Home homebuyer april09

homebuyer april09

April, 2009 Newsletter

+++++++++++ April 1, 2009 +++++++++++++++++++

Introduction: Sales Uptick
Mortgage Rate Update: Rates Continue to Decline
This Month’s Tip: Pricing Considerations

Introduction: Sales Uptick

Although the sales levels were very low, the good news was that in both existing homes and new homes there were sales increases in the month of February. Existing-home sales increased in February, reversing losses in January. Even so, sales activity remains relatively soft, reflecting additional layoffs and buyers waiting for housing provisions in the economic stimulus package to take effect, according to the National Association of Realtors®.

Existing-home sales – including single-family, town homes, condominiums and co-ops – rose 5.1 percent to a seasonally adjusted annual rate of 4.72 million units in February from a pace of 4.49 million units in January, but are 4.6 percent below the 4.95 million-unit level in February 2008. Seasonal adjustment factors are more  volatile in winter months, but sales rates over the past few months show dampened sales activity.

Lawrence Yun, NAR chief economist, said first-time buyers accounted for half of all home sales last month, with activity concentrated in lower price ranges. “Because entry level buyers are shopping for bargains, distressed sales accounted for 40 to 45 percent of transactions in February,” he said. “Our analysis shows that distressed homes typically are selling for 20 percent less than the normal market price, and this naturally is drawing down the overall median price.”

The national median existing-home price2 for all housing types was $165,400 in February, down 15.5 percent from a year ago when the median was $195,800 and conditions were close to  normal; the median is where half of the homes sold for more and half sold for less. “Given  the downward distortion in price comparisons due to distressed sales, it’s important for owners to keep in mind that this doesn’t equate to a similar loss of value for traditional  homes in good condition,” Yun explained.

On the new home side, sales of new one-family houses in February 2009 were at a seasonally adjusted annual rate of 337,000, according to estimates released jointly March 25th by the   U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.7 percent  (±18.3%) above the revised January rate of 322,000, but is 41.1 percent (±7.9%) below the  February 2008 estimate of 572,000.

The median sales price of new houses sold in February 2009 was $200,900; the average sales  price was $251,000. The seasonally adjusted estimate of new houses for sale at the end  of February was 330,000. This represents a supply of 12.2 months at the current sales rate.

Mortgage Rate Update: Rates Continue to Decline

Mortgage rates continued their downward trend in the month of March. According to mortgage company Freddie Mac, 30-year fixed-rate mortgages averaged a record-breaking 4.85% at the end of March, declining from an average of 5.15% at the beginning of the month. 15-year fixed-rate mortgages also declined from an average of 4.72% in the first week of March to a low of 4.58% at the end of the month.

Obviously, long-term interest rates are not the problem with the soft Real Estate market. Many other factors, including consumer confidence, employment levels and availability of mortgage funds are weighing heavily on activity. As we see those  factors improve, we will likely see the market make a turnaround. For a buyer who is currently in the market, it is recommended that they keep a keen eye on all of these factors to be ready to move. Once the market turns, prices and mortgage rates will not likely remain at their current historic lows.

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: Pricing Considerations

Although there have been some glimmers of positive news recently (see the story above), the trend just seems to be a near-endless litany of bad Real Estate news–falling prices, depressed markets, high inventory levels and weak sales. For a home buyer just entering the market in Spring, 2009, how can the current situation play to their advantage?

The first thing to understand is that when it comes to home pricing, there are no absolutes. Markets vary a great deal from area to area. Sales in some parts of the U.S. are down by  huge numbers while in other areas the decline is much less severe. In general, though, prices are falling. On March 31st, the Standard and Poors/Case-Shiller index, which tracks home prices in 20 major U.S. cities, fell a record 19% from the levels of one year ago. Once again, these are averages meaning that some areas fell less than 19% while others fell more. In any case, with changes like we are seeing it is imperative that a buyer get a firm grip on pricing considerations in the area in which they have an interest.

Obviously, the first understanding is that in many areas of the country, there will be plenty of homes from which to choose. Inventory levels are at historical highs, which gives the buyer a couple of big advantages–first, they are afforded a bit more “breathing room” in their search. They will not have to jump at the very first house they see, since there will likely be a number more to evalutate. Second, since inventory levels are high, in the majority of situations the price advantage will be on the buyer’s side rather than on the seller’s. This is a huge difference from just two years ago.

Just knowing that the advantage is with the buyer, however, does not guarantee a good–or even  a fair–price. We still see many people overpaying for properties, even in the current environment. As is the case with many elements of the home buying process, preparation is the most important part of the equation. And the best possible preparation is to know the market inside and out.

How do you best get a handle on current market conditions? There are a number of sources, all of which you should consult. Local news sources often will give a picture of the health of the market in the area in which you are interested. There are several internet resources that can give a overview of the pricing in your area. The most important tool that you will have at your disposal, though, is a CMA–A Competitive (or Comparative) Market Analysis.

The most common source of a CMA is your real estate Buyer’s Agent. The Agent should have access, through the local multi-listing system (MLS), to data on all recent activity in the area. This information will include price for properties that have sold (and closed) as well as  those currently on the market, those that have a sale pending as well as expired or withdrawn listings (those that did not sell). This data should include the size of the homes,  number of rooms including bedrooms and baths, types of systems and amenities installed (for  example, central air conditioning, swimming pools, etc.) With this information in hand,  and with the assistance of your Agent, you should be able to determine fairly accurately what  a similar home should be selling for, taking into account any additions or subtractions  from the price due to condition, size or amenities. This is important knowledge you will need  when preparing to negotiate for a specific property.

Using the Information

Once you have a fairly clear idea of what a property should be selling for, based on the CMA,  you will be much better prepare to make a decision on whether a particular home, price-wise, should be considered. This information will also give you a basis (and justification) for your negotiation when you narrow your focus to a specific property. A sincere seller should  be much more likely to consider your offer if it is the general range of what homes are  selling for in the neighborhood (assuming similar size and condition). If a seller  insists on a price that is considerably in excess of the average, it is probably a good  idea to move on.

Hints on Pricing

+ When you have an idea of what houses are selling for, drive by some of the sold properties  to take a look at the condition and appearance, since these are big determinants of value.

+ Don’t pay a great deal extra for amenities that really don’t add much to the true value– examples might be trendy (and very expensive) kitchen appliances, swimming pools and spas.

+ Don’t put nearly as much weight on prices of homes currently for sale as you do on homes  that have sold and closed. “Sold” prices reflect what a buyer is actually willing to pay  (and a lender is willing to finance). “For Sale” prices may be nothing more than the wishful  thinking of an uninformed (or dreaming) seller. Likewise, prices for homes that have expired or were withdrawn from the market are not good indicators–there is some reason that these homes have not sold, and that very possibly may have been the price.

Summing Up

It is crucially important to be price-savvy in today’s market. To overpay, with the declines in vales that we have seen as well as the inventory availability in most markets, is foolhardy. Educate yourself and pay no more than a fair price for both the buyer and the seller.

Next Month’s Tip: Helping Hands

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