The Anna Maria Island Sun Newspaper

Vol. 9 No. 15 - December 31, 2008


Lower interest rates helpful to some

Once upon a time, interest rates were the holy grail of the real estate market. If the rates went up, fewer people could qualify for financing and sales would go down. If the rates went down, potential buyers were given more buying power and sales would go up. Well that was in the good old days, today even the Federal Reserve lowering the prime rate to a target range of zero to 0.25 percent doesn’t bring a smile to the face of most people, except maybe mortgage brokers.

In the middle of December the Federal Reserve made even more history than we have been recently experiencing by lowering the prime rate three-quarters of a percent. Prior to the Feds’ move, mortgage rates already started falling after the government launched a sweeping effort in late November to help the United States housing market by buying up to $600 billion of mortgage-related securities and other debt issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks.

This resulted in some select 30-year fixed mortgage rates dropping as low as 5.06 percent with some mortgage brokers quoting interest rates close to 4.5 percent for buyers with strong credit and hefty down payments. In addition, 15-year, fixed-rate mortgages dropped to 4.92 percent.

Although mortgage rates for the average borrower did decline to a 37 year low, averaging 5.19 percent for a 30-year fixed rate loan after the Federal Reserve cut the prime rate, the real beneficiaries of the lower prime rate will be homeowners with adjustable rate mortgages and lines of credit.

Many home equity lines of credit and home equity loans as well as credit cards with variable interest rates are tied to prime rates, therefore, people with these types of loans will benefit from the lower prime. All of this is great news for anyone looking to lock into a 30-year fixed rate mortgage, however, not everyone will be able to take advantage since the interest terms of many home equity loans are already at their minimums, prohibiting a further decline in rates.

It’s predicted that the new lower rates will bring an enormous number of people interested in either refinancing their higher rate 30- or 15-year, fixed-rate mortgages or converting adjustable rate mortgages into fixed rate. Nevertheless, for homeowners who are getting close to losing their homes, lower rates won’t help since only people with exceptional credit scores are being considered, and being in pre-foreclosure will automatically eliminate these homeowners from qualifying. Lower rates on adjustable rate mortgages could, however, help many homeowners who are not yet in the foreclosure process, but are struggling to meet their monthly payments by reducing their monthly mortgage payments.

How much relief will these historically lower rates have on the housing market? Most economists unfortunately don’t expect it to help significantly. Lower rates may encourage some potential buyers to come out from under their rocks, but with the economy as a whole being fluid, even people with the money and ability to qualify for financing are sitting on their hands.

The good news is that we’re entering a new year, and hopefully, the worst is behind us. Maybe we’ll all come out the other side with a different perspective on homeownership, and end the fairy tale with, "They all lived happily ever after." Happy New Year!

Real Estate Transactions
Closed sales between Aug. 18 and Oct. 25, 2008

Anna Maria

102 Magnolia Ave.      Duplex      $1,800,000
619 Rose St.      Single family       585,000
517 Blue Heron Dr.      Lot       525,000
145 Crescent Dr.      Single family       510,000
519 South Dr.      Single family       487,500
305 Magnolia Ave.      Duplex       385,000
244 Gladiolus St.      Single family       340,000

Bradenton Beach

200 Gulf Dr. S. #4      Condo       $675,000
404 21st Pl. N.      Single family       470,000
105 Eighth St. S.      Duplex       300,000
1001 Gulf Dr. S. #3      Condo       275,000
1801 Gulf Dr. N. #237      Condo       259,500
2401 Gulf Dr. N. #2      Condo       158,000
2601 Gulf Dr. N. #528      Mobile       83,400


No recorded transactions

Holmes Beach

518 58th St.      Single family       $1,595,000
689 Key Royale Dr.       Single family       1,150,000
5601 Flotilla Dr.      Single family       630,000
136 49th St.      Condo       596,000
507 75th St.      Single family       575,000
508 Key Royale Dr.      Single family       550,000
203 69th St.      Duplex       530,000
5200 Gulf Dr. #604      Condo       480,000
507 65th St.      Single family       467,500
3013 Ave. F. #U23      Condo       450,000
7700 Marina Dr.      Condo       433,500
7702 Marina Dr.      Condo       433,500
312 64th St.      Duplex       425,000
8004 Marina Dr,      Duplex       340,000
405 Bay Palms Dr.      Single family       316,300
4605 Gulf Dr.      Duplex      295,000
409 72nd St.      Duplex      280,000

Source: Manatee County Property Appraiser’s Office

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