2008 Predictions

So you think you know what's going to happen to interest rates, housing, the economy and the stock market this year?  Compare your guesses to those of the experts in this video (runs 1:44).

So what are your predictions?  We'd love to hear what YOU THINK.  Leave your thoughts below by clicking the comment link.  Your email address will NOT be published here for your privacy.

Housing Prices To Free Fall in 2008

In keeping with our promise not to water down reality in what we cover for you at this site, we bring you news of a Merrill Lynch report released recently that said "The worse housing financial crisis in decades is only going to get worse."

The investment bank forecasted a 15 percent drop in housing prices in 2008 and a further 10 percent drop in 2009, with even more depreciation likely in 2010.

By contrast however, the National Association of Realtors (NAR) expects housing prices to remain flat in 2008.  NAR did cut its home price estimate for the current quarter, however, to a 5.3 percent year-over-year decline, which represents the steepest drop in that price measure on record.  But NAR sees an uptick in home prices in the last two quarters of 2008.

The current housing crisis and the depreciation in home prices have pummeled the economy, with businesses and consumers cutting back on spending, raising the specter of a recession.

But for those who think that the worst is over, Merrill Lynch said that housing prices still remain comparatively high. The brokerage believes that home prices are still far above historical norms when compared to other measures such as rent or GDP.

Merrill Lynch believes that housing starts will most likely slide another 30 percent by the end of 2008 - a historic low.

We'd love to hear your comments and thoughts on the current market.  And what about the Fed rate cuts?  Do you think it will help stimulate the economy and the housing industry?  Leave us your comment below.  Your email address will not be published here for your privacy.

House or Condo: Which is the Better Investment?

Although houses historically appreciate better than condos, occasionally the reverse happens.  It's really a case of supply and demand, driven by demographics.

Typically, condos appeal most to the youngest and oldest segments of the population.

But keep in mind, one of the downsides of condo ownership is that you have limited control over the expenses you'll pay in common with other owners through homeowner association fees and assessments.  You have no control over insurance costs, and special assessments an association management company may impose to replace a roof or upgrade landscaping, and with a single-family home, you control these things.

As the owner of a single family home, you definitely have more control over your expenses, at the very least, giving you an opportunity to shop around for the best prices on things relative to your investment.

To determine whether a house or condo is best for you, talk to us.  We'll help you decide what's right for your particular situation.

Super-Secret Budgeting Tips

Among the most common New Years resolutions is to sticking to a budget.  If that sounds familiar, you'll appreciate this story:

Money reporter Stacy Johnson provides some expert guidance when it comes to tracking the family finances. (Video Runs 1:33)

If you have a comment or question about this video, please use the comment link below.  Your email address will never be published here for your privacy protection.

Should You Buy Points or Not?

Make sure you understand what points are.  Points (or discount points) are simply pre-paid interest.  One point amounts to 1% of the total mortgage.  If you have a $100,000 mortgage, one point costs $1,000.  That's pretty much all there is to it.

So why would anyone want to "pre-pay" interest?

You pre-pay interest to get a lower interest rate for the life of your loan.  And because points are pre-paid interest, you can, in most cases, deduct them from your taxes in the year you pay the points.  That's a nice one-time tax benefit!

To find out if buying points will pay off for your situation, here's some simple math you can do:

Let's assume you are considering two options on the day you want to lock your mortgage interest rate:

• a 5.25% mortgage interest rate that costs you one point.
• a 6% mortgage interest rate that costs you zero points.

In this scenario, you would pay 0.75% (3/4 of 1%) less interest on your mortgage each year with the 5.25% option. To get this rate, you have to buy one point upfront.  Divide the total points paid (one, in the example here) by the difference in rate (0.75) which, in this example equals 1.33 (one divided by 0.75).  This is the number of years it will take you to break even from your investment in points.  In months, this would be 16.

So, it would take you 16 months to recoup your pre-paid interest money (regardless of your mortgage amount - it's the same whether you have a $100,000 or a $250,000 mortgage) and from then on you would enjoy your low 5.25% for the duration of your remaining mortgage.  If you think you will be in your home more than 16 months, you’re saving money from that point forward.