Today we attended a Home Tour in a nearby community where a builder was giving away $25 gas cards. In addition to the gas card, we got free drinks and snacks.

Awhile ago, we visited the model homes of a builder who was giving away Target gift cards.

I think we will see more and more of these giveaways if the home market remains soft.

Here in Austin, the housing market is still relatively strong compared to the rest of the country. I can only imagine the freebies that can be found in more depressed housing markets.

Might be worth skimming the real estate section of the Sunday paper, even if you aren't in the market for a new house.

1. Short Sale House: DH & I went to look at it yesterday. It is a real beauty, and it is being offered at a really good price. I had looked at it once, and was afraid DH would fall totally in love with it and want it. I say "afraid" because while it is a lovely home, it looks like the type of home where we would spend quite a bit of time on upkeep of the house and the yard. Fortunately, DH agreed that the house would require quite a bit of time on an on-going basis. (Actually, he made that comment about the yard only, but I can tell the house would be the same, and guess whose shoulders that work would fall on?) The house is pre-foreclosure and has been unoccupied for 6 months. It has not been trashed, but it has been a bit neglected. When we got home, DH walked in to our apartment, looked around, and said: "I like this apartment. It's so CLEAN!" I replied, "Yes, it is" but inside I was laughing and thinking "That's because the magic cleaning fairies show up on a regular basis" I was also thinking "Give me 3 days alone with that house and it will sparkle" but I didn't say that because frankly I'm still hoping for a smaller, more modest house and I did not want to put any ideas in DH's head.

2. 2nd Car: Apparently I was not the only one researching cars the last month. In addition to the SmartCar that I want to test drive, DH wants to check out the new Volkswagen Jetta Diesel. Looks like a reasonable choice to me. Now I just need to find out if it's currently available in our area.

3. Short-Term CDs: BofA is offering a 7-month CD @4.11% (available on-line only). Not too shabby. We decided to go with that for some of DH's post-busy-season money. Higher rates are available elsewhere, but either the terms are longer or the bank is shakier.

4. VMSXX: We discussed, and DH is considering it. He's a bit anxious about putting non-tax-deferred dollars in a non-FDIC insured spot. Why that is any worse than putting tax-deferred money in a non-FDIC insured spot is beyond me. He keeps asking me: "How safe is Vanguard, really?" I'm all for VMSXX, but DH needs a bit more time to process the idea ... He has a couple friends who are both financially savvy and conservative. No doubt he will be consulting with them. Hopefully we won't end up with a mattress investment.

1. Spa Treatment: "The procedure" was today. It turned out very well, tho my face now feels a bit itchy and I can see major breakout starting along my jawline. I'm glad I had this done when I can lie low for a few days. I was a bit red for a couple hours after, but fortunately that calmed down because DH called and asked me to take care of some business for him this afternoon that involved meeting someone. The good news was that I ended up spending only $41 (including tip), not the $50 I had expected. I knew the price of the procedure, but for some reason had mentally added $4 to the price. Also, either tax was included in the price or Texas does not charge sales tax on services (this is the first time I've had a service performed in Texas so I don't know). I had researched spas on Citysearch, looking for customer-recommended spas nearby, narrowed it down to 3 spas, and then checked their rates on-line. The one I chose had a Citysearch coupon for first-time customers. Not only did I get $10 off but I also got a "free" body lotion that normally retails for $28. Not the sort of thing I'd normally buy, but I was happy to take the freebie. Thanks for all of your positive comments on my previous entry. I now feel perfectly fine about my little "secret-self-esteem-boosting-expenditure."

2. In-Laws: A while back I blogged about getting a retirement gift for my in-laws.
http://scfr.savingadvice.com/2008/06/08/retirement-gift-for-...
FIL was supposed to have loose ends wrapped up and be officially retired by June 20th. Guess what? He's still working! Since MIL has already moved to their new home, he had moved in with SIL. But apparently he decided he had overstayed his welcome, so he is sleeping in his office. Good grief! I really don't know if it is because there is a holdup on the portion of the business he is selling, or if he just is emotionally unable to stop working. Take note everyone, especially you self-employed folks: As retirement approaches, create a set-in-stone exit strategy for yourselves. I wonder if it would help if we told him that we were going to give him a nice gift, but that he won't be getting it until after he has actually retired?

