By noon, news of Alan Greenspan's radical inflation-busting rate hike will have filtered into the cars of all the hopeful young couples driving from model home to model home searching for their ultimate abode. By 12:15 p.m., the wife will have pulled out her calculator, punched in their target price, multiplied the new 8.75 percent loan rate over 30 years, gasped, wadded up the preapproval letter, jerked the steering wheel and pointed the whole mess of dejected souls back toward the old home in South Dakota.
By 3 p.m., look for new loan requests to stop flowing into banks and new home permits to stop flowing into government offices. Look for men in power suits (from banks) and ill-fitting golf shirts (from government) dashing toward the nearest Taco Bell, all claiming they're capable of "whipping up one kick-ass chalupa." By 4 p.m., look for the average hourly fast-food wage to have dropped to 25 cents an hour.
By 4:59 p.m., look for human meteors dropping from the skies around the Wells Fargo building. Look for hordes of male real estate agents storming the pawn shops to hawk toupees, only to find mile-long lines of female agents hawking saline bags. And even more grotesque: Look for a piece of litter in Anthem.
And by 5:15 p.m., look for every citizen of Phoenix to hit the road north except for the one sad bastard who put down a huge chunk of earnest money just last weekend to build a new house on which he will now be waiting at least six months to lock in an interest rate.
Yes. I will stay. For I am that sad bastard.
I was blind enough to take the word of people who desperately need me and the millions like me not to fear Alan Greenspan's May 16 meeting. I took the word of people whose very livelihoods depend on my not believing that 9 percent is high and that anything could ever go south in the Phoenix housing market.
If you haven't been following the economy, all predictions outside Phoenix model homes regarding interest rates are gloomy. My wife and I did our research. We forced ourselves to read the business pages.
Unemployment rates slipped in April, meaning more money is flowing to consumers. Production increases were less than projected, meaning there is less stuff out there to buy. More money chasing fewer goods means inflation. And the economy god, the god of Phoenix, the OverAlan, will absolutely not allow inflation to get out of hand.
He's already started putting the brakes on the economy with small Federal Reserve rate hikes. But the economy keeps barreling ahead. So, according to most economists, the rates are going up hard and fast, and they're going to hurt.
Alan feels the best way to save the economy is to stop me from dumping all my potential savings and a huge chunk of my earnings into a house payment. He is my benevolent shepherd, a stern but good father. Bless you, Alan, for trying to save me from myself.
But your guiding hand is frail compared with the lure of the model home.
(They are so, so beautiful, Alan. People just like me have them, Alan. My wife and children would be happy in here, Alan. I pray to you: Must you choose this precise moment to throttle my little overconsumptive vision of the American Dream?)
Anyway, we came to believe rates will be climbing fast very soon. That was one reason we first looked at resale homes. We could lock in the loan now.
In those homes, the selling agents agreed that interest rates would soon be troublesome. We should buy their house quickly. In a few months, a couple of agents mentioned, our money would buy considerably less house.
We walked into one resale open house not knowing the price. We were dazzled by the warm oak and warm yellows and cavernous vaulting and all those upgrades too numerous to mention. A middle-aged woman with strangely luminescent cheeks greeted us.
We were interested. Then she mentioned the price -- way over our heads. Then she pointed to the kitchen table. There sat a business card of a mortgage man. She said this man could get us into our dream house.
She called the man (her husband, we later learned) on her cell phone and fed him our numbers. Like the Oracle of Delphi she began relaying in a rapid babble the conventional rates and ARMS and rates tied to savings. It all could be "worked out," but it should be worked out quickly.
"So things are getting bad?"
"Oh, yes," she said.
We paused, considered and, finally, ran for the door.
We walked through more houses with more stories of impending doom. But after looking at 20 or so resales that somehow all backed up to major thoroughfares, we decided to look at new construction.
With new construction, though, we wouldn't close for five or six or maybe nine months. Interest rates could be at 10 percent by then. We ran the numbers. Bad news. But let's take a peek anyway.
We began the model crawl. Shea, US Home, Continental, Maracay, Kaufman and Broad, and so on down the road. We hit every development southeast of U.S. 60 and I-10 and a few in the Northwest Valley.
And everywhere we went, the interest rate forecast was rosy.
"Well," I said several times, "we're both kind of scared about where interest rates are going."
"Oh, my," one sales rep said. "Don't even think about that. Nothing is going to happen. And if it does -- which it won't -- you just re-fi later."
"And anyway," he continued, "even if rates go up -- which they probably won't -- you're only talking a few extra dollars a month anyway."
My wife chimed in: "We figure at least $100 a month."
"Yeah. Just a few extra dollars," he said, shrugging. (His new Ford Excursion waited outside.)
Sales reps invariably snickered at my Greenspan comments. In two sales offices, several sales reps actually converged on us to laugh when I mentioned Greenspan and interest rates.
Don't worry, they said. It's an election year. The administration wouldn't allow the economy to be killed with high rates because it would kill Gore's chances. Again and again we heard: "It's just a few dollars a month." "You can always re-fi."
Refinance. Refinance. When things get worse they always get better, they said. And most every sales rep had a happy personal story of rebirth through refinance.
They were pouncing on any mention of higher interest rates and Alan Greenspan. And in my mind, the consistency and fervency of the pouncing implied that there had been earlier meetings, closed meetings, meetings to discuss the rise in interest rates and the drop in new building. And at those closed meetings much anxiety was vented. The real estate Dust Bowl of the early 1990s was mentioned to much hemming and hawing. And in the end, although they could not alleviate their own fears, they did create a new encyclical for fielding and diffusing the fears of the masses.
Although my little inner Cassandra kept screaming otherwise, we decided to build a new house. We loved the house. We loved the location. We even liked the sales rep because he was knowledgeable, human-looking, a little surly, and he talked us out of a couple of upgrades.
But it was too much money. And it's just going to become much too much money over the next few months.
But Alan, those models are just so pretty.
Maybe, just maybe, I'm terribly wrong on all this. It may be a case of plain old buyer's remorse. To those sales reps, maybe $100 or more a month isn't a big deal. And maybe they're right. Phoenix's economy has remained strong for several years now. This isn't a recession coming, for God's sake. This is an attempt to moderate an overly healthy economy. Being real estate crazy, Phoenix may bear the brunt of this a little bit more than other cities, but it will be just fine.
Maybe that Apocalypse I envision is, like most prophecies, just a projection of personal anxieties.
But when it's down here on the personal-finance level and you've just committed to the biggest outpouring of cash ever, it's very hard not to feel like the sky is falling.
Whatever the truth might be, just be careful out there, young couples. Study the market, know the forecasts, bring along your calculator and stick to what you know you can afford.
Because you will be told over and over that two plus two only equals three. And I promise you, after enough days in the Phoenix heat and model beauty, you will begin to believe it.