With the nation’s remodeling boom in full swing, everyone is out to get the maximum value out of their homes. In order to do so, you’re going to have to pay attention to trends… and not just those of right now. What’s more important is what will be hot when the time comes to put your house on the market.

So think down the road a ways.

After all, like a new car that you drive off the lot, home improvements start to get old the moment they’re completed. How fast their value slides depends on your ability to predict what will appeal to future buyers. The remodeling you do today can look almost as cutting edge five or even 10 years from now if you guess accurately.

Guess wrong, and you are stuck with something no one wants. Not the way to sell a piece of Florida real estate. To avoid this pitfall, here are a few pieces of advice.

HIGH-END HOMES DRIVE THE MARKET
It’s true. About 90 percent of the growth in the remodeling industry over the last decade was fueled by high-end homeowners — defined as those with houses worth $400,000 or more, in 2003 dollars — according to the Joint Center for Housing Studies at Harvard University. Trends hatched in this market tend to percolate down to the middle-class markets, said an expert at the National Association of Home Builders, and eventually are incorporated into the new-home market. If you want to wrap your head around what’s going to be hip five years from now in your neighborhood, tour some open houses in more affluent communities today.

THE X FACTOR
Or at least take them into account. Baby boomers own more housing and spend more on remodeling than any other groups, but an influx of Americans born on their heels — from 1965 to 1974 — is coming on fast. Aging boomers may be looking to downsize and make their lives easier, while a new crop of mid-lifers — Generation X –might be looking for more space as their families grow. Bottom line: Think about features that appeal to both groups.

THINK ABOUT THE NEXT BUYER(S)
Particularly among GenXers, one of the bigger trends in remodeling is people looking to leave a stamp, or personal statement, said Joan Stephens, chairman of the National Association of the Remodeling Industry. These owners don’t want their kitchens or bathrooms to look like anyone else’s. They might invest big bucks in things like custom glass-tile designs or bold-colored counter surfaces and appliances.

These personal statements could date quickly and alienate future buyers, who might detest what you are so crazy about. If you care a lot about resale value (and if you are considering selling in the next 10 years, how can you not), think about more neutral colors for floors, countertops and other hard surfaces. Infuse personality with paint and accessories, which can be easily altered by a new buyer.

Don’t make structural changes that can permanently devalue your home, either. Eliminating a bedroom or removing a tub from a bathroom could drop your property’s value by a lot more than you think. Also, make your remodeling more timeless by matching it to the style of your home.

• A Cape Cod cottage-style home will look better with a cottage-style kitchen, for instance. It adds charm and class.
• Be cautious of any remodel that’s a sharp contrast to the rest of your place.

DURABILITY IS INVALUABLE
Investing in high-quality materials can pay off if they hold up well over the years, said interior designer Juliana Catlin, a past president of the American Society of Interior Designers. A cheap surface might show so many gouges, dings, wear and tear after five years that a prospective buyer will insist you pay to replace it, whereas a well-chosen surface like granite could still be in ti-top shape (and adding value) in a decade.

BEING CAREFUL IN THE KITCHEN
It’s important to use caution in the kitchen, and not just because those plates can be hot!

Seriously, though, what’s hot now is not always going to last… and could come back to bite you. Highly polished granite and stainless steel were the hot trends in the 1990s. Not any longer. The remodeling craze in the kitchen these days is warmth, not sleekness.

Color trends are also tricky to navigate, so a more conservative (but still trendy enough) choice might be installing panels that help refrigerators and dishwashers blend in with the cabinetry. Higher-end appliances are also in big demand, as are stone countertops, as usual.

Homeowners are becoming wary of the drawbacks, however, said Vince Butler, chairman of the NAHB’s Remodelors Council. Granite and other natural stones can sustain permanent stains and damage from cooking oils and common cleaners. Butler recommends more synthetic or engineered stone countertops.

“It may not have the eye appeal [of granite] but I think as people live with it, it may be easier to take care of,” Butler said.

Some are also wondering if this monster/gourmet kitchen trend might begin to taper off, particularly with older boomers wanting less room and maintenance with their real estate.

“I think in the future people are going to be tired of cooking, and it doesn’t make much sense to invest $100,000 in kitchen remodeling if you don’t cook that much.” said Tim Carter, a columnist and former builder whose site, AsktheBuilder.com, focuses on remodeling and construction.

