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November, 2009 Newsletter
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CONTENTS:
Introduction: Existing Sales Jump, New Sales Drop
Mortgage Rate Update: Rates Begin to Turn Upward
This Month's Tip: Breathing Room
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Introduction: Existing Sales Jump, New Sales Drop
Existing-home sales bounced back strongly in September with
first-time buyers driving much of the activity, marking five
gains in the past six months, according to the National
Association of Realtors®.
Existing-home sales – including single-family, townhomes,
condominiums and co-ops – jumped 9.4 percent to a seasonally
adjusted annual rate1 of 5.57 million units in September
from a level of 5.10 million in August, and are 9.2 percent
higher than the 5.10 million-unit pace in September 2008.
Sales activity is at the highest level in over two years,
since it hit 5.73 million in July 2007.
Lawrence Yun, NAR chief economist, said favorable conditions
matched with a tax credit are boosting home sales. “Much of
the momentum is from people responding to the first-time
buyer tax credit, which is freeing many sellers to make a
trade and buy another home,” he said. “We are hopeful the
tax credit will be extended and possibly expanded to more
buyers, at least through the middle of next year, because
the rising sales momentum needs to continue for a few
additional quarters until we reach a point of a self-sustaining
recovery.”
In new construction, sales of new one-family houses in September
2009 were at a seasonally adjusted annual rate of 402,000, according
to estimates released jointly October 28th by the U.S. Census Bureau
and the Department of Housing and Urban Development. This is 3.6 percent
(±10.2%) below the revised August rate of 417,000 and is 7.8 percent
(±12.0%) below the September 2008 estimate of 436,000.
The median sales price of new houses sold in September 2009 was $204,800;
the average sales price was $282,600. The seasonally adjusted estimate
of new houses for sale at the end of September was 251,000. This represents
a supply of 7.5 months at the current sales rate.
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Mortgage Rate Update: Rates Begin to Turn Upward
After a long period of generally declining mortgage
interest rates, the averages began to turn upward in
the month of October. According to mortgage company
Freddie Mac, the average for 30-year fixed-rate mortgages
stood at 5.04% at the end of October after beginning the
month at an average of 4.94%. 15-year fixed-rate loans
showed a similar trend, beginning the month at an average
of 4.36% and ending at an average of 4.46%. Nevertheless,
these rates still are some of the lowest rates available
in the last half-century, so those who are ready to make
a move can likely still find very advantageous terms.
For current average mortgage rates, see the rates page.
For more information on mortgages, visit the Mortgage
Section
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This Month's Tip: Breathing Room
For home buyers, one of the few upsides of the Real Estate crisis we
just endured was the wide availability of inventory when sales plummeted.
For many potential purchasers, they had literally dozens of homes--or more--
to consider. Besides the wide variety of choice there was another distinct
benefit: The buyer was much more likely not to need to rush to make a
decision.
With the expense of a home purchase--both immediate and long term--more
time for decisions often converts to savings. There are several examples
of ways that a buyer may benefit as the market befins to make a
transition from a depressed to a recovering market:
+ More time = more choices
+ A better negotiation position due to competition
+ More time to explore mortgage options
+ No pressure to ignore inspections
More time = more choices
Without the fear of "missing out" because homes are selling rapidly, a
buyer has the luxury of investigating more options for their purchase.
In a given area they may find multiple properties that fit their needs.
Not only will it be less likely that they will need to compromise, they
will be able to make comparisons to see which home or homes best fit those
needs. Plus, this goes a long way in easing some of the tension involved
with buying a house, especially if you are being pressured to "buy now
or you will lose out!"
More information
A better negotiation position
The most important financial aspect of a market such as we are seeing now
is the fact that as sellers compete with each other for buyers, the laws
of supply and demand take hold. This puts the buyer in a much better
position--one of strength rather than weaknwss. This does not mean that
you will not encounter sellers "taking a shot" with a ridiculous price--
we see it every day. It does mean, however, that you are much more likely
to find realistic sellers who will be inclined to negotiate in the buyer's
direction in order to make a deal. That becomes a win-win for all involved.
More information
More time to explore mortgage options
Thankfully, the current mortgage market is much less a maze than it was
only a couple of short years ago with hundreds and hundreds of competing
(and confusing) products. Still, since the choice of the mortgage is
close in importance to the choice of the house, exploring and comparing
mortgage options can bring real rewards. Even a seemingly inconsequential
savings of $25 per month will equate to nearly $10,000 in savings during
the term of a 30-year mortgage. Imagine the rewards you would enjoy if
your mortgage explorations found a 15-year mortgage that fit your
parameters rather than one twice as long.
More information
No pressure to ignore inspections
One of the biggest (and, frankly, probably the most boneheaded) downsides
of the Real Estate "boom" was the willingness on the part of some buyers
to purchase a property without the benefit of a whole house inspection.
They agreed to this because the seller demanded it and they were afraid
of lsing the house. The obvious effect of all of this is that thousands
of buyers purchase homes needing major repairs (that they likely were
not aware of) that later needed to be addressed. Since these "no
inspection" clauses were in the "hottest" areas, these repair costs
have and will be spent on houses that have fallen precipitously in
value.
To be clear, never purchase a home without having it inspected unless
it can be demonstrably proven that the selling price, plus the cost of
any and all potential defects and repairs, is considerably less than
current market value. And since the chances of that are virtually
slim and none it means simply this: Don't purchase a home without
having it inspected.
More information
Summing up
The Real Estate boom and subsequent bust has handed home buyers today
a golden opportunity that should not be squandered. Low mortgage rates,
lots of inventory and prices that have dropped measurably in most
areas converts to a once in many, many years opportunity. Don't,
however, make the mistakes of the past by getting caught up in the
fever. We see prices being bid up far beyond what makes sense in
some areas that have hit hit the hardest in the last few years,
virtually guaranteeing that fresh mistakes are being made.
If you take your time, do your homework and make adequate
comparisons, you will be much more likely to make the kind of home
purchase that you will be happy with both now (and most importantly)
as well as in the future.
Next Month's Tip: "Virtual" Home Buying
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The Home Buying Checklist
Many of our visitors have said that one of the most valuable
aspects of the Home Buyer's Information Center is the
Buying Checklist, where they can make sure that all
the bases have been touched. You can find
the checklist
here.
As always, if you have suggestions for improving the
site, or topics you would like to see addressed in
this newsletter (or, if you have used the Home Buyer's
Information Center to successfully purchase a home),
drop us a quick line here.
A special thanks to all those who have written to let us know
that they have found the Home Buyer's Information Center a
helpful resource in their buying process.
Have a great month and good luck in all your endeavors!
The Team at the Home Buyer's Information Center
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