April, 2005 Newsletter
+++++++++++ April 1, 2005 +++++++++++++++++++
Introduction: Existing Home Sales Slip, New Home Sales Jump
Mortgage Rate Update: Rates Continue Rising
This Month’s Tip: Closing and Settlement
Introduction:Welcome to the April edition of the Home Buyer’s Newsletter, brought to you by the Home Buyer’s Information Center.
Existing-home sales slipped in February but remained above year-ago levels, while home prices rose at double-digit rates, according to the National Association of Realtors®. Total existing-home sales, including single-family, town homes, condominiums and co-ops, were down 0.4 percent in February to a seasonally adjusted annual rate of 6.79 million from an upwardly revised pace of 6.82 million in January.
Last month’s sales activity was 6.1 percent above the 6.40 million-unit pace in February 2004. David Lereah, NAR’s chief economist, said the housing market appears to be in the early stages of settling down. “In essence, home sales were surging at unprecedented levels for most of last year,” he said. “The cooling we expect in sales this year means we’ll be transitioning from a white-hot housing market into a very strong market that still favors home sellers, but should become more balanced as the year progresses.” New home sales made a big gain in the month of February. Sales of new one-family houses in February 2005 were at a seasonally adjusted annual rate of 1,226,000, according to estimates released jointly on March 24th by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 9.4 percent (±14.7%) above the revised January rate of 1,121,000 and is 5.2 percent (±13.3%)* above the February 2004 estimate of 1,165,000. The median sales price of new houses sold in February 2005 was $230,700; the average sales price was $288,400. The seasonally adjusted estimate of new houses for sale at the end of February was 444,000. This represents a supply of 4.4 months at the current sales rate.
Mortgage Rate Update: Rates Continue Rising
Mortgage rates continued marching upward throughout the month of March. 30-year fixed-rate mortgages averaged 6.04% in the period ending March 31st, according to mortgage company Freddie Mac. This is an increase of a full quarter-point since the beginning of the month when the average was 5.79%, not including points. 15-year fixed-rate mortgages also showed a fairly large increase in 30 days time, averaging 5.43% after beginning the month with an average of 5.17%, again without factoring in the cost of points. Current rates are at a seven-month high, which is fairly in line with what many analysts were predicting for the first quarter. As we move further into 2005, opinions are fairly divergent, running from predictions of modestly higher averages and then a fall back, to predictions of continuing increases in rates toward the 7% range or even higher. Nevertheless, taken in the historical context, current rates are still among the lowest in the last 4 decades. For current average mortgage rates, see: Mortgage Rates For more information on mortgages, visit the Mortgage Section at: Mortgages
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This Month’s Tip: Closing and Settlement
In sales, there is an old adage that goes something like “nothing happens until someone sells something.” In Real Estate, that could be paraphrased to “nothing happens until the sale closes and is final.” Although it is known by different terms–escrow, settlement, closing, as examples–depending on the area in which you live, a closing occurs when title–the deed–passes from the seller to the buyer and the transaction is thus finalized. In Real Estate, the closing is pretty much the “point of no return” so preparation becomes extremely important. Any uncertainties or questions must be ironed out BEFORE the day of closing, since, in general there is no going back after the settlement occurs.
It is important to understand that there is always a risk for glitches between the time of the contract and the actual day of closing, and these problems are neither rare nor unusual. With you and your Agent both keeping tabs on progress toward the closing, though, you can minimalize problems and usually eliminate those that do crop up prior to the closing day. In addition, time spent on closing issues prior to the day of settlement usually results in less confusion when you sit down at the closing table. What takes place at the closing? The settlement activity varies a good bit from state to state and even from locality to locality. In some areas, all concerned parties– buyers, sellers, both the buyer’s Agent and the seller’s Agent and a closing Agent or Attorney–will sit down together to sign all of the necessary documents. In other areas, the buyers and sellers never meet, signing paperwork seperately. In general, though, a closing or settlement occurs when buyer and seller complete all of the paperwork relating to a Real Estate purchase, including all legal, governmental and loan documents. The deed is then recorded at the local courthouse, the buyer becomes the owner of record and the sale is final.
What documents are usually involved?
Loan Documents From the point of your loan application onward, your lender will be requesting various documentation from you. These may include letters of employment, pay stubs, declarations from you concerning prior credit problems, copies of Income Tax returns and more. You can save yourself a great deal of aggravation if you quickly get this documentation to the lender and, just as important, MAKE COPIES OF EVERYTHING YOU SEND. These documents somehow often find a way to get lost or go to the wrong person and will still be required, even if the misplacement is not your fault. Have backups ready if needed!
Title Documents Title searches and Title Insurance are important–and necessary for closing–because they protect your (and the lender’s) interest in the property. Depending on your locality, these Title Documents may be requested by the seller, yourself, or the closing Agent or Attorney. It is always a good idea to have the closing Agent notify you when the Title Insurance Policy is finalized so that you will be aware of any encumbrances or potential defects on the title PRIOR to the date of closing. Major title problems will stop the closing (the lender won’t allow them) but minor problems (for example, a utility easement right where you planned to place a new garage or a neighbor’s fence that is 2 feet on your side of the property line) can be troublesome during your time of ownership.
Homeowners Insurance Casualty Insurance will be required both by your lender and by common sense. In most cases, you will be responsible for securing your own policy prior to the closing date, so it makes sense to begin your comparison process early. Be aware that although standard Homeowners Insurance policies will cover many calamaties–fire, theft and vandalism–there are situations where additional policies or riders, such as flood insurance or earthquake insurance, may be required or desirable since they are otherwise not covered. More information on Homeowners Insurance at: Homeowner’s Insurance
Are there other issues that should be addressed?
Make your arrangements for a Closing Agent as soon as the contract has been approved by all parties. Closing times are often scheduled many weeks in advance, and it gives you time to co-ordinate work and moving schedules around the closing time. * Get a copy of your Settlement Statement (known as a HUD-1 form) from the Closing Agent as soon as possible–ideally, 3 or 4 days prior to closing. Not only will it give you the amount of cash you will need (in certified funds) at closing, it will also show you complete breakdowns of fees and closing costs. Waiting until the day before closing always turns into a mad scramble!
You will find more information on closings, an example of a HUD-1 form and links to more information at: Closing and Settlement
Next Month’s Topic: Interest Only Mortgages
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: Home Buyer’s 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 all your endeavors! The Team at the Home Buyer’s Information Center