THINK SPA
As in lots of space, big soaking or whirlpool tubs, multiple shower heads or even steam attachments in the shower. That’s the wave of the future as far as bathroom remodeling goes. Dual sinks are a given in master baths, and luxuries like heated floors and towel warmers are making upscale renovators all warm and fuzzy… or something.

Many renovators are putting the toilet in a separate room or partitioned area, while shelling out — big bucks, big time, for custom tile. Just be careful about going overboard if your primary goal is boosting resale value, because as your efforts get grandiose, you aren’t likely to see the biggest difference in monetary returns.

KEEPING IT ACCESSIBLE
Contractors polled by the National Association of Home Builders said that a universal design — making homes more accessible for the elderly and disabled — would be one of the top future trends in remodeling. Since most folks want to “age in place,” making sure they can get around their homes as they age will be increasingly important.

Of course, baby boomers don’t like to be reminded that they are getting older. Fortunately, most aspects of universal design involve fairly subtle changes that add little, if any, cost to a remodeling project. Making your hallways and doorways wider, for example, are aesthetically pleasing as well as more functional changes.

The AARP asserts that universal design can be incorporated into virtually any remodeling campaign. Or you can tackle projects one by one, such as replacing regular doorknobs with lever-style handles, making your shower a “step-in” model, removing thresholds between rooms and adding better lighting. Bottom line: Safer and more convenient is also more aesthetic.

WIPING THE FLOOR WITH YOUR FLOOR PLAN
Open floor plans make smaller homes feel roomier and are not likely to suffer a decline in popularity. The value of additions, by contrast, appears to be waning, according to surveys which show that projects which added square footage didn’t pay off as well as other remodeling efforts for U.S. homeowners. If energy prices remain high and overall home sales decline, that trend is likely to continue.

THE BONUS ROOM
Retiring baby boomers are going to want workshops and hobby rooms to pursue their hobbies and passions. Home offices are also more and more common as people start to work part- or full-time from home. Any extra storage space is also seen as important. You might want to incorporate it into space that also serves as the laundry and/or mud rooms. Adding storage space is a pretty safe bet as far as lasting usefulness is concerned. Americans love stuff!

GOING HIGHER AND HIGHER TECH
Movies, video games and other content increasingly will be delivered via broadband, so it could pay off to install conduit that will help future electricians run wires from wherever the cable or satellite enters to your house to the rooms where you have your computers and entertainment centers. Electronics closets, to house all the home entertainment gear, are also sharp in that they minimize visual clutter. Remote control sensors can be set up so that you can further stash the ugly gizmos. Another techie project that’s hot these days is running speakers throughout the house and even outside.

KEEPING THE COSTS DOWN, INCREASE THE RETURN
As you may know, luxurious home sales are on the rise. But don’t be caught up in all the hype. The nice thing about renovations is that you don’t necessarily have to go all in to get a lot out of many of these efforts.

The good news is that minor kitchen remodels actually seem to pay off better at resale time than major undertakings, at least according to Remodeling Magazine. Someone who spent an average of $14,913 on minor projects in 2005 will recoup an estimated 98.5 percent of the cost if the home sold within a year, whereas someone who spent $81,552 on a massive, tear-everything-out-and-replace-it effort would recoup 84.8 percent of the cost, on average.

In the bathroom, adding multiple shower heads to a shower typically costs just a few hundred dollars, making it one of the most economical ways to add a spa feel. If you can avoid moving fixtures, which adds enormously to a project’s cost, you will be in much better shape. The average bathroom renovation costing around $10,000 would recoup 102.2 percent of its cost within a year, while a $26,000 job would bring back 93.2 percent.

Something to think about. As for the floors, laminated materials designed to look like wood can be less expensive — and more durable — than the real thing. As long as it doesn’t look tacky, it’s a wise move to save yourself the work.

As far as adding overall space, knocking down walls yourself (or with the supervision of professionals, ideally) is cheaper than building a new wing or room. And while you probably won’t want to build rooms devoted to a single use, especially if you don’t have a lot of money to blow on this task, adding shelves or cabinets is a great and inexpensive way to increase a room’s functionality. For tech upgrades, adding speaker wire is an inexpensive do-it-yourself job. It is also cheap to add conduits yourself, if you’ve already got walls torn open.