3. House Hunting: I went and checked out a home that is in pre-foreclosure ... the sellers are trying to do a short sale. It's a really lovely home but I think it's too big and too much money, but DH is REALLY interested in it so we'll be going back to see it after he returns from his trip. Sad situation for the sellers tho ... It's a really lovely home yet they only lived there for about 1-1/2 years. It never ceases to amaze me how so many people managed to get themselves so over-extended.

Before I leave for work in the morning, I make my lunch and fill up a travel mug full of coffee.

I had a couple days off and I guess that threw off my routine. This morning I forgot my coffee! So, I decided to use the vending machine at work for the first time ever, and shelled out 65 cents for a cup of java. Necessary expense? Certainly not. But I decided it would be better than going through the entire day without coffee.

I remember back in my early 20's I would have spent the money without even thinking about it ... I probably would have been buying a cup every day, in fact. Now it's a conscious decision, every time I choose to spend money.

Oh, and speaking of spending money (a bit more than 65 cents this time) ... DH has found what he thinks is a fantastic deal on a foreclosed house, and on paper it looks good. We are going to take a look at it this weekend. We'll see what it looks like "in person" ... it's in a neighborhood we like very much, and it just might be a real bargain, but it's a bigger house than I was hoping for.

Great Brunch Out: Today DH & I went to Olive Garden for an early lunch; we both had the all-you-can eat soup/salad/breadsticks combo ($5.95). We had a $4 coupon, so the total with tax & tip for 2 of us came to $10.34 ... Not too bad for a tasty lunch with lots of veggies (tho the lettuce was iceberg), no dishes to wash, and a date with my favorite guy! We don't eat out a lot, so it's always a much-relished treat when we do! [And in case you're wondering, we combined our brunch out with running other errands, so there was very little gas expense.]

Broccoli: Oh I'm still smiling about this... It's been so long since I found a good deal on FRESH veggies! Super Target had a sale on broccoli, the cello-pack bunches for 2 / $3. I had a coupon that I had printed out on-line for $1 off, so I got 2 big bunches of broccoli for $2. Since they charge by the bunch instead of by the lb, of course I chose the heaviest bunches!

Staying Put: We decided to renew our lease, so we'll be staying put for awhile. We do think home prices will drop a bit more, we are completely contented where we are, and it's lovely having our costs so low, so why not wait?
I am kind of burned out on househunting, and am relieved that there is no reason to do any more of that until the fall, when we can get serious about looking (and then hopefully buying) again.

New Job: Forgot to mention that I got a job. It's intermittent full-time ... not contract work, but off & on temp assignments, challenging & enjoyable; I will likely stick with just this until we buy a house.

1. Car Insurance Discount: Geico is good! After DH finished his on-line defensive course, they instantly applied a 10% discount to our auto insurance premium. I thought they would apply a credit to our next bill (for the period already paid for), but they cut us a refund check that we already received. Those guys are fast!

2. HSA: DH went in and got his teeth cleaned, and paid using our HSA. It was the first time we have used our HSA. He said it felt good knowing he was paying with tax-free money. He also said the dentist was great. The January edition of "Austin Monthly" magazine included a "Top Dentists" ranking, so I used that to select a dentist (called several rated as top general dentists in our area, and chose the one that was taking new patients and had the most professional office staff). Someone posted in the forums about dentists being crooks, but I've almost always had great dentists --- only had one bad experience and that was with a guy who was subbing for my regular dentist. I've always relied on personal recommendations when choosing a dentist, but since we are new here I thought the magazine ranking would be a good substitute for word of mouth. The only bummer was that the new dentist doesn't offer a cash discount, but I suppose if you are a "Top Dentist" you don't have to ... or maybe offering cash discounts just isn't as common here in Austin as it was in Seattle.

3. New Account Bonus: Haven't received my $75 prepaid Visa gift card from Wachovia yet (for opening a new account), and it's been 6 weeks... They said allow 4-6 weeks. Guess who I'll be calling tomorrow? Did they think I'd forget? They don't know who they're dealing with!

(Update: Oops --- It's only been 5 weeks! My bad.)

4. Interest Rates: I have a CD maturing Friday. This is a little reminder to myself to try to not get upset when looking at renewal rates and deciding what to do with the CD funds. I already know rates are down, and I can't control the rates. I can negotiate but I can't control. I'll do the best I can and try to be thankful and proud that I have money in the bank.

