Home homebuyer april03

homebuyer april03

April, 2003 Newsletter

+++++++++++ April 1, 2003 +++++++++++++++++++

CONTENTS: 
Introduction: Both Existing and New Home Sales Drop
Mortgage Rate Update: Rates Turn
This Month’s Tip: What Determines Value

Introduction: Both Existing and New Home Sales Drop

Welcome to the April edition of the Home Buyer’s Newsletter. On the sales front, sales of existing  single-family homes declined last month from a  record pace in January, but were still at the  fourth highest pace since record keeping began in 1968,  according to the National Association of Realtors®.

Existing-home sales dropped 4.3 percent in February to a seasonally adjusted annual rate* of 5.84 million units  from an upwardly revised record pace of 6.10 million  units in January. Last month’s sales activity was  1.2 percent above the 5.77-million unit pace in  February 2002. Other months with higher sales  levels were in January and December of 2002.

David Lereah, NAR’s chief economist, said the decline  was anticipated. “After reaching an unprecedented  level in January, it was no surprise to see existing-home  sales drop in February,” Lereah said. “A disruption in  normal buying patterns, resulting from large areas of  the country being buried in snow for days on end,  may show in later data. Even so, generally strong sales  are expected this year assuming the war in Iraq is not prolonged.”

On the new home side, sales of new one-family houses  in February 2003 were at a seasonally adjusted annual  rate of 854,000, according to estimates released jointly  on March 26th by the U.S. Census Bureau and the  U.S. Department of Housing and Urban Development.  This is 8.1 percent (±13.0%) below the revised  January rate of 929,000 and is 8.9 percent (±10.5%)  below the February 2002 estimate of 937,000.

The median sales price of new houses sold in February  2003 was $188,800; the average sales price was $235,000.  The seasonally adjusted estimate of new houses for sale  at the end of February was 352,000. This represents a  supply of 5.0 months at the current sales rate.

Mortgage Rate Update: Rates Turn

The one-way trend in mortgage interest rates that  we’d seen for the last several weeks–down–was  interrupted mid-month as average rates for both  30-year and 15-year fixed-rate mortgages increased.  Mortgage company Freddie Mac reported that as of the period ending March 27th, 30-year fixed-rate  mortgages averaged 5.91%, up from the all-time  low of 5.61% mid month. 15-year fixed-rate mortgages  averaged 5.21%, an increase from the 4.93%  seen mid month. These rates do not include the costs of points paid up-front to the lender.

Is this change in direction lasting or temporary? 
Much will have to do with the economic picture  (and the bond market’s response to it) over the  next month or so…and much of that picture will be determined by the progress in the conflict in  Iraq.
For current average mortgage rates, see: Mortgage Rates
For more information on mortgages, visit the Mortgage  Section at:  
Mortgage Information

Get a Copy of Your Credit Report

IPlace.com, the largest supplier of credit reports on the Internet, has a number of options to quickly get a copy of your report. You can get a single report, your credit score, a full 3-bureau report or even a free copy of your credit report, quickly and easily. See more information at: Sources of Credit Reports

This Month’s Tip: What Determines Value

For many home buyers, one of the most intriguing aspects of a house purchase is the method of setting the value on a property. What are the various factors that will make one home worth more (and sometimes, considerably more) than another home. How can there be so much variance in the value of two properties?

The primary factors that determine the relative value of a home are:
1) The location
2) The condition
3) The size
4) The extras that come with the home

These factors, though, are not equally weighted. As you have probably heard numerous times, the most important factor is location–where the home is located, whether  in a popular or an unpopular area. The least important of the 4 factors above would be the extras–the amenities– that come with the home. Unfortunately, some buyers get mixed up at this point and are so enthralled with the “bells and whistles” that they purchase a home more for the extras than for other, far more important, factors. It is this kind of thinking, for example, that finds buyers owning homes with jacuzzis, pools and stainless steel kitchens that are located in a neighborhood that  is not up to par. The total value of the home, then, is negatively impacted.

1.LOCATION

As we have said, the #1 determinant of the value of a home is where it is located. All other factors (such as condition, size, age and the like) being equal, if the  neighborhood is a popular one, then homes located there  will be worth more money than those located in less  popular areas. Popularity–and therefore value–can be  determined by a number of factors including quality of  schools, proximity to services, shopping, recreation and  the like, as well as the simple perceived value of the area. If a neighborhood is known as a “good place to live” a home located there will garner higher prices than one that is not determined to be as good a place to live.

2.CONDITION

In our opinion, the next most important consideration in determining value is the condition of a particular property in relation to those around it. Obviously, a home in need of a new roof, exterior paint and new appliances will be worth less than one where those items are functional. The deficencies that can affect value can either be necessary repairs (like an inoperative furnace or deferred maintenance (such as painting that needs to be done).

3.SIZE

Naturally, the size of a home is a big determining  factor when judging value. When you have two homes located in the same area and in basically the same overall condition, a larger home will almost always be worth more than a smaller one. The relative size is determined by the square footage of livable area (generally those areas that are heated and/or cooled).

4.EXTRAS

The least important factor in determining value (but a  factor nontheless) are the extras and amenities that  come with the home. In general, the location, condition and size will take precedence when comparing the values of two similar properties, so it is wise not to put more emphasis on the amenities than on those first 3 factors affecting value.

Although extras and amenities are often the heaviest sold by sellers and builders (“Beautiful master bath with jacuzzi tub!!”) there are several reasons why these extras are not as big a determining factor in assessing value. First and foremost is that, in many cases, these extras are not that expensive to add if a home does not already have them. For example, a jetted tub in the  master bathroom can be purchased brand new for, say $2000. Of course, then, a used one would not even begin to add that much to the price of a home.

A second important consideration is that the desirable extras and amenities today are often not desirable in a matter of months or years. For example, certain styles
of kitchens were “all the rage” a few years back–all white cabinets with all white appliances were one such style– that now are in very little demand. Today’s “hot” kitchen style is the “professional” look, with stainless steel covering every appliance in the kitchen. Somehow, we get the feeling that this style will also fall by the wayside, especially when owners find that they will need to spend hours keeping these stainless steel appliances clean of marks and fingerprints!

SUMMING UP

Unlike the old adage–“There are 3 things that determine the value of real estate: Location, location and location” the reality of the situation is a bit more complicated than that. When attempting to determine the value of a  home, make sure to take as many factors as possible into account. Do not make a decision–or allow someone to make a decision for you–regarding pricing unless a wide range of factors are considered.

If you would like more information on the two basic methods of arriving at values, (Comparative Market Analyses (CMAs) and appraisals, see the information on those subjects on the site:
CMAs
Appraisals

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:Home Buyer’s Checklist

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: Email Us or access our feedback page at: Home Buyers Information Center Feedback

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 your home buying process!

The Team at the Home Buyer’s Information Center