Otherwise, save your money.

Of course, if you are looking into financing a property with a Florida home loan, and are feeling like the area’s high prices are stretching your budget plenty as it is, you might be better off looking for some bargain Florida real estate with some imperfections. If you are looking for ways of freeing up capital to finance some renovations you think could yield big-time returns when it comes time to re-sell, think about tapping your home equity.

According to the National Association of Realtors, sales of existing houses were down last month - while home prices continued to appreciate at double-digit rates. This is not a great combination for anyone on the search for a reasonable Florida home loan.

Total existing-home sales – including single-family, townhomes, condominiums and co-ops – declined 2.8 percent to a seasonally adjusted annual rate1 of 6.56 million units in January (from an upwardly revised pace of 6.75 million in December). Sales were 5.2 percent below the 6.92 million-unit level in January 2005.

David Lereah, chief economist for NAR, said sales are tracking the trend in the association’s Pending Home Sales Index.

“Our leading indicator, based on pending sales, has been trending down since hitting a record last August,” he said. “In the wake of interest rates peaking in November, we are in a bit of a trough that may be followed by a modest rise and then a general plateau in the level of sales activity. Existing-home sales should stay below the record levels experienced over the last two years, but they’ll maintain a historically high pace.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage was 6.15 percent in January, down from 6.27 percent in December; the rate was 5.71 percent in January 2005.

The national median existing-home price for all housing types was $211,000 in January, up 11.6 percent from January 2005 when the median was $189,000. The median is a typical market price where half of the homes sold for more and half sold for less.

NAR President Thomas M. Stevens from Vienna, Va., said home prices continue to show the long-term effects of tight supply: “Although housing inventory levels have been improving, it is far from being a buyer’s market in most of the country and we see the momentum of double-digit appreciation being sustained in home prices.”

This isn’t the case everywhere, of course. Orlando saw record home sales last month, indicating that Florida home loans are in solid shape.

Priced out of many Florida real estate markets and tired of the violent storms, many of the state’s residents are looking elsewhere in the Southeast to get more bang for their buck.

With appreciation rising faster than new buyers’ salaries can keep up with, real estate markets in some unexpected and long-overlooked places are starting to boom as a result. In Eufaula, Alabama, a picturesque lakeside town with a rich history and a slower pace of life, the housing market is suddenly red hot.

“Eufaula is centrally located in the state, we have such warm weather year round, and 680 miles of shoreline,” says Dianne McLaney, a Eufaula realtor.

Shoreline real estate along nearby Lake Eufaula, on the Georgia line, is being developed at an astounding rate, with local business skyrocketing in the last two years.

“About two years ago our market really picked up. It initially kicked off with a lot of waterfront interest,” Bob Powers, of the Eufaula Agency, said.

In a case of price appreciation that would make even Palm Beach County real estate investors impressed, some Eufaula homes have increased five-fold in value over the past year alone. Property in one subdivision is going for as much as $400,000, and even that’s not enough to stop buyers from clamoring for their parcel.

So exactly who’s doing the buying? Local real estate agents say it’s a healthy mix of retirees, families, and migrants. Some are looking for a permanent place to grow their roots, others for a vacation property. Many are hurricane-weary Florida residents looking to put their money to work and enjoy a more affordable, less volatile way of life.

For now, realtors in the area are not worried about the population boost. They say the influx of transplants shouldn’t have too much impact on the way of life in Eufaula, which lies only about 75 miles from the Florida state line. It seems many Floridians tired of waiting for mortgage rates to lower housing prices in the Sunshine State are considering less expensive alteratives such as Alabama and South Carolina real estate.

Contrary to earlier reports, Mayor John Peyton is worried about Jacksonville’s housing affordability. His recent challenge for the Northeast Florida financial and business community - to have 10,000 units of housing in downtown Jacksonville by the year 2010 - was met with both praise and skepticism from community and industry leaders.

Officials point to the successfully completed projects of Berkman Plaza as proof that housing momentum is picking up in the downtown area. A development report issued in December by Downtown Vision Inc. lists 20 proposed downtown projects that involved residential housing.

