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August, 2009 Newsletter

+++++++++++ August 1, 2009 +++++++++++++++++++

CONTENTS:
Introduction: Sales on Upswing
Mortgage Rate Update: Rates See-Saw
This Month's Tip: Laying the Groundwork

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Introduction: Sales on Upswing

Sales on Upswing

Existing-home sales rose for the third consecutive month
with inventory easing and home prices declining less
sharply in June, according to the National Association of
Realtors®.

Existing-home sales – including single-family, townhomes,
condominiums and co-ops – increased 3.6 percent to a
seasonally adjusted annual rate of 4.89 million units in
June from a downwardly revised pace of 4.72 million in May,
but are 0.2 percent lower than the 4.90 million-unit level
in June 2008.

Lawrence Yun, NAR chief economist, is hopeful about the
gain. “The increase in existing-home sales occurred in
all major regions of the country,” he said. “We expect
a gradual uptrend in sales to continue due to tax credit
incentives and historically high affordability conditions.
Despite the rise in closed transactions, many Realtors®
are reporting lost sales as a result of new appraisal
standards that went into effect May 1 of this year.”

Total housing inventory at the end of June fell 0.7 percent
to 3.82 million existing homes available for sale, which
represents a 9.4-month supply2 at the current sales pace,
down from a 9.8-month supply in May. Raw inventory totals
are 14.9 percent below a year ago.

“This is another hopeful sign – if we can keep the volume
of sales above the level of new inventory, prices could
stabilize in many areas around the end of the year,” Yun said.

On the new home side, sales of new one-family houses in June
2009 were at a seasonally adjusted annual rate of 384,000,
according to estimates released jointly on July 27 by the U.S.
Census Bureau and the Department of Housing and Urban Development.
This is 11.0 percent (±13.2%) above the revised May rate of 346,000,
but is 21.3 percent (±11.4%) below the June 2008 estimate of
488,000.

The median sales price of new houses sold in June 2009 was $206,200;
the average sales price was $276,900. The seasonally adjusted estimate
of new houses for sale at the end of June was 281,000. This represents
a supply of 8.8 months at the current sales rate.

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Mortgage Rate Update: Rates See-Saw

Mortgage rates were up and down over the last month. 30-year fixed-rate
mortgages averaged 5.25% at the end of the month after beginning the month
at an average of 5.32% then dipping to as low as 5.14% according to
mortage company Freddie Mac. This continues the recent trend, where
we have seen 30-year rates vary between a low of 4.78% and a high of
5.59% in the last 90 days. Going forward, many experts do not see
a definable trend--either up or down--in the near future, so those
who are in the market for a home (and a mortgage) need to keep a close
watch on the market.

For current average mortgage rates, see the
rates page.

For more information on mortgages, visit the
Mortgage Section
++++++++++++++++++++++++++++++++++++++++++++++

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++++++++++++++++++++++++++++++++++++++++++++++

Laying the Groundwork

For many, the purchase of a home is one of the most stressful
periods of their life. For others, though, the process is much
less daunting. Obviously, buying a home will never be as easy or
as uncomplicated as buying an appliance, but the differences in
experiences between those that are stressed and those that are
largely not can be traced to differences in preparation. Those
who spend the time necessary to adequately lay the groundwork
for the purchase almost always find considerably less stress and
aggravation than those who proceed through the process completely--
or partially--unprepared.

As with many things in life, the first bit of groundwork is a
financial one. It makes no sense whatsoever to proceed in a home
purchase direction without being familiar with a couple key points:

+ What is your current financial health?
+ How much home can you comfortably afford?

These financial investigations become the foundation of your home
buying experience. They help to prevent disappointment later on or
finding yourself "stuck" in a house that is simply unaffordable.

What is your current financial health?

To he honest, for a few years recently this was much less an issue
than in the past. A large part of our current economic mess is due
to the fact that tens of thousands of people with virtually NO
financial health ended up in homes that they could not afford.
Fortunately, those days are pretty much over now and your financial
strength WILL be an issue in your purchase process. Simply put, if
you cannot afford the home, you likely will not be able to buy it.
Credit scores and histories, income levels and expenses are once
again becoming an issue in the mortgage process.



How much home can you afford?

Again, standards of affordabiltiy that were in place for decades
were thrown out in recent years and we are paying the price in
diminished real estate values due to the unprecedented level of
foreclosures. Although there will often be variables, the
time-tested ratios frequently used for conventional mortgages
likely make sense here. These stipulate that your monthly mortgage
expense (which includes princioal and interest as well as property
taxes and insurance) whould never exceed 28% of your total monthly
gross income. Likewise, your mortgage expense plus any other monthly
debt obligations (car payments, credit car payments, student loans
or other loans) should not be in excess of 36% of that total monthly
income. These ratios, obviously, do not guarantee that you will be
able to make the payments, but they tilt the odds strongly in your
favor.

Groundwork on market conditions

Once you are comfortable with the amount of home you can afford, you
will need to educate yourself on the current state of the market in
the area in which you are interested. The easiest, and possibly the
most effective, way of handling this educational process is by using
the services of a good buyer's agent. Since they deal with market
conditons on a daily basis, a buyer's agent can bring you into focus
on exactly what the situation is in your chosen area. Are sales
strong or weak? Are prices rising, falling or stagnant? What is the
prognosis for the near future? Armed with this information, you are
better prepared for the negotiation phase later.

Comparison

With financial and market groundwork done, you can proceeed to the
house comparison and selection process. For many buyers, this is
unewisely their FIRST step, and why many stumble here as they go forward.
They may be looking at far more house than they can afford or they
botch the negotiations when they get to that point. If you are prepared,
this is generally the most exciting part of the entire process since
you begin to see, and compare, actual homes that fit your needs, wants
and budget. It is also the poing where you can narrow the field down
to a single house you would like to purchase.

More information on the site:
Finding a Home

Pricing preparation

Now your preparation and groundwork will come full circle--back to
financial matters as you negotiate your way to a purchase. Just
because a home is listed for a specific price is no guarantee that
it is a FAIR price--or even in the realm of reality. Sellers will
frequently "take a shot" to see what the market will bear and
unprepared buyers can end up paying thousands (or tens of thousands)
more than was necessary. Overpaying for a property is a mistake that
keeps haunting you long after the settlement date since the monthly
mortgage payments will be based on that inflated price.

Getting a fair price is much easier if your preparation includes a
CMA-- a Comparative Market Analysis. Your agent can develop this
for you which will show you the exact prices that homes are selling
for in the neighborhood in which you are interested. You can then
make a comparison, taking into account size and condition, between
the home you want to buy and what those around it are actually
selling for.

Summing Up

Like most things in life, prepartion is frequently the best pathway
to success. The size, scope and expense of a house purchase makes
this preparation process a crucial part of the equation. Not being
properly prepared too often results in buying the wrong house (or too
much house) for your needs or paying too much for the property.
Either of these mistakes will likely cause havoc with your financial well
being and comfort.


Next Month's Tip: Don't Forget Resale

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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
.

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

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