PRICE REDUCTIONS
3 bedroom 3 bathroom 1800 square foot condo in Sparrow now ONLY $129,000
1 bedroom 1 bathroom condo with garage parking one block from UF now priced at $137,000
4 bedroom 4 bathroom condo close to campus and on a bus route priced to sell at $160,000
Rebecca Johnson Bosshardt Realty Inc. is a full-time Florida REALTOR® who specializes in Gainesville, Florida and communities in Alachua County, Florida. To find out more information about her real estate services please visit www.RebeccaJohnsonRealtor.com or to contact her by phone at 352-275-9900 or by email at Rebecca@RebeccaJohnsonRealtor.com
Saturday, June 28, 2008
Thursday, June 26, 2008
What the Fed decision means for you
For months mortgage rates have shot up while the Fed has slashed interest rates. What's going to happen now?
NEW YORK (CNNMoney.com) -- If you have a mortgage, carry credit cards and are considering a home equity loan to cope with soaring food and energy prices, you should be paying attention to what the Fed has to say. On Wednesday, the Federal Reserve held a key short-term interest rate steady, following a series of steady rates cuts - a move that signals to some that rates are about to change direction. And most assume that means consumer lending rates will rise as well.
But the central bank had cut rates seven times since September in an effort to bolster the lagging economy and spur economic growth. And during that time, mortgage rates were increasing. So what gives? And what should consumers expect loan rates to do next?
How it worksThe fed funds rate is often thought of as a benchmark to set rates paid by consumers on many types of loans, from mortgages and home equity lines of credit to credit cards and business loans. Generally, the Fed lowers rates when it is concerned about the economy slowing and raises rates when it is more worried about inflation. In times of lower interest rates, consumers tend to spend more because of the cheap cost of borrowing. But people incorrectly equate the Federal Reserve's actions with changes in consumer interest rates, cautioned Eric Tyson, author of "Personal Finance for Dummies." There is not a direct connection, he explained, but an indirect one. "Rates are set by market forces and they have been trending higher in part because of inflationary concerns and, in part, because of Fed expectations." So with inflation fears on the rise and many investors expecting the Fed to raise rates again, mortgage rates have already begun to tick higher. Rates on 30-year fixed mortgages have surged to a 9-month high on growing concerns about inflation, according to a recent report by mortgage backer Freddie Mac. And rather than track the fed funds rate, which is the rate banks charge one another for overnight loans, fixed mortgage rates are more closely aligned with the yield on the 10-year treasury note, which offers a long-term look at a fixed investment. While the lagging economy has bolstered the yield on the benchmark 10-year note, it still remains at a relatively low level, Tyson said. Unlike fixed-rate mortgages, adjustable-rate mortgages can fluctuate in response to a number of rates, depending on the terms of the loan. Many are pegged to the Libor rate, an international interbank lending rate. Others follow the prime rate, which is generally three percentage points higher than the federal funds rate (presently the prime rate is 5%).
Credit card companies also tend to move the rates on their variable rate credit cards in line with the prime rate of interest. "Credit cards are generally tied to the prime rate which usually moves in lock step with the Fed's actions," according to Scott Hoyt, senior director of consumer economics at Moody's Economy.com. Why it mattersEven as the Fed leaves rates unchanged, what they say about the economic picture could also influence consumer interest rates in one direction or another. "Most likely they will express concern about inflation," said Keith Gumbinger, vice president of HSHAssociates.com, an online publisher of consumer loan information, which could send consumer interest rates higher as people take that as a cue that the Fed intends to start raising rates soon. So if you are in the market for a house, now could be the time to pull the trigger before rates rise even further. As Tyson points out, yields on 10-year treasury notes are still relatively low, an indication that 30-year mortgages could still be a good deal. Financing conditions for lines of credit, including home-equity lines, will be tighter than they have been for years. "Keep in mind that it will be difficult to leverage your home's value to greater than 90%," Gumbinger said. So if you do need to borrow against your home equity, now might be a better time than in the near-term future. And it is likely that credit card issuers will switch back to variable interest rates to ride the future rate hikes, according to Robert McKinley, CEO of credit-card tracker CardWeb.com. "Consumers should be weighing carefully all card offers they receive in the mail or via the Internet to lock in a good promotional rate or long-term rate, before rates head north again," McKinley advised. If you carry a balance on your credit card, now is a good time to pay that down as well. But generally speaking, "if you have consumer debt you should get rid of that anyway," Tyson said. But since no one can predict for certain what the economy will do, and how the Fed will react, it is generally not a wise idea to make critical financial decisions based on expectations about what will happen with interest rates, he added. First Published: June 25, 2008: 2:30 PM EDT
NEW YORK (CNNMoney.com) -- If you have a mortgage, carry credit cards and are considering a home equity loan to cope with soaring food and energy prices, you should be paying attention to what the Fed has to say. On Wednesday, the Federal Reserve held a key short-term interest rate steady, following a series of steady rates cuts - a move that signals to some that rates are about to change direction. And most assume that means consumer lending rates will rise as well.