5. House Hunting: Our current lease will be up in a couple months, so we are at a point where we have to decide if we want to renew the lease (and if so for how long), give notice, or go month-to-month. We went back to look at one house yesterday that we liked and was a good size & price, but ruled it out because of location (nice neighborhood, but in the middle of nowhere). It was disappointing because I had pretty high hopes for that one. Oh well. There are still two houses on our "short list," but I think both are more than we ought to spend, are too big, and will require too much ongoing expense in terms of maintenance, property taxes, etc. So, I am going to step up my efforts to find something small and affordable that DH will like.

There's quite a bit of advice out there about how to avoid buying too much house.

But what I've been pondering lately is whether you can buy too LITTLE house? By little, I'm referring to house value, not size.

There are no "rule of thumb" answers to this question that I'm aware of, and as far as I know none of the mainstream PF writers have written about it. So, this is a "think outside the box" question. Any thoughts or opinions any of you can offer, no matter how off the wall, would be very much appreciated!

As I have pondered this question so far, my answer wavers between "a qualified no" and "well, maybe yes."

I say "qualified no" because there are a few situations where the answer would in my eyes obviously be yes:
- If you are living in a house that is a health or safety hazard (a rat-infested firetrap, for example) and you can clearly afford to buy a better house, then yes, I think you have too little house.
- If you are horribly miserable in your house (family of 8 crammed in to a 1-bedroom house, for example) but you could easily afford a more comfortable house, then yes, I think you have too little house.
- If you buy a house that is very poorly constructed and corners have been cut to bring the house price down, then yes, I think you are buying too little house short-term (tho' given what you will end up paying in repairs, you may be buying too much house long term).

But beyond these fairly obvious (in my eyes) and extreme examples, can you buy a house that is too low in value? As long as the house is safe, comfortable, and well-constructed, does it matter? If I ended the discussion here, it may seem that the answer is "well, no, duh, you can't buy too little house."

But ... Then I start thinking ... Is it possible to have too LITTLE of your net worth tied up in your primary residence?

Historically, house values have kept pace with inflation. You can get better returns than that with almost any other investment, even extremely conservative ones such as TIPS or MMAs. But on the other hand, house value increase does have the advantage of being tax-exempt in many (most?) cases. So this is why I say "well, maybe yes" you can spend too little on a house. Perhaps there is a minimum percentage of net worth you should consider not going below when buying a house?

I'm relying on my memory so this may not be 100% accurate, but I read some Census Bureau data that said the average American household has about 40% of it's net worth in home equity, and the highest wealth households have a bit less than 20% of their net worth in home equity. Does this data mean anything???

And ... When will I stop grinding my teeth when I start pondering how much to spend on a house? Please don't suggest that I stop thinking about it so much. I just can't conceive of making the single-largest purchase of my life without thinking about it from every conceivable angle!

Today DH & I threw out a lowball verbal offer on a house we like. We were pretty sure we wouldn't get the house (we didn't), but we finally decided that we had nothing to lose by making the offer. To tell you the truth, I was more than a bit nervous about giving the builder's rep the offer. After giving myself a little pep talk and summoning my courage, I walked in to the sales office and presented the offer in a straightforward and respectful way, and the rep returned the favor by replying in an equally respectful way why the offer wouldn't fly. He filled me in on some recent sales prices in the area. I left the house feeling better informed about the market than I was when I went in.[In case you're wondering where my Prince Charming was all this time, he turned chicken and decided to wait in the car!]

I guess you could call this "strike one" in our house hunt, but I actually feel fine about it because it was such a good learning experience. And it was a good reminder that it never hurts to ask!

We'll just keep looking and know that eventually we'll find a house that we like where the seller is willing to sell for what we are willing to pay. [The last house we bought, it was the fourth house we made an offer on. How long will we keep looking? As long as it takes.]

"Courage and perseverance have a magical talisman, before which difficulties disappear and obstacles vanish into air." - John Quincy Adams

Housing market ... blah ... blah ... blah!
I'm sure many of you sick to death of hearing about the housing market, right? If so, I understand. However, as I am "on the ground" right now in the market (house hunting), it's on my mind almost constantly, and so I'm gonna keep blogging about it. Sorry.

So much going on since my last update.

1. Went back & looked at the "more than we originally wanted to spend" house that DH was getting dreamy-eyed about. Had a serious talk, and reconfirmed that it is indeed more than we want to spend. It's out of the picture for now.

