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April, 2006 Newsletter

+++++++++++ April 1, 2006 +++++++++++++++++++

Introduction: Resales Up, New Sales Drop
Mortgage Rate Update: Rates Up Moderately
This Month's Tip: Negotiations in a Changing Market

Introduction: Resales Up, New Sales Drop

Welcome to the April edition of the Home Buyer's
Newsletter, brought to you by the
Home Buyer's Information Center.

Existing-home sales rose in February following five months of decline,
indicating a stabilization is taking place in the market, according to the
National Association of Realtors®.

Total existing-home sales – including single-family, townhomes,
condominiums and co-ops – increased 5.2 percent to a seasonally
adjusted annual rate of 6.91 million units in February from an upwardly
revised pace of 6.57 million in January, but were 0.3 percent below a
6.93 million-unit level in February 2005.

David Lereah, NAR’s chief economist, said mild weather appears to
be responsible for some of the gain. “Weather conditions across
much of the country were unseasonably mild in January and likely
were a factor in higher levels of buyer activity, which boosted sales
that closed in February,” he said. “Higher interest rates had been
tapping the breaks (sic), notably in higher-cost housing markets since
mortgage interest rates trended up last fall, but we’re seeing signs
of stabilization in the market now with the sales rebound. Home
sales should level-out in the months ahead.”

On the new home side, sales took a big 10.5% fall in February,
the biggest drop in over 8 years. Sales of new one-family houses in
February 2006 were at a seasonally adjusted annual rate of 1,080,000,
according to estimates released jointly on March 24th by the U.S.
Census Bureau and the Department of Housing and Urban Development.
This is 10.5 percent (±12.4%) below the revised January rate of 1,207,000
and is 13.4 percent (±12.5%) below the February 2005 estimate of 1,247,000.
The median sales price of new houses sold in February 2006 was $230,400;
the average sales price was $296,700.

The seasonally adjusted estimate of new houses for sale at the end of
February was 548,000. This represents a supply of 6.3 months at the
current sales rate.

Again, like we mentioned last month, these are really mixed signals.
Buyers should keep a very close eye on their local markets to determine
how to proceed. Also, in changing markets, negotiating the best
possible price becomes extremely important. See this month's tip below.


Mortgage Rate Update: Rates Up Moderately

Although they see-sawed a bit through the month of March, mortgage
rates ended the month up moderately. According to mortgage company
Freddie Mac, 30-year fixed-rate mortgages averaged 6.35%, not
including points, in the period ending March 30th. Rates began the
month at an average of 6.24%. The trend in 15-year fixed-rate mortgages
was similar, averaging 6.00% after starting the month at an average of

For the year-to-date, the averages are similar, with rates rising for a
couple of weeks, then falling for a week or two, then rising again. Different
economic reports, often not in agreement, can cause these fluctuations
in the market when the reports are released.

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: Negotiations in a Changing Market

It wasn't that long ago that an extremely strong seller's market made negotiations
on a home purchase a very different affair than it had been in the past. Less
than a year ago, in many areas of North America, multiple offers, bidding wars
and final sales prices thousands (and sometimes tens of thousands) of dollars
over the listing price were fairly normal. Recently, though, the landscape has
changed a bit in many areas as more properties compete for less buyers, and it is
taking longer for the average home to sell. These factors have combined to put
today's buyer in a much better position than they were six months or a year
ago. For buyers, although we are not yet in a "buyer's market," it definitely is
a positive development. For many sellers, adjustments to their thinking will
probably need to be made.

We have always recommended a hard nose approach to negotiation from a
buyer's perspective. It is simply too easy to overpay--sometimes horrendously
overpay--when you do not take the time to negotiate effectively. Even when
real estate markets were booming, we recommended not getting involved in a
bidding war unless it could be demonstrably proven that you could obtain the
property at market value or close to market value. Thousands of buyers who
threw common sense out the window and paid large amounts over real value for
homes may end up holding the bag, now or later.

With the market likely in a state of flux, this is definitely NOT the time for foolhardy
negotiation. To overpay in a rising market may be unwise, but to overpay in a
stagnant or declining market could be financial suicide. Mistakes made in this
type of changing market can take many years to overcome, especially if it takes
a long time for the market to recover, as happened in some areas in the past.

Be Effective

The first key to effective negotiation is to have a gameplan in place BEFORE
you begin the actual process of negotiating to purchase a home. This is partly
mindset and partly preparation, and is designed to put the buyer on, at the very
least, an even footing with the seller. For first time home buyers, this is
extremely important since the negotiations that will be taking place will be with
a seller that has purchased and owned a minimum of one home (the house they
are selling) or, perhaps, multiple homes. In all probability, then, the seller's
personal experience alone will act as their gameplan. By leveling the playing
field, through mindset and preparation, the buyer is better assured that their
interests will be represented.

The Gameplan: The Mindset

Purchasing a home is a very emotional experience. The fact that there is
negotiation involved further complicates that emotional experience. It is
important to remember though, that a home purchase is also a financial
experience--a very expensive one. The joys of purchasing can rapidly erode
if financial errors--such as paying far too much for a property--are made.
The negative repercussions from such a mistake can go on for years,
far overshadowing the emotional joy at the time of the purchase.

What qualities compose a good approach to this mindset? First, you must
be prepared and willing to let a property go if it does not fit financially. This
applies both to the properties price in relation to its true value and in relation
to your overall budget. You need to be able to say three, simple words:
"No, too much" instead of getting caught up in the euphoria, offering
to pay more and more, ending up paying too much. Second, you must
understand that you cannot negotiate from a position of fear. The notion
that says "we will NEVER get a house. We can NOT less this one get
away, even if it is a good bit more than we want (or can afford) to pay"
has cost many buyers a lot of sleepless nights trying to figure out how
they possibly can make their budget work.

The Gameplan: Preparation

The key to the preparation phase of your gameplan is working to get
yourself very familiar with the current state of the real estate market in
the area in which you are interested. This includes having a good feel
for the health of the market: Is it still a seller's market (which means
prices will tend toward the high end), a buyer's market (which means
pricing will be more competitive) or somewhere in between. This will
give you a good overview of how much bargaining power you should be
able to wield. Obviously, the more the conditions trend toward a
buyer's market, the more strength you will have in negotiations.

The most important information that you can have at your disposal
is a CMA--a Comparable (or Comparative) Market Analysis--on any
home in which you have an interest. A CMA will give you the exact
figures on what similar properties are actually selling for in the
neighborhood. With this information in hand, you can make
adjustments (either up or down) to determine fairly accurately
what a specific home should be worth. For example, a home
with more square footage will be worth more, a home that needs
maintenance and repairs will be worth less. Your Real Estate Agent,
if they are representing you as a Buyer's Agent, should be able
to develop a CMA for you for any property.

Armed with these 2 important pieces of information--market conditions
and the CMA--virtually any buyer should be able to develop a clear
strategy for negotiation: How much to offer, how to raise their offer
if need be, what a maximum price should be and, most importantly,
when to walk away if necessary.

You can find more information on negotiations on the site here:
as well as a CMA example here:

Next Month's Topic: The Steps to Buying a Home


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

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

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

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