Archive for April, 2008
I was listening to my favorite economist this week, but I had to disagree with him. A favorite economist, you say. Well yes, I may not be able to fathom all of the complexities of the markets, but I have enjoyed the writings of Tim Harford and his commentary on NPR. He has a new book out that I will have to find. I think his work, The Undercover Economist, should be essential reading for the business community or anyone interested in this field.
To save or not to save; oh, that is the question! I have been an advocate for saving on my posts here, but Mr. Harford offers a different view. If you do not have the money, should you save money? No according to this intelligent advisor. He gave this example: saving money when your funds are tight is the setting money aside for your future self. Your future self will be wealthier than your current self anyway, because of improvements in your earnings, so you are setting money aside for when you are going to be wealthier anyway. He likened debt to borrowing money from your future self. This argument speaks to a core belief in many people: I cannot save because I have too many expenses now. Harford’s argument allows you to enjoy this money now.
Why would I disagree with this idea? I imagine in a more in depth format that Harford’s position may be more nuanced, and he may not dismiss my thoughts on the matter. Firstly, there is retirement planning. In the United States, we have been saving far less than needed for our retirement. In the past, with good pension plans, we were going to see a comfortable retirement without having to save on our own. My pension from another job will only offer me $360 per month (if it still is there). Secondly, in this time of uncertainty with your job (will you have one next month, or will you have the income that you need), an emergency fund can be a way to easily handle tough times. Maybe you will not lose your income, but a large expense can put you into financial stress, which frequently leads to a downward spiral in your personal life. I have mentioned having a $5000 savings for home expenses, and financial advisors have suggested having at least three months worth of salary to weather income loss. Studies show that many of us do not have these funds, so I think it is wise to advocate saving toward this goal.
When your money is tight, you need to find ways to cut back on expenses. We generally react to increase prices by cutting back in other areas. Rising food costs lead us to skip going out for a meal. Rising fuel costs cause us to cut down on day trips. We are still spending the same amount of money, but we have changed how we are spending it. I
think that it is in our interest to find ways to reduce our expenses , so we can have those extra funds when needed.
Sometimes I feel that I have not done much in the garden, but when I look back on the week, I find that I did accomplish a bit. I have been walking through my gardens each day to see what might need some help, which is a nice way to nip things in the bud before they become major problems. The cool morning air today was such a relief from the humidity that we have been experiencing. My wife bristled at the chill, running back inside for a sweater. It was not that bad, but I love the chill.
Most of my efforts have been directed towards cleaning up the appearance of the beds. The azaleas have stopped their blooms, so it is a perfect time to trim them back. I do not want these bushes to be overgrown. My Aztec Sweet Herb has run amok, spilling over the edging, as have various groundcovers that are substituting for mulch in certain beds. I pruned them back to the edging for a manicured look, which helps with the fact that my small meadow in the backyard can seem unkempt. Deadheading the roses has helped keep these flowers in bloom. My toddler daughter has been picking flowers from plants within her reach. She has become fascinated with the eggplants though. She has come to realize that these fruits have thorns at their base to prevent being pulled off, so she drags me to these plants every day for assistance. Eggplants do not have a bitter taste when freshly picked. She has been after the peppers too. This caused
me to make a dish with these two ingredients for dinner last night.
Like many people, my family has not dined out too often recently. We were having a good family day yesterday, and we thought that it would be nice to spend the day enjoying each other’s company by going out. We considered where we may go to eat. We thought of buying a shwarma from Phoenicia for a picnic in the park. We were not in town for the opening of the Discovery Green park in downtown, and there are scheduled events each weekend, so we thought that might be a nice option. In the end, we decided that I could make some sausages, with some bread and fruit.