Concerns over Jacksonville housing projects

The concern remains, however, that luxury home sales have taken priority over developing a downtown market that will be affordable to buyers in middle-income brackets. Large-scale public funding limited to such projects as the Carling and 11 East Forsyth has had community members questioning how far the city will go to reach its projected goal.

“We felt that it was appropriate to use public funds to jumpstart the market on this type of housing,” said Susie Wiles, spokesperson for the Mayor’s Office. “We do not feel, however, that it is necessarily the government’s role to continue to do so. It is time for investors to step forward and help with these needs.”

Executives at the Jacksonville Economic Development Commission are banking on stepped-up marketing efforts and more specialized incentives to encourage investors to do just that in the future.

“The market-rate housing issue is one of our top three project objectives for this year. We want to facilitate as many projects as we can, and we’re very anxious to get out there and work with developers,” said JEDC Executive Director Ron Barton.

What is market-rate housing?

Market-rate housing is defined as housing that accounts for about 25 percent of household income. In Jacksonville, that is the equivalent of either a condominium unit priced at $100,000 to $200,000 or a one-bedroom apartment that rents for about $700 per month.

“People who buy market-rate or affordable housing, typically those with a median income, represent about 60 percent of the market,” said Ray Rodriguez, an independent analyst and owner of the Real Estate Strategy Center of North Florida Inc.

Of the 20 proposed downtown residential projects in Jacksonville listed by Downtown Vision, less than one-third include plans for housing that would be in the market rate or workforce range.

The future of affordable housing

Projections for 2007 have market-rate housing remaining at 15 percent, but show luxury housing increasing to 38 percent and affordable or workforce Jackonville housing dropping to 2 percent. Two luxury condominium projects are currently under construction on the Southbank of the St. Johns River.”Patience is the key when it comes to downtown development,” said Amy Harrell, director of business development and communications for Downtown Vision. “Of the market-rate housing we have now, occupancy is in the 80 percent range and continues to climb. We anticipate it being near 95 percent in the next few months.”

The issue of affordability is of great concern to anyone seeking a Florida home loan across the state. If Florida real estate continues to remain too expensive, buyers and investors may turn elsewhere.

Buyers, beware! As you set out for a Florida home loan, make sure it’s one you can afford and avoid being the next in a growing line of home owners to default on their mortgage.

According to a recent report, foreclosures jumped 27 percent in a single month - and 45 percent in the past year. These numbers represent the trend of a couple growing concerns: rising rates and softening home prices that are lowering the boom on home owners, as indicated by RealtyTrac.

“This is the first time since we introduced the report in January of 2005 that we’ve seen back-to-back months with increases of more than 20 percent,” said James J. Saccacio, chief executive officer of RealtyTrac.

And you can’t merely blame this on the seasons.

“While some of this might have to do with the seasonality of normal real estate cycles, it appears that rising interest rates and softening home prices are beginning to push foreclosure inventories close to the historic average of one percent of all us households,” Saccacio added.

Georgia had the highest foreclosure rate of any state - one new foreclosure for every 422 households. The foreclosure rate jumped 144 percent in a single month as the state reported 7,342 properties entering some stage of foreclosure, more than twice the number reported in December.

Moreover, foreclosures are not an equal opportunity financial problem.

Foreclosures among minority home owners are often higher, perhaps due to the growth in the subprime market which offer loans at higher interest rates than prime loans which are designed for the most creditworthy consumers.

Unfortunately, numerous studies have shown that minority borrowers are often targeted with subprime home loans, even when they could easily qualify for prime Florida home loans.

According to a recent New York Times report, Cleveland State University research found that in Cuyahoga County, Ohio, the ratio of auctions to regular sales was 23 per 100 last year in the eastern portion of the county, which is 52 percent black and 7 percent Hispanic. That was up from nine foreclosures per 100 regular sales in that area in 1995. In the 82 percent white western portion of the county, the ratio was 11 foreclosures per 100 homes sold, up from 2.5.

The Times also reported that the number of Chicago foreclosures has tripled since 1993. Neighborhoods where the population is more than 80 percent non-white account for 65 percent of all cases, up from 61 percent in 1993.

