Good Night, Mr. Greenspan, Wherever You Are

After living in rentals since my freshman year of high school, it’s official… we now have a close date on our first home. The past few months of watching our house go from a gleam in our construction manager’s eye to a free-standing, equity-accruing habitat for our family has been exciting. It’s been so much fun to take E to the house each week and have him excitedly show us where his bed should go in his new room (even before his new room had walls – I’ve included a few pictures for your viewing pleasure). And on the whole, the process has gone really smoothly – aside from picking paint colors, that is (we’re all right now – no lasting damage done - and finally, I'll have a color beside off-white to stare at all day! As an art major, that's important to me). But one rollercoaster of emotion that I was not quite prepared for – having never done this before – was locking in our mortgage rate.

Back in late spring, when we began seriously looking at the prospect of buying a house within the year, interest rates were low. Not the record lows of previous years, granted, but low. And what with the cost of owning your own piece of the American Dream here in Texas being so dirt cheap, it seemed like a good time to buy. But there was one problem – we were currently renting a house and the lease wouldn’t expire until early 2006. So we clenched our teeth, deleted the real estate bookmarks from our web browser and decided to look back at the end of the year. After all, interest rates were holding fairly steady.

Then we had a visit from our friendly neighborhood HOA (homeowners association) representative. A nice man, but a little creepy, if you ask me. He sends his wife off to work every morning and then spends the rest of the day, as far as I can tell, either in his front yard or very near his front door so as to be in prime position for ambushing people when they pass his house. And on the day of said visit, we didn’t even pass his house. We were just minding our own business in our front yard. He came over to welcome us to the neighborhood (a nice gesture, yes – but I still couldn’t get over his slightly creepy aspect) and proceeded to tell us that the housing prices in our neighborhood were skyrocketing. He had facts and figures and statistics – sadly, he had left his pop-up bar graphs at home. By the time he had finished with us and moved on to the next person who ventured out their front door in his line of sight, we were pretty concerned. We had been confident that prices would hold fairly steady. But thanks to HOA guy, we were no longer sure.

I began to do some research. In one community, the price of a floor plan that we had considered had increased $10,000 in five months! But we couldn’t buy now. We still had about half a year of rent to pay. Then we had an idea. Why not build a house. We would be able to lock in the price when we signed the contract, but wouldn’t have to start paying until it closed some four-six months later. Genius!

So we found a builder and signed a contract and felt extremely clever – especially when our floor plan increase in value $2,000 just a week after we signed the contract. We had gotten in just in time. And we breathed a collective sigh of relief…

…Until the wind got knocked out of us. (Thank you, Mr. Greenspan). After holding steady for months, interest rates began to rise again in September and they kept on rising. We called our mortgage company and found out we could lock as much as sixty days before our close date – or roughly the middle of October. The first day we could lock our rate came and went and I began to feel like I had so many times before in college.

Having to travel back and forth across the continental United States at the beginning and end of each semester got to be a pretty expensive proposition. Getting the best deal was critical. My freshman year – being a novice – my Dad had gone with a travel agent to book our flights. It was an expensive lesson, but we learned quickly that we were better off doing it ourselves. Over the years, I became a pro. I knew all the websites and received email updates of fare changes. But I’ve never been patient. As soon as the fares dropped below $200 round-trip, I would pounce. Then, inevitably, two weeks or so after buying my ticket, a friend would tell me that their tickets cost only $99. I have heard of the existence of these $99 round-trip tickets, but I’ve never actually seen one. Ticket buying became an expensive game of “chicken”. How long could I wait for my tickets? The prices keep going up – should I buy now or gamble that they’ll fall? I’ve never believe in gambling. And I’ve flown round-trip for $200 many times.

And thus it was with our interest rate. After a weekend of nail-biting and one not so pleasant Monday, we decided to lock our rate. I was sure, having seen this type of thing happen before, that the instant we had signed the paper locking in our rate, interest rates would plummet to a thirty-year low. However, I was also sure that were we to wait the Fed would raise rates at least 10 points, we would be unable to secure a mortgage and I would have to tell E that his bed had to stay where it is... in his off-white, un-paintable bedroom.

Although part of me is still waiting for the big fall, I am pleased to report that two days after we locked interest rates rose. And for once I felt secure in my decision to not wait-and-see. Maybe I’ve finally ended up with the $99 dollar ticket. Good night, Mr. Greenspan, wherever you are. And thank you.