Long Live the Bubble

Long Live the Bubble

Long Live the Bubble

Our family's search for a house
March 30 2009 9:21 PM

Long Live the Bubble

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.

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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.