The increases in foreclosure rates could be the first wave of financial disruption in other communities including Philadelphia and Atlanta where minority neighborhoods are loaded with subprime adjustable rate mortgages (ARMs) expected to jump to higher interest rates in the coming years, according to analysis of data lenders must disclose under the federal Home Mortgage Disclosure Act.

Other higher foreclosure rates are expected in generally high cost regions with or without minority communities. RealtyTrac also found that along with Texas and Georgia, five states reporting the most new disclosures in January included Florida, California and Ohio.

With the nation’s most effervescent local markets simmering down, the overall real estate focus is turning to something much more fundamental: Florida home equity.

• How big is the home equity cushion you are sitting on?
• How much more is your home worth compared with the debts you’ve got loaded on it (in other words, your first and second mortgages, and additional lines of credit)?
• Do you have a 20 percent equity stake? Less than 10 percent?

The common perception is that Americans are turning into debt fiends, unwisely depending on exotic loans, hocking their houses to the hilt, and banking on the pattern of double-digit appreciation rates to bail them out. But a new analysis of home equity holdings suggests that the reality is much more balanced, according to syndicated columnist Kenneth Harney of the Realty Times.

It is true that a surprisingly large percentage of recent home buyers are sitting with minimal (even negative) home equity levels. But on the other hand, and for the most part, homeowners have substantial net equity holdings — a record $11 trillion, almost double what they amassed just five years ago. The results were garnered from mortgage and real estate valuation databases maintained by First American Real Estate Solutions of Santa Ana, Calif., a giant title insurance, credit, and settlement services company.

Appraisal or valuation information on 26 million homes in 36 states, plus loan file data on approximately 20 million active mortgages originated in 2004 and 2005, was used in the study. Some findings do correspond to the stretched-thin, debt-laden portrayals of today’s homeowners and borrowers by the media:

• Nearly one out of 10 was in a zero or negative equity position as of Septembe 2005. Five percent were in negative territory by more than 10 percent — in order words, their combined mortgage debts exceeded their home’s value by more than that amount.
• Nearly 30 percent have equity cushions of less than 20 percent.
• About 44 percent have less than a 30 percent cushion.
• To use some state-by-state examples, more than 28 percent of Colorado buyers or refinancers had less than 5 percent equity in their properties, with about 24 percent of Ohio owners in the same situation. These circumstances apply to 13 percent in Washington, D.C., and around 11 percent in California and Florida.

Equity levels are important measures of financial health and a key component of net worth. The less equity one has, the more vulnerable one is to economic shocks and rising mortgage rates. An owner could find himself walking away with little or nothing at the end of a sale if forced to make one quickly, and a decline in property value could send those with smaller equity stakes to the negative side.

Overall, however, the state of home equity holdings is not nearly so dire. The First American study cites Federal Reserve research which found that most of America’s homeowners have plenty of equity — 57 percent, on average, as of the third quarter of 2005. The figure was practically identical — 58 percent net equity — five years ago, when the housing boom kicked into high gear.

Household equity varies by how close mortgages are to maturity, among other factors. Eight out of 10 people who took out their mortgages in 1985 have equity stakes of 75-80 percent, thanks to paydowns of principal as well as overall price inflation. Similarly, sixty-five percent of borrowers whose loans date to 1990 have 50-55 percent equity, while about half of those who bought or refinanced in 2001 have grown their stakes to 25-30 percent.

The most recent borrowers tend to be the thinnest, thanks to high home prices, piggyback loans, “option” plans, low down payments and other factors that limit the accrual of equity. Nearly 30 percent of 2005’s borrowers are in 0- (-5) percent equity positions. Some of those low-equity homeowners who face hefty payment ”resets” on interest-only and negative amortization loans in the coming two to three years may end up in a bind.

But most need not worry, and if you do, you can still stave off the damage. The bottom line? If you have a low-equity Florida home loan with a reset coming in the future, plan ahead now. Make sure you are in position fiscally to handle what’s in store. Do not risk the equity you already have, plus the equity you’re almost certain to grow in the future, by failing to see the big picture.

In the wake of a scandal at another government-sponsored agency, Fannie Mae, Freddie Mac shrank its retained portfolio for the first time in three months in January. It’s now contracting at an an annualized rate of 9.9 percent to $704.2 billion.