Plans go awry. My son had more homework than expected, and my daughter wanted her nap. We found ourselves on the front lawn. I am glad that so many flowers were on display in my beds. The jasmine scented the air, as did my antique roses. We waved to neighbors, and played with a frisbee and ball. Finally we could dine out, and not worry about the mess that a one year old girl will make with her food. My wife laughed as I scurried off to pick nasturtium, onion and shallot greens, or some other herb for my bread. She complained that I was not growing mint for her mojitos. I mentioned that she was sitting on it. The mint had escaped the bed into the lawn where she was. Oh, is that why I smelled mint, she asked. Complain first, eh? You should learn to recognize your favorite herb was my reply.
There are times when you do not need to do much in the garden, except to enjoy it. The news today reported that the rising cost of rice is causing problems for restaurants and consumers. Food costs have increased, but enjoying life does not need to be determined by the purchase. Just by the fun that you have.
Many real estate professionals are bemoaning how current events are being portrayed in the media, when it comes to their industry. I know that I have done my share of this. We appear to be in a buyer’s market in much of the country, but there are no buyers for homes. In one post, I saw the term that buyers were living in a “2006 fantasy world”, since many buyers have not really listened to the news or real estate professionals thoroughly.
First, a little definition is called for. A buyer’s market is a reference to a situation at the negotiating table for a home. It means that the circumstances for this negotiation favor the buyer. Here are some problems buyers have created for themselves, because they believe that all of the conditions to purchase a home are in their favor. We hear reports in the news that home prices are falling, so buyers are waiting to see if they will drop further. The national price for a home is falling, but this is not true in all areas. In fact, some areas, like my home Houston, have seen an increase in home prices. The fall in the national average is due to dramatic declines in certain locales. This has led to buyers going after homes that are out of their price range, thinking that they can bring the price way down. Most sellers are ignoring these offers. In one instance that I am familiar with, the buyer was looking at homes that were $100,000 above his price range. He seriously believed that he could receive such a steep discount. You have to ask yourself, would you want to loose that money on your home? If you would not, then the seller will not either.
I have witnessed situations where a buyer has taken my inspection report to the seller to ask for all of the repairs to be done. On a home that I re-inspected yesterday, many of these repairs had been completed, which came as a bit of a surprise to me. Generally, sellers are concerned with the big ticket items, and finding a way to have them dealt with. In the current market, there are some sellers who are willing to make every single little repair. However, this is not always the case. Most minor repairs are left undone.
My favorite stories are coming out of the mortgage industry, where the
term “2006 fantasy world” came into play. You see that year was a great year for a buyer to obtain a mortgage. Zero down loans at good interest rates were available. Many of the subprime loans that we are hearing about in the press were made during this time period. Some buyers feel that since conditions are in their favor, that they could obtain their dream loan. Reports of how lenders are pulling back from these offerings are not being heeded. One broker I know had clients who seemed to be serious about the loan, so he went through all of the paperwork. At the end, his clients told him that they were going to shop for a better rate. He attempted to explain to them that rates are in flux, but he was delivering the best rate that he could produce, and that to lock it in, they had to complete the loan. The buyers were convinced that they could do better, so they left his office. Some time later, they come back to his office, stating they were ready to sign for that loan at that specific rate. He informed them that he could no longer provide what they wanted, because the rates had gone up. They were naturally upset that they were no longer getting the best deal; however, they blamed the broker, when he did try to explain to them that he could not lock it in without completing the forms. The buyers only had themselves to blame, but this they could not see.
If you are planning to purchase a home, you should have some money tucked away to pay for a down payment on the loan and for closing costs. Even if there are zero down loans out there, which some lenders still claim are available in certain circumstances, your priority should be to find the best deal. In the loan industry, this has always meant coming to the lender with some cash in the bank. The larger you down payment is, the lower your interest rate can be. To determine your down payment amount, ask about what the closing costs might be (just an estimate; they cannot give you all of the specifics); plan to have some money to deal with the costs of moving
in (for example, if you are new to paying for utilities, they will ask for some money to hold to see that you will pay- this money will be given back to you over time). Then see how much you have left over to use towards the loan.
Good luck in finding your home.
