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December, 2003 Newsletter

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Introduction: Existing and New Home Sales Decline
Mortgage Rate Update: Rates Remain Stable
This Month’s Tip: Buying for the Future

Introduction: Existing and New Home Sales Decline

Happy Holidays and welcome to the
December edition of the Home Buyer’s Newsletter.
Sales of existing single-family homes eased from an
all-time high last month but remain at the third highest
pace on record, according to the National Association
of Realtors®.

Existing-home sales declined 4.9 percent in October
to a seasonally adjusted annual rate* of 6.35 million
units from a record level of 6.68 million in September.
Last month’s sales activity was 12.8 percent above
the 5.63-million unit pace in October 2002. The second
highest level was an annual rate of 6.46 million units in
August of this year.

David Lereah, NAR’s chief economist, said the housing
market is easing. “We think this marks the beginning of
a soft landing for sky-high home sales,” he said. “The
last four months are the only months on record when
the existing-home sales pace exceeded the 6.0-million
mark we expect the pace to ease gradually but to
remain at historically high levels over the next year.”

Housing inventory at the end of October improved
slightly, rising 2.5 percent from September to a total of
2.46 million existing homes available for sale, which
represents a 4.6-month supply at the current sales pace.

On the new home side, sales of new one-family houses
in October 2003 were at a seasonally adjusted annual
rate of 1,105,000, according to estimates released jointly
on November 26th by the U.S. Census Bureau and the
U.S. Department of Housing and Urban Development.
This is 3.5 percent (±8.6%) below the revised September
rate of 1,145,000, but is 10.0 percent (±12.5%) above the
October 2002 estimate of 1,005,000.
The median sales price of new houses sold in October
2003 was $190,900; the average sales price was $250,200.
The seasonally adjusted estimate of new houses for sale
at the end of October was 360,000. This represents a
supply of 4.0 months at the current sales rate.

Is this a sign that the housing market is starting to cool off
or is it simply a one-month anomaly? The biggest factor
here, in our opinion, will be the future trend of mortgage
interest rates. See the article below on mortgage rate
activity in November and our take on the future outlook
for rates.

If you haven’t visited the Home Buyer’s Information Center
recently, we’d love to see you again! We’ve updated much
of the information found on the site as well as added a
number of new articles related to the home buying process.
The Home Buyer’s Information Center

Mortgage Rate Update: Rates Remain Stable

Although the majority of the economic news was very
positive during the month of November, mortgage interest
rates were suprisingly stable. According to mortgage
company Freddie Mac, 30-year fixed-rate mortgages
averaged 5.89% in the period ending November 27th, after
beginning the month of November at 5.94%. 15-year fixed-rate
mortgages averaged 5.22% at the end of the month after
starting at an average of 5.26%.

The future trend is, according to a number of analyists,
for rates to rise slightly. The longer term forecast
will depend almost completely on the strength and durability
of the economic recovery. If you believe that the current
recovery is viable and sustainable, then it would be wise
to plan for increasing mortgage rates. If you think that
the recovery may lose steam or reverse, then chances are
good that interest rates will stay at or slightly below where
they are today.

For current average mortgage rates, see:  Mortgage Rates
For more information on mortgages, visit the Mortgage  Section at:  
Mortgage Information

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This Month’s Tip: Buying for the Future

When purchasing a home–especially if it is a first home–
many buyers get so caught up in the “here and now” that
they totally overlook how the house may–or may not–
fit into future plans and outlooks. Obviously, buying
a home that fits into your current needs and wants is
the main priority, but this should not eliminate or
totally overshadow an awareness that future needs and
wants must also be considered. These future concerns
should be addressed whether you plan to stay in the
home for a considerable length of time or if you have
plans of selling within a specific time frame.

There are two costs that need to be considered in the
purchase of real estate. First, of course, is the
initial price of the home. Second, and just as
important, is the eventual resale value. Therefore,
to ignore the factors that affect resale (or your
continued enjoyment of the home if you don’t sell)
is to be unaware of the true TOTAL cost of the home.

With an eye to the future, there are a few important
factors that play into the cost equation that
should be considered when comparing and choosing homes,

* Size
* Location
* Style
* Trends


Not adequately considering the size of the home can be
one of the most expensive mistakes in your purchasing
process. If you buy a house that is too big or small
for the neighborhood, you will either be paying for
size that you cannot recoup (too big) or face a more
difficult sale at resale time (too small). Like many
things in life, the middle ground is often the best
and in this case, it is the house that is the best
fit for its area that will bring the best return.


As you have probably heard numerous times, location is
usually the most important factor in the value of a
home. When buying for the future, though, it is necessary
to consider how location will affect resale value. For
example, if development is moving in one direction in
an area, it may be wise to buy with that in mind rather
than buying in the area that is currently in demand. Be
aware, though, that there usually is a limit to how far
people will commute. To purchase outside of that “limit”
can make a home much more difficult to sell in the
future. In fact, in a number of areas in North America,
there has been a movement BACK toward city centers as
more and more commuters got fed up with long drives and
traffic jams.


Over a period of years, home styles can evolve and change.
As an example, in many areas split level and split foyer
(or split entry) homes were very popular for a number of
years. Today, though, in these same areas virtually no
contractors are building that style of home, which lowers
the resale value of homes of that type. Sticking with
more classical styles, depending on the area of the
country where the home is located, is generally the
best tactic when keeping resale in mind.


Have you ever walked into a home that has not been
updated since the 1970s? Bright green shag carpet,
gold (or avocado) appliances, vibrant (or even garish)
linoleum. Virtually any buyer of such a house will
need to factor in the costs of remodeling and updating–
if they will consider the home at all. And that will
equate to a lower sale price, costing the seller money.

This should be a good lesson about avoiding “trendy”
homes when purchasing today. It makes much more sense
to stick as close as possible to the tried-and-true–
white appliances, simple, quality cabinetry and trim,
pile carpet in non-descript colors (beige, grey and
the like) will bring a better return than a home
that is loaded with the latest styles but will look
very dated (like the shag carpeting and the avocado
stove) when it is time to sell.

Summing Up

Since buying a home is both a financial AND an
emotional experience, it is important not to put
too much emphasis on one aspect or the other. To
focus solely on the financial side runs the risk
of missing the most enjoyable parts of home ownership–
the emotional ones. To concentrate just on the
emotional or the “feel good” aspects, though, can
cost a considerable amount of money in the long run.
Remember, there are two costs associated with home
ownership: The original price and the net cost when
the resale value is eventually factored in.

Next Month’s Topic: Finding a Home: Effective Techniques

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