February, 2004 Newsletter
+++++++++++ February 1, 2004 +++++++++++++++++++
Introduction: New Sales Down, Re-Sales Up
Mortgage Rate Update: Rates Fall then Rise
This Month’s Tip: Avoiding Nasty (and Expensive!) Mistakes
Introduction: Welcome to the February edition of the
Home Buyer’s Newsletter, brought to you by the
Home Buyer’s Information Center.
The Home Buyer’s Information Center
Existing single-family home sales jumped from November to December
while overall sales in 2003 easily surpassed the previous record in 2002,
according to the National Association of Realtors®. There were a total of
6,100,000 existing-home sales in 2003, up 9.6 percent from the previous
record of 5,566,000 in 2002. NAR began tracking the sales series in 1968.
Existing-home sales increased 6.9 percent in December to a seasonally
adjusted annual rate of 6.47 million units from a level of 6.05 million units
in November. Last month’s sales activity was 8.9 percent higher than the
5.94-million unit level in December 2002 and was second only to a record
6.68 million-unit pace in September 2003.
David Lereah, NAR’s chief economist, said the housing market continues
to offer surprises. “We’ve been expecting the pace of home sales to ease,
and a decline in November seemed to indicate a more sustainable pace,
but the rebound in December – the second highest monthly pace on
record – shows there’s still a lot of life in this market,” he said. “The biggest
factor is a resumed decline in mortgage interest rates, which have been
much lower than most analysts expected.”
On the new home side, sales of new one-family houses in December 2003
were at a seasonally adjusted annual rate of 1,060,000, according to
estimates released jointly on January 28th by the U.S. Census Bureau
and the U.S. Department of Housing and Urban Development. This is 5.1
percent (±9.4%) below the revised November rate of 1,117,000, but is
0.8 percent (±11.8%) above the December 2002 estimate of 1,052,000.
The median sales price of new houses sold in December 2003 was
$197,600; the average sales price was $261,100. The seasonally adjusted
estimate of new houses for sale at the end of December was 374,000.
This represents a supply of 4.3 months at the current sales rate.
In 2003, there were 1,085,000 houses sold compared with 973,000
houses sold during 2002, establishing a new record. This is an increase
of 11.5 percent (±3.6%).
Mortgage Rate Update: Rates Fall then Rise
Mortgage rates fell in the middle of January and then rose at the end
of the month, but they finished the month lower than where they began.
According to mortgage company Freddie Mac, 30-year fixed-rate
mortgages (not including points) averaged 5.68% in the period ending
January 29th. These rates began the month at an average of 5.85%.
Similarly, 15-year fixed-rate mortgages averaged 4.97%, after beginning
the month of January averaging 5.15%.
With the language of the Federal Reserve statement issued on January
28th, the bond market reacted strongly with rising yields, which will
affect mortgage rates in the near future. Expect average rates to increase,
at least slightly, over the next week or longer. Longer-term outlooks on
rates will largely depend on economic reports to be released in the next
In this volatile financial and interest rate
environment getting as many loan comparisons as
possible is crucial. At LendingTree you can submit
one simple loan request form and within a few business days
get up to 4 bona-fide offers from lenders competing for your business.
Get more information here.
This Month’s Tip: Avoiding Nasty (and Expensive!) Surprises
Few experiences during (and after) the home buying process are as
frustrating as being confronted with a nasty (and often expensive)
surprise (or, worse, suprises). You can avoid many of these
potential problems and surprises by educating yourself, taking
advantage of the tools that are available to you and by simply
taking your time. Buying a home need not be excessively
complicated, but it definitely helps if you have prepared yourself.
What are some of these potential surprises?
+ Not securing prequalification and preapproval
+ Not having a CMA
+ Not studying the good faith estimate
+ Not getting a whole house inspection
+ Not being aware of what conveys with the house
+ Not having sufficient title insurance
What can you do to lessen the chances of negative surprises?
Secure prequalification and preapproval
One of the worst surprises is finding out that you simply cannot
afford the dream home that you have just found. This situation can
be avoided by getting prequalified for a mortgage (determining
exactly how much is affordable) and then getting preapproved
(making certain you will be able to get the mortgage). By having
prequalification and preapproval in hand, you assure yourself that
you and a potential home are a good fit. Plus, if there is negotiation
involved, your offer will carry more weight with a seller when it
is accompanied by a preapproval. See more on this subject
on the site: Prequalification and Preapproval
Get a CMA
One of the most expensive surprises that you can encounter is
finding out that you have paid considerably more for a home than
it is worth. You can eliminate much of your exposure here by having
a CMA–a Comparable Market Analysis–run on any property in which
you are sincerely interested. A Buyer’s Agent can do this for you,
generally at no cost to you, to indicate for what price comparable
properties in the same general geographical area are selling for.
See an example of a CMA on the site:
Study the Good Faith Estimate
If you are applying for a loan on the house you would like to purchase,
you will be supplied with a “Good Faith Estimate” shortly after your
application. Although it is just that–an estimate–this form will give you
a fairly good idea of what your total costs, at settlement, will be for
such items as:
* Points and/or orgination fees
* Attorney’s fees
* Transfer taxes/fees
* Title fees and insurances
as well as other charges related to the mortgage loan and settlement.
Study it closely so that you do not encounter a big surprise in costs
shortly before settlement. See an example of a Good Faith Estimate:
Good Faith Estimate Example
Get a whole house inspection
This can be a doozy, since there is almost no limit to the number of
(and the cost to repair) potential defects in a home. Talk about
ugly surprises! Whether it is because you do not want to invest the
$300-500 for the inspection or the seller refuses to allow it, there
virtually is NO real reason to bypass a professional whole house
inspection on a property you want to purchase. The exposure in
money and headaches is simply not worth the saving of a few
dollars (or the caving in to a seller’s demand) that eliminating the
inspection brings. See a complete discussion on inspections:
Whole House Inspections
Be aware of what conveys with the house
Your moving day will be one filled with excitement and emotion.
Don’t make the emotion a negative one by expecting to find
certain items (like refrigerators, special lighting fixtures, etc.)
in the house and having them go missing. Your contract for sale
must detail any item that will convey that is not firmly attached
to the house. Examples:
* Fireplace doors/screens
* Hot tubs/spas
* Special lighting fixtures
Have sufficient title insurance
A truly nasty surprise is to find out, months or years after purchasing
a property, that there is a problem with a deed (the title) to the home.
This could be a unforseen lien against the property or a claim against
the title. Title insurance, even though it is required in virtually every
sale that includes a mortgage, is frequently misunderstood. Title
insurance, simply put, is an insurance that protects against errors
or mistakes in the title of a home. These may include defects in
the title, unexpected liens or encumbrances on the property.
There are two types of title insurance policies–one, the “lenders
policy” will be required if you get a loan. It protects the lender up
to the amount of the total amount financed. The second, an
“owners policy” protects you, the owner, up to the full price
paid for the property (usually more than the amount financed).
By purchasing owners coverage in conjunction with the lenders
coverage, you will generally be able to save money in the policy
cost. Your closing agent will be able to give you full details.
Nothing can deflate the excitement of buying a home like an
unexpected surprise. If you make some simple preparations,
though, you can eliminate or mitigate most of the most damaging
of these surprises. You also may be able to save yourself some
money and effort in the process!
Next Month’s Topic: Negotiation: Prepare First, then Negotiate
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