My wife is concerned about the impression we are making. She wants a new coat of paint on the front door to cover some of the minor scratches there. She feels that this is important step in making the right impression on our neighbors. My sister-in-law is discussing a purchase of a front door with an oval window in it for her parents home. She feels that will stand out. A seller is wondering if she should restain her front door to make a great first impression. I am under the impression that we all give only a thought to our entrances.
Walking through a home yesterday for an inspection, I noticed that the homeowner had replaced the door handles to the interior doors. They had some wear, so she had not done this recently. Most homes
have “builder doors” when constructed. These are generally the cheapest or most easily obtainable style of door with hardware to match. We homeowners pay no attention to the fact that we can upgrade these doors for a better appearance. The first step is simply replacing the door handle. A nice unit will cost around $20 to $40. Hinges for doors are frequently painted over at one point, so I would not worry about them.
My sixties era home has interior doors that are made out of wood
products, which is better than the newer version of these doors. I
have seen some that are made from a very shaky plastic material. I have seen wood/plastic composite materials that are very good, but these new doors really cry out their cheap heritage. You can replace both of these doors with a solid wood unit, which are truly nice, but I admit to repainting my doors. I take the time to sand them, and to make the job look good.
I do like the looks that are being produced by manufacturers now.
I have thought about replacing my doors with units that have some type of translucent panel in them. A panel in a door which is meant to let light through is called a light by the door industry, and it is an easy way to bring light into a darkened hallway. At this site from Masonite, you can see all of the variations in the design for a door. I particularly like the chalkboard idea for a kids room. This would be a great way for me to write reminders for my son.
If your exterior door sets the tone for a house, let your interior doors set the tone for your rooms. You do not need to have the same style door for each room, but you may want to stay consistent with your theme.
A bright yellow lace fluttering through my line of sight, seemingly
pushed by the slightest movement of the air. My family is having dessert on the front lawn, on this beautiful, cool evening. My wife is over talking to the woman who just had twins, while my son contemplates his escape on a bike. My daughter and I follow the path of this fairy. There seem to be a few
butterflies staying around the house, attracted by some of the flowers here. I probably like watching the dragonflies more, but butterflies are wondrous creatures.
However, this is an aspect of this creature that I despise: the caterpillar. You cannot have one without the other, but I do long for my
vegetables and other plants to be spared from these ravenous beasts. You may not have thought about this fact, but you may have many edible plants in your gardens that you look upon as ornamentals. Kale is one such plant, that is popular in this regard. There are other plants, like gingers, which are quite tasty to these voracious eaters, so you can easily find that the colorful foliage that you have prized is being eaten away.
My first step is to never turn to pesticides. My children have grown up eating directly from the vegetable beds, so I do not want a poison there for them to ingest. I try taking these pests off of my plants by hand to throw them away. I have also used a method of interplanting various species of plants, so I do not have a monoculture. The butterflies sometimes pass by plants to lay their eggs, because they are misdirected by the other plants, or at the very least, I do not have all of my plants of one type attacked. I spread cedar mulch today. The scent is said to drive insects away, like the cedar used in your closets. I have used this before, and it has worked, but in the past, I found that this mulch was expensive. The price has come down, so it is around the same cost as other hardwood mulches. Be sure you are buying cedar and not cypress mulch. If these counter measures have not succeeded, I turn to BT (bacillus thurengensis). It does not effect humans, but it will wreak havoc on caterpillars.
There are a few other organic solutions , like a soap and water spray, but the above steps have worked for me. If you are interested in other means to control some pests in your garden (and you are in Houston), I should direct you to Southwest Fertilizer on Bissonnet. They have the whole gamut of supplies for your garden at good prices. I have found that staff to be knowledgeable about the products, so they can help find the right concoction for your problem. They have good vegetables for sale too. I particularly like the fact that I can obtain organic fertilizers in bulk here at a good price.
Enjoy your butterflies, but let the caterpillars plague someone else, or just on spot of your garden, set aside for them.