Alan Greenspan, then-chairman of the Federal Reserve, last year told the House Financial Services Committee he sees “no reasonable basis” for Freddie Mac to hold enormous mortgage portfolios.

Both the White House and Greenspan have said Fannie Mae and Freddie Mac pose a risk to the economy because they have grown too large. Legislation to curb the company’s mortgage holdings is currently under consideration in Congress.

“The portfolio decline was mainly a product of our desire to be opportunistic, and the spreads between mortgage-backed securities and agency debt were not conducive for growth,” said Michael Cosgrove, spokesman for Freddie Mac. “The tightness of spreads gave us fewer opportunities to grow.”

Freddie Mac’s contraction in January primarily stemmed from the company holding fewer of its own fixed-rate mortgages, called participation certificates, or PCs, in its portfolio. The company also held fewer agency and non-agency securities.

Both Freddie Mac and Fannie Mae have been rocked by accounting scandals. In December 2004, Fannie Mae replaced Franklin Raines, its chairman and CEO, who announced he was taking early retirement, and Fannie Mae’s chief financial officer, Timothy Howard, resigned Dec. 21.

You may have noticed that Miami real estate — specifically, preconstruction — has been the center of attention in the press lately. There have many predictions about the future of this dynamic market, and Miami preconstruction investor and realtor Andrew James has shed some light on what this investment craze is all about, and what he sees happening in the near and distant future.
Essentially, preconstruction investing is buying real estate properties prior to their construction. A condominium that will be built in two years, for example, can be purchased with a small deposit now — to hold the condo and, ideally, capture the price appreciation during the two years, which is the time it takes for the condo to be built.

Miami preconstruction is particularly attractive to investors because there are no “carrying costs” during the two years until the condo is built. There is no Florida home loan, no taxes, no expenses at all. A buyer does not need to manage tenants or qualify for mortgage. Developers will sell you a unit regardless of what your credit report looks like.

It is easy enough to calculate your return on Miami preconstruction real estate investing. If the Florida condo is priced at $500,000, a developer will require a 20 percent deposit in most cases. You will usually be asked for 10 percent at contract time and additional 10 percent as construction begins. So you are looking at putting $100,000 down overall.

If that seems like a lot for a building that does not even exist yet, remember that the Miami real estate market has been appreciating over 20 percent annually. Using that rate, the condo that has not been built yet would have already appreciated from $500,000 to $600,000 at the end of one year. Which means you have made $100,000 already on your $100,000 investment. That is a 100 percent return in one year.

Be aware of the fact, however, that developers are financial managers out to make you money, but people in the business of building real estate. They understand the real estate market and they make the most profit by selling for the highest price, so investors not making the right decision could be burned if they do not take this into account. So, do your own research, then find a good Realtor that understands the market and preconstruction in particular.

Contacting the developer directly is taking a big risk, as its sales staff has no loyalty to you at all. Go with a knowledgeable local realtor, who will be paid commission by the developer (so your price is the same), to get a good and safe deal. As a simple rule, waterfront real estate is the safest investment. Many transplants move to the area each year and most will be angling for waterfront or oceanfront Florida real estate.

Miami real estate has been very rewarding to its investors over the long run, but prices are always controlled by greed and fear — the primal emotions that drive economic markets. So use caution and think it through. Rising Florida home loan rates might not have great impact on Miami real estate, however, since it is such an international market. Droves of domestic and international buyers (who are enjoying the extended buying power from the weak U.S. dollar) are still investing heavily.

Savvy and long term investors who exercise proper risk management will thrive. Remember this cardinal rule if you are considering Florida home loans and real estate investments.

As the economy is off to a roaring start in 2006, potential home buyers and sellers must be wondering how this will affect future deals. Many economists are saying the Federal Reserve will raise interest rates in the months ahead.

The latest forecast from the National Association for Business Economics has gross domestic product growing at a robust 4.5 percent annual rate from January through March. If this proves to be accurate, it would mark the best showing since the July-through-September period in 2003, when the economy expanded at a blistering 7.2 percent pace.

The beginnings of recent economic growth

Growth slowed to a crawl over the final quarter of 2005. The 1.1 percent pace was the most sluggish in three years. Reasons for the slowdown included lingering fallout from the Gulf Coast hurricanes, along with belt tightening by consumers and businesses.