But the central bank had cut rates seven times since September in an effort to bolster the lagging economy and spur economic growth. And during that time, mortgage rates were increasing. So what gives? And what should consumers expect loan rates to do next?
How it worksThe fed funds rate is often thought of as a benchmark to set rates paid by consumers on many types of loans, from mortgages and home equity lines of credit to credit cards and business loans. Generally, the Fed lowers rates when it is concerned about the economy slowing and raises rates when it is more worried about inflation. In times of lower interest rates, consumers tend to spend more because of the cheap cost of borrowing. But people incorrectly equate the Federal Reserve's actions with changes in consumer interest rates, cautioned Eric Tyson, author of "Personal Finance for Dummies." There is not a direct connection, he explained, but an indirect one. "Rates are set by market forces and they have been trending higher in part because of inflationary concerns and, in part, because of Fed expectations." So with inflation fears on the rise and many investors expecting the Fed to raise rates again, mortgage rates have already begun to tick higher. Rates on 30-year fixed mortgages have surged to a 9-month high on growing concerns about inflation, according to a recent report by mortgage backer Freddie Mac. And rather than track the fed funds rate, which is the rate banks charge one another for overnight loans, fixed mortgage rates are more closely aligned with the yield on the 10-year treasury note, which offers a long-term look at a fixed investment. While the lagging economy has bolstered the yield on the benchmark 10-year note, it still remains at a relatively low level, Tyson said. Unlike fixed-rate mortgages, adjustable-rate mortgages can fluctuate in response to a number of rates, depending on the terms of the loan. Many are pegged to the Libor rate, an international interbank lending rate. Others follow the prime rate, which is generally three percentage points higher than the federal funds rate (presently the prime rate is 5%).
Credit card companies also tend to move the rates on their variable rate credit cards in line with the prime rate of interest. "Credit cards are generally tied to the prime rate which usually moves in lock step with the Fed's actions," according to Scott Hoyt, senior director of consumer economics at Moody's Economy.com. Why it mattersEven as the Fed leaves rates unchanged, what they say about the economic picture could also influence consumer interest rates in one direction or another. "Most likely they will express concern about inflation," said Keith Gumbinger, vice president of HSHAssociates.com, an online publisher of consumer loan information, which could send consumer interest rates higher as people take that as a cue that the Fed intends to start raising rates soon. So if you are in the market for a house, now could be the time to pull the trigger before rates rise even further. As Tyson points out, yields on 10-year treasury notes are still relatively low, an indication that 30-year mortgages could still be a good deal. Financing conditions for lines of credit, including home-equity lines, will be tighter than they have been for years. "Keep in mind that it will be difficult to leverage your home's value to greater than 90%," Gumbinger said. So if you do need to borrow against your home equity, now might be a better time than in the near-term future. And it is likely that credit card issuers will switch back to variable interest rates to ride the future rate hikes, according to Robert McKinley, CEO of credit-card tracker CardWeb.com. "Consumers should be weighing carefully all card offers they receive in the mail or via the Internet to lock in a good promotional rate or long-term rate, before rates head north again," McKinley advised. If you carry a balance on your credit card, now is a good time to pay that down as well. But generally speaking, "if you have consumer debt you should get rid of that anyway," Tyson said. But since no one can predict for certain what the economy will do, and how the Fed will react, it is generally not a wise idea to make critical financial decisions based on expectations about what will happen with interest rates, he added. First Published: June 25, 2008: 2:30 PM EDT
On the path to a housing rebound
On the path to a housing rebound
The pain that homeowners and homebuilders are feeling now is a sign that things are going to get better.
By Shawn Tully, editor at large
Last Updated: June 25, 2008: 9:08 AM EDT
NEW YORK (Fortune) -- The news that housing starts have fallen to their lowest level in 17 years sounds like one more reason to be depressed about the shrinking value of your home. In fact, it's an almost certain sign that the path to a housing recovery is finally in sight.
