And it could cause inflation to take off and possibility
By Chris Isidore @CNNMoney September 24, 2012: 12:06 PM ET
NEW YORK (CNNMoney) — The Federal Reserve’s QE3 bond buying program announced earlier this month could last until the middle of 2015 and eventually reach $2 trillion, according to an estimate from economists at Goldman Sachs.
The Goldman economists also wrote in a report that they believe the Fed will not raise the federal funds rate until 2016. This rate, which is used as a benchmark for a wide variety of consumer and business loans, has been near 0% since December 2008. The Fed said in its last statement that it expected rates would remain low until mid-2015.
The Fed announced earlier this month that it would buy $40 billion a month in mortgages for the foreseeable future, a plan that has been dubbed QE3 since it is the central bank’s third round of quantitative easing. The Fed hopes that by pumping money into the economy lowering mortgage rates, QE3 could lead to more consumer spending and more hiring by businesses.
Goldman’s $2 trillion estimate also includes the buying of long-term Treasuries planned by the Fed under an extension of what is popularly known “Operation Twist.” In that program, the Fed is selling short-term Treasuries to fund those purchases.
The Goldman economists also said they think the Fed wants to see the nation’s unemployment rate in the 7% to 7.5% range before it ends its bond purchases, and in the 6.5% to 7% range before it starts raising interest rates again. Unemployment stood at 8.1% in August, down from 8.3% in July. But much of the most recent decline was due to job seekers, particularly young adults, dropping out of the labor force as opposed to a pick-up in hiring.
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Proprietary OC Housing News home purchase analysis
$399,000 …….. Asking Price
$315,000 ………. Purchase Price
6/11/2012 ………. Purchase Date
$84,000 ………. Gross Gain (Loss)
($25,200) ………… Commissions and Costs at 8%
$58,800 ………. Net Gain (Loss)
26.7% ………. Gross Percent Change
18.7% ………. Net Percent Change
73.1% ………… Annual Appreciation
Cost of Home Ownership
$399,000 …….. Asking Price
$13,965 ………… 3.5% Down FHA Financing
3.60% …………. Mortgage Interest Rate
30 ……………… Number of Years
$385,035 …….. Mortgage
$100,536 ………. Income Requirement
$1,751 ………… Monthly Mortgage Payment
$346 ………… Property Tax at 1.04%
$0 ………… Mello Roos & Special Taxes
$100 ………… Homeowners Insurance at 0.3%
$401 ………… Private Mortgage Insurance
$0 ………… Homeowners Association Fees
$2,597 ………. Monthly Cash Outlays
($263) ………. Tax Savings
($595) ………. Equity Hidden in Payment
$16 ………….. Lost Income to Down Payment
$120 ………….. Maintenance and Replacement Reserves
$1,875 ………. Monthly Cost of Ownership
Cash Acquisition Demands
$5,490 ………… Furnishing and Move In at 1% + $1,500
$5,490 ………… Closing Costs at 1% + $1,500
$3,850 ………… Interest Points
$13,965 ………… Down Payment
$28,795 ………. Total Cash Costs
$28,700 ………. Emergency Cash Reserves
$57,495 ………. Total Savings Needed
The property above is available for sale on the MLS.Contact us for a comparative market analysis, a cost of ownership analysis, or information on how you can make an offer today!
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