Real Estate

I've been reading lots of articles about what will happen if the real estate market "bubble" that people have been talking about for the last few years finally pops once interest rates rise and other factors make the economy go down the tubes. One today in Sunday's NY Times Real Estate Section sparked a thought. If houses are in a bubble, and there's lots of evidence suggesting they are, then folks who are in houses with payments they can afford for the long term shouldn't have much to worry about, so long as they don't have to sell.

The way I see it, even if you're like us and are recent homeowners, slowly building equity through your payments, then so long as the amount you have to pay don't change, and your income dosen't decrease, then you should be able to ride out any downturn, right? All a deflated housing market bubble means is that if you have to sell, and prices have gone below what your mortgage balance is, only then will you have to (a) take steps to make up the difference, (b) refinance the house to stretch out your remaining debt over a longer term so that you can either continue paying off the debt, or rent the thing out to someone who will pay it for you, or (c) stay put in the house and keep making the same payments you always have.

Now, I realize that adjustable mortgages like ours make this thought a little more complicated, but I think that most adjustable mortgages have caps built in so that your interest can't rise extraordinarily. My idea is to pay off as much of the principal as possible before rates rise, thus cutting the chance that any interest rate increase won't break our proverbial bank. I know that this is playing chicken, but on balance the risk seemed acceptable for the house we wanted to buy.

OK, back to the bubble. I can see this really affecting people who are leveraging their way into very high mortgage equity, but even they would have to be caught bya very quick and dramatic downturn, otherwise, flippers who turn houses over regularly and quickly will sort of ride the decline down, unless they are overextended and get stuck in a house. Then it's every man for himself, and hopefully the person hasn't gotten himself in a position of having to pay a bunch of mortgage debt they cannot afford.

But what do I know. These are just thoughts I have - I'm just feeling my way forward like any other fool.

Rag Review

I usually don't read magazines - the occasional home improvement rag and the daily paper, but nothing really beyond that. I've been seeing reviews though for Money Magazine's new look and format, so I thought I'd pick it up. Two days later, I've read the thing cover to cover, and I think it's great - Seemed the articles were practically tailored for people like me, late 20s, early 30s, sort of starting out, figuring out this money stuff, and trying to separate the wheat from the chaff in terms of press coverage of Americans' general money mess (low savings, high credit cards, all that - you've heard it before). So anyway, Money was great - articles on real estate, investing, saving, retirement, and an appropriately small section on those little rewards that are supposed to wait until you've accomplished a goal, but seem to creep into the must-have list in our consumer culture.

I loved it, I recommend it, I may subscribe, I think I would read it every month if it continues to be so strong. I think I'll wait until a few more issues come out to see whether this first one was just a super issue teaser to get folks like me to subscribe, or if it will really be that good.

Even though no one looks at this blog, Hoppy Easter Everyone.

No Free Lunch for Sallie.

I had an idea today on the train home from work as a possible way to attack these dreadful student loans. Where I work they will subsidize education that is relevant to my job. So I realized that I might be able to get my work to pay for a class or two, which would make me eligible for a deferment of at least some of my loans. During deferment the loans don't accrue interest, so if I continued to make regular payments I could knock down the principal more quickly. I just called Sallie Mae and they said that I would have to be in school at least half-time, which is determined by the school.

Now, to find a school that considers one class half time and offers some rudimentary accounting or economics class one night per week.

Crawling

I guess the first step is figuring out where we are. So I'm going
through all of our outstanding student loans and am trying to write down in
one place, how much we owe, what the interest rates are, what the
monthly payment is, and, if possible, break down the payment into principal
and interest. I noticed on the sallie mae website that they tell you
how much interest you pay every day. Seems my champagne grad school is
now costing me about $7.00 per day. So I go to work and every day I
buy Sallie Mae lunch. That's depressing. But also empowering. Now I
know that every day, even though I'm not writing a specific check to
them, I buy them lunch. It would be nice if we didn't have to do that.

That argument doesn't get me very far in my house, though. The
response, which I think makes sense practically and emotionally is, "yeah, but
if you didn't go to that school and earn the opportunities you now have
before you, you wouldn't have choices like you do now. So the debt was
necessary at the time and necessary for everything that has happened
since." (That's my wife talking, in case you couldn't tell.) And she's
right -- those decisions I made then: where to go to grad school, how
to pay for it, when to go, how hard to study, etc. all put us here
today. So I agree that student loan debt is good debt - my earning power
increased exponetially with the education, but still, it's debt. And I'm
starting to really hate it. I mean I'm declaring war on it. All out
war on it.

In case you're curious, preliminary estimates are that we have about
$170,000 in student loan debt. I know, it's unbelievable. Every time I
see that I think there must be some mistake. But there it is.

I'm collecting data - I'll soon (how soon, I'm not sure) have all of
our long term debts, income, assets, and spending habits all together and
then we'll decide how to attack and how to win this war in the shortest
amount of time. We're talking about it and have a few ideas, but let's
not get ahead of ourselves...

Title

Digaditch is actually three words.  Dig. A. Ditch.  And I picked it because when I was growing up ditch digging was the default worst job anyone could have.  "Well, it beats digging a ditch." was a euphamism for quit complaining, you could have it lots worse.  And sometimes I have to remind myself that I could have it lots worse.  So, even though it's a long row, let's get to work, it could be lots worse.  Digaditch 

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Why

I just put my 15 month old son down for a nap. It's Saturday and I get to be with him all day. Joy. Exhaustion. I don't know how people who stay home with their infant children every day do it. Anyway, that's why. Him. He's now the reason for everything. Which is a good thing. I love him. So, now we've got to get our house in order. I'm talking cash, thinking about the long term to be sure that we're not a burden to our kids, to be sure we're not a burden to ourselves, to be sure that we're not limited in the choices we get to make because of money. Right now our choices are too limited by money, but that will change. And this is where we're going to track that change. Maybe not dollar for dollar, and maybe I'll lose interest and quit posting after a while, but it's useful to have a place to reflect on this stuff. So why the hell not a blog? Whatever. Here we go.

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