If prices are going to stabilize, let alone rebound, the United States needs to produce far more first-time home buyers than new houses. That's the only way to tame the glut of "For Sale" signs dotting front yards from the Inland Empire of California to the Gold Coast of Florida.
Builders constructed far more homes from 2002 until 2006 - the peak bubble years - than could possibly be absorbed by the normal growth in households.
As a result, the market is now swamped with one million new and existing homes for sale that aren't occupied, and hence need to sell quickly. That's a multiple of the figure in most downturns, and it testifies to the duration and girth of the bubble.
"For the recovery to begin, builders need to eliminate the standing inventory of finished, unoccupied new homes," says Mike Castleman, founder of Metrostudy, which assembles sales data on four million subdivisions across the U.S.
The massive overhang of unsold inventory has remained stubbornly high. Sure, builders cut back, but sales dropped just as quickly.
Now that excess supply is finally beginning to shrink. In April, the number of new homes for sale stood at 456,000 according to the U.S. Commerce Department, still a big number, but 93,000 below the mountainous figure a year ago.
The return of the first-time buyer
The key player in any recovery scenario is the first time buyer. The housing market operates with a pronounced laddering or ripple effect. When entry-level buyers flood the market, they not only stimulate production of new homes, they purchase existing homes. Those purchases, in turn, allow the sellers to move up to bigger houses.
But when the first-timers are absent, the entire buying chain gets frozen.
Today, newbies are coming back. Why? For the first time in years, entry-level homes are affordable. Builders have slashed prices, and what they're building tends to be far smaller than the McMansions of the boom, selling for far lower prices. KB Home's average selling price dropped to $248,0000 in its February quarter, versus $267,000 a year earlier. In 2006, KB's basic model in Victorville, Cal., a former boomtown east of Los Angeles, took up as much as 3,800 square feet and sold for $328,000. Today, its stripped down offering goes for $220,000, at less than half the size.
So the first time in a decade renters can carry the mortgage payments and taxes on a new house for what they're paying a landlord. Call it the New Affordability.
Here's how the numbers play out: Single-family housing starts are now running at fewer than 500,000 a year. The normal demand for housing, based on immigration and household formation, is around one million units.
We won't get back to that figure for a while because so many people rushed to buy homes during the boom.
But with first timers returning, sales should rise to almost 700,000 units by the end of next year, according to Bernard Markstein, senior economist for the National Association of Home Builders. That means sales will soon exceed new production by as much as 250,000 units a year.
That margin forms the foundation of the housing revival that comes in four steps.
Step 1: First, the return of first-time buyers will shrink the overhang of new houses for sale.
Step 2: Second, because so few new homes are being built, first-timers will start buying existing homes from owners who want to move up but have been trapped by the dearth of buyers. Their improved fortunes, though, come with a big caveat: The prices of new homes are now lower than comparably-sized existing homes. It's as if used cars are selling for more than new ones. That can't last. So move-up buyers are going to have to accept less than they had hoped to get for their current homes.
They'll get a big break as they trade up, however. Unless they bought at the height of the boom, they'll still sell at a profit. They can then use that equity to buy bigger homes at bargain prices. During the bubble, homebuilders started pushing up home sizes to 3,500 square feet or more. It's those behemoths that are selling for the steepest discounts today.
Step 3: Next, housing starts should start rising, probably next year. The increase, however, will be slow and gradual. For the next two years at least, homebuilders will compete ferociously with existing home sellers for customers.
Step 4: Eventually, the glut of existing homes will disappear as well. The excess of new-home buyers over new homes being built makes that inevitable. But the oversupply is so enormous that the healing process could take as much as three more years. Only then will prices in former bubble markets start rising again.
What could go wrong?
One event has the potential to slow or even derail the recovery: A sharp rise in interest rates. Right now, the first-timers are gorging on 6% loans guaranteed by the FHA. But rates may not stay there.
If they rise to 8% or higher because inflation rebounds, it would take a far bigger drop in prices to make new and existing homes affordable.
The New Affordability is now in place. But if rates rise, we'll have to establish a New New Affordability - at even lower prices.
First Published: June 24, 2008: 10:44 AM EDT
The pain that homeowners and homebuilders are feeling now is a sign that things are going to get better.
