Fun Bits From WSJ This Weekend

For some reason, the Wall Street Journal still wants my eyeballs. Though my subscription expired in May, I’m still receiving it. That’s fine by me since it’s pretty expensive to get it which is why I chose not to renew.

This weekend had some pretty spiffy articles. If you can get a copy of the Saturday edition, that’s what I’m looking at.

1) Milton & Rose Friedman Interview – They are a charming couple and it’s kind of amazing sometimes to think a Nobel Laureate like Milton Friedman, ultimately is just a really nice, humble old man. Kind of reminds me of one of my favorite professors in college, fiesty and witty even as he turned 75.

2) “The Most Inventive Towns” – GREAT topic! Technically my major is in economic geography, so I am a big fan of AnnaLee Saxenian’s Regional Advantage. It formed the core of my independent study major and it’s the premise of the article. The idea is that geography/region forms some of the basis of why innovative ideas come from specifc locales. For instance, when the article lists its top 20 locations for patent filings, naturally a lot come from Silicon Valley. However, as you reach down into 21-40, you start getting into regions where good state technical universities are located. Brain synergy is very exciting stuff.

3) “New Headache for Homeowners: Inflated Appraisals” – Front page story, beneath the fold. I’m not surprised about inflated appraisals and sellers getting dinged when the appraisal doesn’t come through with the listed price. Right-pricing a listing seems to be an art form and I know I was really glad when my realtor had a funny twitch at a seemingly great apartment we saw. I liked the unit a lot, but I didn’t care much for the neighborhood. After we ran comps at her office, she steered me away from the place since it was overvalued at the listed price, plus given my concerns about safety it wasn’t a good fit for me.

What bothers me is why the lady highlighted in the article, Karen Ammon, wants to refinance her home a twice in 5 years. The first time she did it was to roll up her credit card debt into a cash out refi. I know I’ve been tempted this week to do the same thing, but I know with diligence and discipline, I can pay my credit cards off without paying the sunk costs of another loan closing. In fact, closing would cost me just about the same as my credit card debt, so what would be the point?

Ms. Ammon finds herself 3 years later unable to pay her adjustable rate mortgage with the increase in rates. I’m not necessarily fiscally conservative. I’ve written about my spendthrift tendencies on this blog, but undertaking a mortgage was very serious business for me and I did my homework (See Peter Miller’s book in the sidebar). Let this be a cautionary tale (because I love those!) for readers of this blog. Don’t get a mortgage you can’t afford. Don’t get more house than you can afford. And if you go with an ARM, fix your rate for as long as you possibly can by asking for longer term hybrids (7/1’s and 10/1’s).

I didn’t intend for this to be a rant, but inflated appraisals are going to cause a world of hurt for a lot of folks and there is nothing to be done about it since these were done in the past. I’m really sorry if you’re sitting out there with an inflated appraisal. I can’t offer you a miracle, only some resources where you might find some good advice.

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