2. A couple of houses we've been looking at have taken one or two price drops, and still have not sold.

3. We have expanded our search to include not only Austin but also San Antonio and all points in between.

4. A small to mid-size builder whose homes we had looked at and liked stopped all operations last week. Still uncertain whether they will declare bankruptcy or what. They have quite a few homes under construction, some under contract to buyers and some are spec homes. I feel incredibly sorry for those buyers whose homes are sitting there half-finished. What happens in a situation like that? And I feel sorry for the people who live next to half-finished homes when construction ceases; I am guessing that most of them haven't yet figured out what is going on. DH & I had thought we might consider buying a house that was almost finished, but now we are committed to not making an offer until the last nail has been pounded in!

5. We both have a list of our "top 3 houses we have seen so far" and we have 1 house in common. However, we don't feel we have a clear enough grasp of the market yet to make an offer.

6. DH & I have had some disagreements about how far we think the market will fall. But Suze Orman said something on her show about a week ago that we could both agree with: She said that if you could buy a house at 2002 prices, you are getting a good deal. The question for us is how to determine what 2002 prices were. Sales prices are not published here in Texas, and we haven't yet figured out a way to get the hard data we need. Back in good old King County (Seattle), you could find data on what every single home sold for, although you knew there was a bit of fudging because of buyer's bonuses, mortgage point pay-downs, throwing in the appliances, etc, etc. But at least you could get a decent general idea. [Note to Texas Realtors: If you would cease your lobbying against making house prices public record, maybe some of us fence-sitting buyers would climb off the fence and buy that house you are so eager to sell! Since when did non-transparency make a housing market better?]

7. Speaking of realtors ... It boggles my mind when they do not return calls from potential buyers. Two homes we wanted to see, the agents never called back. [In one case I was so interested in the house that I actually called twice.] In a third case, the agents called back 3 days later explaining they had been out of town ... Don't they know how to retrieve their voice mail? [Note to sellers: If your house is priced right and houses in your area are selling while yours is not, take a long hard look at your agent.]

Awhile back I mentioned that I had found a foreclosure house that we would probably be able to get at a greatly discounted price, but that needed to have semi-serious some work done. This house is in a desirable, established neighborhood and has "good bones" but it has some issues that are probably due to the fact that the people were losing their home and just stopped keeping it up.

Took DH to see it ... He looked at it for about 2 minutes and said "NO WAY."

Okey-dokey ... At least now I know that he didn't really mean it when he said he was willing to buy a fixer if it was a great deal!!!

We've been doing TONS of looking together the past week, and I've concluded that, in spite of what he says, he will really only seriously consider a brand new or almost new house that is in great condition. Okay; that's easy; I just automatically rule out any houses over 3-4 years old.

But he has also been showing interest in houses that are significantly higher in price than what we had talked about originally. [Interestingly, my target price that a couple months ago was "way too high" according to DH is now too low according to the same guy! ]

He found one house in particular that he is quite smitten with. I had been in the neighborhood and liked it, and suggested that DH go take a look. There was one house in particular I mentioned he should look at. When DH was on his way home from visiting that neighborhood, he called me. I asked him what he thought of the house and he said ... "Let's talk about it when I get home." All I could think was "Oh-oh!!!" When he got home, he was all sweet, asking if he could pour me a glass of wine, etc. All I could think was "Oh crap! What is he cooking up in that brain of his?" Well, turns out he visited several houses in the neighborhood and fell hard for one that is significantly higher $$ than what we have been looking at.

He took me out to see it, and to tell you the truth, other than being larger than what we would ideally like, it is a perfect house.

So I started crunching numbers. I guess I was hoping the numbers would say that the house wasn't remotely doable for us. Well, it's doable, and doable comfortably, according to the established rules of thumb. Motgage amount isn't a problem, since we'd be paying cash. House price would be no more than 2.5 times our average annual income (and probably more around 2.3 times, if we can get the price we think/hope we can). Property tax payments and upkeep are affordable. We'd still have plenty of cash reserves to keep DH's business running smoothly. We'd still have at least a year of expenses in our EF.

The sticking points for me are that the house would represent a larger percentage of our net worth than what I would like to see (I was shooting for no more than 25% but this house would be about 30% of NW), and we would lose the interest income on the money that would go in to the house. This last one's a biggie.

So, we are grappling with the question that everyone does (or certainly should) when they think about buying a house: What is most important for me when it comes to buying a house?