“Our forecasters expect the economy to shake off the effects of last year’s hurricanes and surging oil prices,” said the association’s president, Stuart Hoffman, chief economist at PNC Financial Services Group.

The forecasters predict this robust growth will lead the new chairman of the Federal Reserve, Ben Bernanke, and his central bank colleagues to raise interest rates at least twice more this year. Bernanke will preside over his first interest-rate meeting on March 27-28.

For nearly two years, the Fed has tightened credit to keep the economy and inflation on an even keel. The most recent rate increase came on Jan. 31, at Alan Greenspan’s last meeting as Fed chairman. A key interest rate controlled by the Fed now stands at 4.50 percent, the highest in nearly five years.

The future of interest/mortgage rates

Economists, including some who had been uncertain about the future direction of rates, now say this rate will climb to at least 5 percent this year. After that, analysts say, the Fed probably will take a break and leave rates alone for a while.

In 2007, however, the forecasters predict the Fed gradually will start lowering this rate.

For all of 2006, the forecasters expect the economic growth to be around 3.3 percent. That would be a solid performance, but slightly below the 3.5 percent increase in GDP in 2005. Economic growth in the first half of this year is expected to be better than the second half.

The economy should expand by a respectable but slower 3.1 percent in 2007 as the toll of higher borrowing costs, a slowing housing market and elevated energy prices is felt, according to the association.

In terms of risks to the economy, forecasters rank rising energy prices as the biggest potential wrench. Increasing interest rates and falling home prices were other potential risks. Long-term interest rates, such as mortgages, have stayed at relatively low levels in the United States even as the Fed has boosted short-term rates.

If these long-term rates were to jump sharply or if housing prices, which have risen rapidly, were to fall, it could spell trouble for the housing market, overextended homeowners and the overall economy.

For now, however, individuals/families seeking a Florida home loan have every reason to believe that 2006 will be a stellar year in the real estate market.

Due to a recent drop in long-term interest rates, overall home sales should see an increase in the near future - but one segment of the housing market that’s remained stronged throughout ups and downs elsewhere is that of the million-dollar-plus homes.

Americans are buying properties that are bigger and contain more luxury features than ever. By some accounts, this is now the strongest segment of many housing markets.

Pamela Liebman, CEO of The Corcoran Group, a leading real estate brokerage in New York City, Long Island, New York and Florida, says, “A lot of money is going into high-end housing. Buyers just don’t want to compromise their desires.”

A lot of those desires have filtered down from the luxury home market to more mundane residences. This has contributed to a jump in single-family home prices of more than 13 percent this past year. The median U.S. home now costs about $214,000, according to the National Association of Realtors.

Leading the expensive home charge

The largest areas of million dollar homes cluster in and around big coastal cities and posh beach and mountain resort communities. Among states, California had the highest percentage of million-dollar homes the last time the Census Bureau reported; 4.1 percent of all Golden State homes were worth a million or more at the end of 2003.

Other centers of high million dollar home ratios as of December 31, 2003 include Connecticut (3.3 percent), the District of Columbia (3.2 percent), and Massachusetts (2.2 percent).

So, what can buyers expect from these purchases? In expensive Santa Monica, it might only buy a two bedroom teardown on a vest-pocket lot. In much more reasonable area, such as Dallas, it could buy a 5,000 square foot mini-estate with six bedrooms, five baths, in-ground pool and spa.

The growing need for home improvement

Americans everywhere continue to make their homes bigger and better. Harvard’s Joint Center for Housing Studies reported in January nearly $150 billion, a new record, was spent on home improvement in 2005. This was up 4.3 percent from remodeling costs in 2004.

Low mortgage rates fueled the home improvement mania, according to the Joint Center report. Many homeowners refinanced their loan when mortgage rates cratered and some owners took out extra cash to pay for home improvements.

Mortgage rates have been on a slow upward trajectory lately, however, which could lead to fewer cash outs and home renovations, as well as a dampening effect on home prices. This trend of million-dollar home loans may have already begun decreasing. Median home prices in the second half of 2005 grew much more slowly than the first half.

The forecast for 2006 home prices from the National Association of Realtors calls for much more modest increases, more in the mid-single-digit range. Those seeking a reasonable Florida home loan can look forward to this drop in their direction.