My New Blog

The Fed's primary goal is to protect our economy against inflation. But, what do you do with the skyrocketing oil prices that have led to the largest rise in consumer prices in 17 years? Watch out because the Fed may have to increase rates before year end if inflation does not calm down.

Would you want to be in Federal Reserve Board Chairman Bernanke's shoes right now? Daily, we watch our economy and financial markets collapsing. In the first six months of 2008, our economy has lost almost 500,000 jobs (and so many of them in the mortgage and financial industries). Meanwhile, the stock market has lost almost 15% of its value during this same time frame. Recently, our government took over a major Federal Bank and the Fed had to get involved and offer to back mortgage giants Fannie Mae and Freddie Mac with easy credit. So what is the Fed left to do? Let’s hope the media finds something else to talk about so low interest rates can maintain just a little longer.

What does market saturation really mean? Are you watching that fabulous home for sale and trying to figure out what to offer?
Our example, Flossmoor, is a South Suburb of Chicago. Look at the number of homes over $500,000 currently on the Flossmoor Market (46) and see how many have sold in the past 6 months (2). If no additional homes go on the market, based on the past 6 months of sales, it will take 11 years to sell the existing inventory.
Of course, more will sell faster than a decade. The real estate market is a fluid environment. As many variables change, interest rates, JUMBO rates, property taxes, homeowners insurance and down payment requirements alter your purchasing power. Underwriters are studying these saturation times because in their worst case scenario, you foreclose on this property, how long will it take the lender to sell this property? This impacts your rate with your percentage of equity. If the loan amount is 50% vs 70% of the purchase price, you will see some variables in mortgage rate pricing.

Knowing your market specific saturation rate will give you a strong detail in making your offer on your dream house. Traditionally, underwriter will only accept comparable houses sold in the past six months. However, when dealing with unique homes in this slow a real estate market, some underwriters will go back an entire year to get three similar sold properties. Unfortunately, in some situations, an entire year is not far enough for the value for which you are looking. If you have the money for a great down payment, this is the best time in years to buy that dream home!