Interest rates are down, Gas prices are down, housing starts nationwide are up, and home prices in the Valley are up, so you know what that means. Yup, the sky is falling yet again.

Affordable homes are vanishing. Vanishing! It must be the Grinch, slinking around with a bottomless bag full of affordable homes. And all the poor Whos down in Whoville--er, Phoenix--are rapidly becoming impoverished by their incredible real estate wealth.

Truly, these are Trying Times...

Here, by way of a metaphor, is a way of understanding real estate reporting as it is practiced in the Valley of the Sun:

The rains in Phoenix are torrential! When a big storm is coming, the clouds will gather all afternoon, piling up hundreds of feet high. You'll look off to the southeast, and it looks like the entire island of Manhattan is about to crash land onto the Valley. But first comes the dust, a thick carpet of brown grit propelled by sixty-mile-an-hour winds. And the first hint of precipitation may not even be rain: Golf-ball size hail is a common precursor. By now the winds will be entirely untamed, ripping away branches and uprooting whole trees, blasting picture windows right out of their frames, even tearing the roofs off of older homes. When the rain finally comes, it drenches, dumping inches of rainfall in a few short minutes. Flood retention ponds overflow. Sewers back up. The washes and floodways rush like rivers gone mad. If you are foolish enough to get caught in the path of the water, your car may be pushed hundreds of yards downstream--or totally submerged. A storm in Phoenix is like a storm nowhere else.

Every bit of that is true, and none of it is relevant. We have three or four storms like that every year, almost always in the late Summer. They're over in a couple of hours and life goes on. Rain is interesting in Phoenix, but one of the things that makes it interesting is that it is extremely rare.

So: Is it possible that a homeowner could live through a 60% run-up in the value of his home and still have financial problems? You bet. Is it likely? Not so much. It is common? Not at all. If you want to insist that, say, 5% of homeowners are in trouble irrespective of all the gifts that wise men bring, we'll go along with that. But the other 95% are a lot richer than they were this time last Christmas--and most of them aren't even doing anything about it.

The same metaphor applies to the argument for so-called 'affordable housing'--which is not news but a political campaign. In fact, thrifty school-teachers and firefighters--the usual designated pity-objects--are buying homes every day. In general, thriftless people are not buying homes--not because the homes are 'unaffordable' but because they have no savings, their credit is bad, and their debt-to-income ratios are too high. How boring the news is when you drill down to the facts.

We should concoct a Grinch-be-gone spray, because these pitiful sob stories never go away. In March of 2005 and again in May, we were entreated to weep along with the Mahlerweins:

Just ask Rebecca Mahlerwein. She teaches in Tempe but can't afford a house in the same city as her kindergarten pupils. The starting salary for the typical elementary school teacher in the Valley is about $30,000. Mahlerwein's husband is also a teacher.

The couple found a house they could afford in the southwest Valley suburb of Laveen, but now Rebecca has a 40-minute drive to her classroom every day.

"I carpool with another teacher so that helps, but it would be so nice to live in Tempe," she said.

Who doesn't commute? But that's beside the point, because we have to look at this situation like Realtors, not newspaper reporters.

First, the Mahlerweins have a combined Adjusted Gross Income of at least $60,000 a year--they're both teachers. With good credit and low debt, they were a slam dunk for a nice house in Tempe. Stipulating that they couldn't get a nice home in Tempe, what does that tell us? Yup, you guessed it.

What they did buy, on July 9, 2004, was a brand-new 1,943sf home with a pool in Laveen, a bucolic near-in suburb with sweet views of South Mountain. They bought the home in Rebecca's name only--this per the tax records--which suggests that the lender for whatever reason didn't want husband Randy on the loan application. In other words, what made Tempe 'unaffordable' wasn't that anything was actually beyond their reach, but that they bought their home with only half their income. Brand-new. 1,943sf. With a pool. Qualifying with only half their income. The poor babies!

Now here's the Grinch-getter for both sets of sob stories, the vanishing affordable homes and those poor, poor house-rich Phoenicians:

The Mahlerweins paid $161,739 for their home. It's now worth $300,000 at least. They put $8,931 down, so their cash-on-cash return is 1,548% in less than 18 months, an amazing rate of return. What's more, if they sell their home, they're sitting on around $135,000 in equity, after closing costs, which is 20% down on a $675,000 home in Tempe. The highest-priced home currently offered in Warner Ranch, a very nice place to live, is $599,900--for 2,813sf with a pool. If they want to, the Mahlerweins can hopscotch from a nice home in Laveen to an even nicer home in Tempe in only one hop. Everywhere but in the newspaper, that would be very good news.

The points are these:

1. Affordable homes are not vanishing, but under-qualified buyers cannot and should not buy homes.

2. Valley homeowners are not poor. They are really, really rich all of a sudden. They should put their newly-acquired equity to work getting even richer.

3. Don't believe everything you read in the newspapers.

4. Don't expect the Grinch to change his ways on Christmas morning. That's just in the storybooks.