Since lists help me sort out my thoughts, I made a list of most important features of a purchased house. (If you can think of others, please let me know.):

- The price is cheap = Finances will be very comfortable

- The price can be had for significantly under market (it's a "good deal")

- The house has good investment potential

- The house is brand new or nearly new, in pristine condition

- The house is low-maintenance for an easy lifestlye (think condo as the easiest and go up from there)

- The house is small and/or energy-efficient = good for our planet

- The house is in a good location (safe, nice neighbors, easy to get to where you need to go)

- The house is the sort you would get a lot of pleasure living in = It's what "gorgeous" looks like to you

Both DH and I are struggling to figure out which qualities are must-haves for us. Of course, we'd love a house that is "all of the above" but we are realistic enough to know that at most we can hope to get half of those qualities.

DH reminded me that I am more practical-minded, and that he is more likely to use his 6th sense about these things (makes us a good team, I guess). Fact is, his 6th sense has resulted in some pretty good decisions for us so far. However, I know it would be foolish to make the biggest purchase of your life without really thinking it through first.

So ..... Am I being too cautious/conservative? ..... Is he developing "eyes bigger than his stomach?" ..... Will it take us another 2 years to buy a house? ..... Stay tuned.

Since beginning my househunt, I have run in to just about every type of realtor.

At the high end of the scale are the sharp & courteous (but not overly friendly) professionals who really seem to really know the market. Some are knowledgeable about building techniques, geography, and even interior design.

At the low end are the ones that seem to either ignore me or are distracted by something else, and aren't able to answer basic questions. These tend to be the Mercedes-Benz driving, rhinestone-studded-jeans wearing, French manicure types.

In one instance, a group of FOUR ladies were setting up refreshments at an open house; they were so busy getting ready for "their guests" that they could barely stop to answer the questions of an actual potential buyer that was standing right there. I did fill out the guest registration form, and FIVE days later one of the women called me --- she was not even a realtor but a mortgage broker pushing her services. I tried evading her questions ("No - We don't need help arranging financing" etc) but finally just came out and said we'd be paying cash. She thanked me and said good-bye --- Then, lo and behold, 15 minutes later the agent Emailed me letting me know how pleased she was to have met me --- yea right!!! blech

Well ... anyway ... Today I had a most interesting realtor encounter, like nothing I've ever experienced before. Pretty soon after I walked in to the open house, he was showing me a list of all homes for sale in the area with stats including how long they had been on the market (this is the kind of information I love). He also explained about how different areas around Austin have different types of soil and so construction in some parts is more stable (extremely interesting). He eventually asked "What are you looking for?" (the usual realtor question) and when I replied "a bargain" he paused for a second, kind of stared at me and then asked: "Are time & money on your side?" I replied "Yes" and then he said the words that no agent has ever said to me: "You guys should be looking at short sales and pre-foreclosures" ...BINGO! How did he know that is exactly the kind of thing we are interested in? Very interesting indeed.... Perhaps because he himself was not very polished (a bit of a slob, actually) he knew to look beyoned the fact that I came in wearing a Tshirt, plain tan pants, and no jewelry/makeup/manicure. Or maybe he just got lucky. Or maybe he says that to all the buyers these days. Who knows? We'll see what kind of follow-up he does. I'm still not convinced that I want to work with a realtor, but if I did, it would be someone like that: Someone who gives me hard core information, is trying to help me find a real bargain instead of trying to be my "new best friend," and who really listens to what I say and responds accordingly.

Just added a new category, house hunting, since that is currently one of my biggest PF-related projects.

DH & I spent all afternoon yesterday visiting some new developments in the area, just starting to get a feel for the market. We noticed that some builders were offering pretty significant discounts for 30-day closes which means they are hungry to get cash in their pockets. Since we don't need financing (something we of course will not reveal to any seller's agent until an actual offer is made) and can close any time (we do not care if it is 7 days or 3 years from now) this seems to be a moderately good time to be a buyer.

This afternoon we are going to hit one particular city in the greater Austin area and visit as many open houses as we can.

At this moment, we are not looking for a house to buy, just getting a feel for the local real estate market.

We will probably change this strategy several times before we actually purchase, but as of today, this is our buying plan: If we find a house we like, we would be willing to buy it if we could get it for 25% less than current market price. [That is based on our thinking of how much, given the worst case scenario, prices could drop over the next few years.] So, we will need to find a buyer who is in a bit of a hurry to sell for whatever reason. If they won't sell for that price (25% below what we think is fair market price), we'll just move on to the next house. It's not like there is only one good house out there; there are tons and tons and we can be perfectly happy in many of them. We most definitely won't be buying a house because we fall in love with it! We'll be buying a house that we like and can get a great deal on.

The trick for us will be to figure out what that current market price is!