By Shawn Tully, editor at large
Last Updated: June 25, 2008: 9:08 AM EDT
NEW YORK (Fortune) -- The news that housing starts have fallen to their lowest level in 17 years sounds like one more reason to be depressed about the shrinking value of your home. In fact, it's an almost certain sign that the path to a housing recovery is finally in sight.
If prices are going to stabilize, let alone rebound, the United States needs to produce far more first-time home buyers than new houses. That's the only way to tame the glut of "For Sale" signs dotting front yards from the Inland Empire of California to the Gold Coast of Florida.
Builders constructed far more homes from 2002 until 2006 - the peak bubble years - than could possibly be absorbed by the normal growth in households.
As a result, the market is now swamped with one million new and existing homes for sale that aren't occupied, and hence need to sell quickly. That's a multiple of the figure in most downturns, and it testifies to the duration and girth of the bubble.
"For the recovery to begin, builders need to eliminate the standing inventory of finished, unoccupied new homes," says Mike Castleman, founder of Metrostudy, which assembles sales data on four million subdivisions across the U.S.
The massive overhang of unsold inventory has remained stubbornly high. Sure, builders cut back, but sales dropped just as quickly.
Now that excess supply is finally beginning to shrink. In April, the number of new homes for sale stood at 456,000 according to the U.S. Commerce Department, still a big number, but 93,000 below the mountainous figure a year ago.
The return of the first-time buyer
The key player in any recovery scenario is the first time buyer. The housing market operates with a pronounced laddering or ripple effect. When entry-level buyers flood the market, they not only stimulate production of new homes, they purchase existing homes. Those purchases, in turn, allow the sellers to move up to bigger houses.
But when the first-timers are absent, the entire buying chain gets frozen.
Today, newbies are coming back. Why? For the first time in years, entry-level homes are affordable. Builders have slashed prices, and what they're building tends to be far smaller than the McMansions of the boom, selling for far lower prices. KB Home's average selling price dropped to $248,0000 in its February quarter, versus $267,000 a year earlier. In 2006, KB's basic model in Victorville, Cal., a former boomtown east of Los Angeles, took up as much as 3,800 square feet and sold for $328,000. Today, its stripped down offering goes for $220,000, at less than half the size.
So the first time in a decade renters can carry the mortgage payments and taxes on a new house for what they're paying a landlord. Call it the New Affordability.
Here's how the numbers play out: Single-family housing starts are now running at fewer than 500,000 a year. The normal demand for housing, based on immigration and household formation, is around one million units.
We won't get back to that figure for a while because so many people rushed to buy homes during the boom.
But with first timers returning, sales should rise to almost 700,000 units by the end of next year, according to Bernard Markstein, senior economist for the National Association of Home Builders. That means sales will soon exceed new production by as much as 250,000 units a year.
That margin forms the foundation of the housing revival that comes in four steps.
Step 1: First, the return of first-time buyers will shrink the overhang of new houses for sale.
Step 2: Second, because so few new homes are being built, first-timers will start buying existing homes from owners who want to move up but have been trapped by the dearth of buyers. Their improved fortunes, though, come with a big caveat: The prices of new homes are now lower than comparably-sized existing homes. It's as if used cars are selling for more than new ones. That can't last. So move-up buyers are going to have to accept less than they had hoped to get for their current homes.
They'll get a big break as they trade up, however. Unless they bought at the height of the boom, they'll still sell at a profit. They can then use that equity to buy bigger homes at bargain prices. During the bubble, homebuilders started pushing up home sizes to 3,500 square feet or more. It's those behemoths that are selling for the steepest discounts today.
Step 3: Next, housing starts should start rising, probably next year. The increase, however, will be slow and gradual. For the next two years at least, homebuilders will compete ferociously with existing home sellers for customers.
Step 4: Eventually, the glut of existing homes will disappear as well. The excess of new-home buyers over new homes being built makes that inevitable. But the oversupply is so enormous that the healing process could take as much as three more years. Only then will prices in former bubble markets start rising again.
What could go wrong?
One event has the potential to slow or even derail the recovery: A sharp rise in interest rates. Right now, the first-timers are gorging on 6% loans guaranteed by the FHA. But rates may not stay there.
If they rise to 8% or higher because inflation rebounds, it would take a far bigger drop in prices to make new and existing homes affordable.
The New Affordability is now in place. But if rates rise, we'll have to establish a New New Affordability - at even lower prices.
First Published: June 24, 2008: 10:44 AM EDT
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