did that.) In the end, we made no offer on this house. It’s now under contract to someone else.

Michael: And we’re OK with that. At least I am. This man has never led me astray, and he says I should always be prepared to walk away from a deal.

Nora: This is a great house. Am I sad we won’t be living in it? A little. But I would be sadder living there knowing we’d overpaid for it, and $638,000 is too much for what we’d be getting. Could we have gotten it for less? Possibly—we’ll know when the sale price becomes public. But given the signals we were getting from our Realtor (which were about as reliable as our own intuition), we weren’t going to get it for the amount we were prepared to offer. We’ll keep an eye on how this one pans out. If we’re proved wrong, and the house goes for $600,000 or less, well, we’ll have learned a lesson. Though I’m not sure what. ... Not to not listen to a Realtor?

Michael: Three points. One, "overpaid" is a loaded term. The market will bear what the market will bear. If someone is willing to pay $638,000 for a house and we’re not, that doesn’t necessarily mean they overpaid. It just means they wanted it more. Two, sometimes the market will bear a lot of foolishness. And I think we both agree that this market is still pretty foolish. And three—always my clincher!—it doesn’t matter. We can make the argument, based on any given house’s rental value or replacement cost, that it is overpriced. But where does that get us?

Nora: I was feeling glum and frustrated when Michael passed along the uplifting news that we could get a loan for 3.99 percent. I guess this is what people mean when they say, "Money is cheap right now." Money is never cheap to me!

Michael: There is some fine print, but we can probably get the rate. Money we don’t have, burning a hole in our pocket—this is what 2005 must have felt like. But I resist the notion that, just because we can get it, we should spend it. I also resist the compliments that accompany a good credit score. I feel like that character in a spy novel who has been secretly monitored for the whole book and at the end the bad guys tell him he’s OK, and he’s supposed to be grateful for the compliment, but really he’s mad that they’ve had him under surveillance all this time. I have been reading too many spy novels lately.

Nora: But while rates may be going down, prices in desirable areas are not. A three bedroom with no backyard on a busy corner for $669,000? A two-bedroom Cape for $725,000? Are the lower rates meant to encourage people like us to buy overpriced houses—yes, a squishy term, but I’m using it anyway—simply because our payments would be easier to handle? Isn’t that what got us all into this mess in the first place?

Michael: My own personal barometer of the bubble is this house , a "foreclosure special" that is sagging and peeling and needs a lot of work. Yet it sold for an astounding 25 percent above the asking price. I don't know the details, and they could change my assessment, but for now I look at this place and think: The bubble is dead. Long live the bubble.

Hey Michael, as I was putting together our itinerary for this weekend’s open house visitations, I noticed

, which practically screams, "motivated seller"! Just think, for a few thousand dollars more (just as I wrote that I thought,

) we could have eight more bedrooms than we’d have in the

.What would we do with 12 bedrooms and 4.5 baths? I smell a familyreunion … or a bed-and-breakfast. Either way, I smell a lot of pancakes!

True enough, but if they're willing to knock off $100,000 from theiroriginal asking price, if we wait long enough, maybe they'll knock offanother $100,000. There I go again, tossing off big numbersnonchalantly!