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April, 2003 Newsletter

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

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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.

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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

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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

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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.

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.

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).

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).

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
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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

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