I have been on my own small crusade this week, by advocating that people should stop looking at their homes as a bank, but rather as their greatest investment. The New York Times had an article last week about home equity lines of credit. Lenders slashed the amounts of these credit lines recently for their customers, which caused the clients problems with their credit scores. Lenders have been urging us to use this form of a borrowing, and now they have punished those who took them up on the offer.
This credit turned your home into a cash machine, when you should have looked at it as an investment. Not too long ago, most people saw their homes as their greatest investment. By not taking equity out of it, this investment would grow, and it became an important component in our retirement plans. As businesses moved away from pension funds to 401k or 403b plans, people should have become more cautious about touching their home equity, since they stopped saving for their own retirement. The fact is that most Americans feel it is too hard to save for a secure financial future, or to pay down their debt. We have become accustomed to the lifestyle that credit has afforded us, so we do not save.
If your home is the your greatest asset, should you not take care of it? Many of my home inspections over the last few months have been on foreclosed properties. I realize that these homeowners were (are) facing tough situations, so funds for home care where the last thing on their mind. However, I went over two homes this past week where the owners did have the money, but they did not really check out their home. Items that were apparent, such as a broken water heater, were repaired, but the crumbling chimney was not. There have been a few clients who hired me to inspect their home, simply because they had a problem, and they wanted an answer. You do not really need an inspector for this, but at times it may help.
I have mentioned having funds available for repairs on this blog, but you may wish to consider home warranty insurance too. This insurance is being offered more at the time of closing on a home. It will not take care of the structure, but it will deal with appliances, water heater, and air conditioning systems. The companies providing this insurance have become creative with their policies by allowing you to customize them. I saw that swimming pools could be included. The coverage on these policies will cover the items that homeowners insurance does not, so the two together can provide a good umbrella for your home.
Preventive maintenance is your cheapest route when caring for your home. It is easy to pass by small problems, to eventually ignore them. Once a week, month, or at the most a year, take a quick look at your house from top to bottom, and make the repairs. Fixing locations where water can get into the structure is vital. Moisture damage to the framing is hard to notice, but devastating to the home.
A few years ago, I came across a man who was storing many odds and ends around his shed. His wife was dismayed, but he was pulling in more stuff for his collection. I was a little baffled as to why he would need to save some of these things, and my questioning of this habit led him to take me on a short drive. He showed me a house that had even more items scattered about. He said that the man there had told him that whoever has the most stuff when he dies wins, and he has taken that message to heart.
Most of us do not add to our collections to such a degree, but I seem to be quite a collector myself. I have noticed that over the past few weeks that my neighbors have been taking care of some spring cleaning, which has caused the amount of treasures on the road side to increase. I saw a nice coffee table being left for the garbage men today. It just needed to be refinished. I am not against re-using quite a few items that I see, and I have picked up an object or two. My office suite was obtained at little cost. A firm was moving into one facility, so they were getting rid of the older furniture. I showed up with a U-haul truck to see what I could buy, and the foreman said that I can take what I want for free.
My son has been infected with this trait. Last week he comes home with a nice patio umbrella frame made out of teak. He set about creating a stand for it, and now we need to buy some fabric for it. I am creating some seats from wood planks that were given to me. Some paint and refinishing and we will have a comfortable seating area. In fact, many pieces in my garden are recycled bits. An old bench was repaired and painted, and the glass ball for a lamp has become a garden ball (with a little spray paint) . The shade has become a birdhouse with a little work.
Cleaning supplies, paint, and stain have worked wonders with many older goods. What I really wonder is why these former owners do not do the same? Or why not donate to Goodwill or some other charity? I have been bringing items to Goodwill twice a year for the past few years. Most of the items are not mine. For me it just makes sense to reuse something if possible rather than throwing it into the dump. I see my neighbor is now throwing away old garden furniture, since she has updated her patio. I will go and see if she will let me take to a charity instead. I do not want to win by having the most stuff, but I would like to see some consideration for the stuff we have.