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February, 2009 Newsletter

+++++++++++ February 1, 2009 +++++++++++++++++++

Introduction: Existing Sales Rise, New Sales Plummet
Mortgage Rate Update: Rates Turn
This Month's Tip: Inspectors and Inspections


Introduction: Existing Sales Rise, New Sales Plummet

It may be too early to tell, and a single month does not indicate
a trend by any means, but there are some signs that the plunge in sales
activity in existing homes, at least, may have eased. The picture is
not nearly as bright, however, for new home sales, which declined to
one of the lowest levels in history.

Existing-home sales rose unexpectedly while inventory declined, led by a
surge of sales in the West, according to the National Association of Realtors®.

Existing-home sales – including single-family, townhomes, condominiums
and co-ops – jumped 6.5 percent to a seasonally adjusted annual rate1 of
4.74 million units in December from a downwardly revised pace of 4.45
million units in November, but are 3.5 percent below the 4.91 million-unit
pace in December 2007.

For all of 2008 there were 4,912,000 existing-home sales, which was 13.1
percent below the 5,652,000 transactions recorded in 2007. This is the l
owest volume since 1997 when there were 4,371,000 sales.

Lawrence Yun, NAR chief economist, said home prices continue to fall
significantly. “It appears some buyers are taking advantage of much lower
home prices,” he said. “The higher monthly sales gain and falling inventory
are steps in the right direction, but the market is still far from normal
balanced conditions. Buyers will continue to have an edge over sellers
for the foreseeable future.”

Total housing inventory at the end of December fell 11.7 percent to 3.68
million existing homes available for sale, which represents a 9.3-month
supply at the current sales pace, down from a 11.2-month supply in

On the new home side, sales of new one-family houses in December 2008 were
at a seasonally adjusted annual rate of 331,000, according to estimates released
jointly on January 29 by the U.S. Census Bureau and the Department of Housing
and Urban Development This is 14.7 percent (±13.9%) below the revised November
of 388,000 and is 44.8 percent (±10.8%) below the December 2007 estimate of 600,000.

The median sales price of new houses sold in December 2008 was $206,500; the average
sales price was $246,900. The seasonally adjusted estimate of new houses for sale at
the end of December was 357,000. This represents a supply of 12.9 months at the current
sales rate.

An estimated 482,000 new homes were sold in 2008. This is 37.8 percent (±2.7%)
below the 2007 figure of 776,000.

It will likely take another 2 or 3 months before we begin to see if there is a clear
picture here. At present, there are a couple of issues that are still troubling.
First, a high percentage of the sales of existing homes are foreclosures at rock
bottom prices. Second, the inventory of homes, especially new homes, continues
to be one of the highest levels in history. As we have said a number of times,
until inventories drop to more manageable levels, there is litte chance of a real
housing recovery in both activity and prices.


Mortgage Rate Update: Rates Turn

After their plunge in late 2008, mortgage rates took another drop in early January
and then began to turn upward later in the month. 30-year fixed-rate mortgages
stood at an average of 5.10% in the period that ended on January 29th, according
to mortgage company Freddie Mac. 15-year fixed-rate mortgages averaged 4.80% in
the same period. The increases are largely due to fluctuations in U.S. Treasuries
which saw movement during the month of January.

There is no clear consensus on the direction of mortgage rates in the near future,
with analysts fairly evenly split between a call for rates to fall and one where
rates either stay the same or rise. Those in the market for a mortgage should keep
a close eye for a trend in the coming weeks.

Mortgage Rate Update:
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: Inspectors and Inspections

In the purchase of a home there are but a few absolutes that
need to be considered before you embark on home ownership.
Unfortunately, in the mania that we experienced between 2002
and 2007, to some degree, all of these maxims were ignored by

+ Never overpay for a property, banking on price appreciation to
bail you out
+ Never buy far beyond your means and leave the possibility
that you cannot afford the home
+ Never buy a property without having it adequately inspected to
avoid nasty and expensive surprises in the future

The current housing and mortgage markets have pretty much eliminated
the first two (if a house is badly overpriced it likely will not
appraise for that value and if you cannot afford the mortgage it is
highly unlikely that you will be able to secure a loan). We still hear,
however, of a number of instances where buyers, either to limit expenses
or out of unfamiliarity, fail to have a home that they are considering
propery inspected. An inspection is not a guarantee that you will not
have problems in the immediate future, but having a professional (and
unbiased) eye on the property can disclose problems as well as give
you some peace of mind.

What does a whole house inspection entail?

A whole house inspection examines the structure and the systems
of a house or condominium. The purpose of such an inspection
is to reveal defects (or potential defects) in the basic structure of the
home as well as the electrical, plumbing, heating/cooling, roofing
and foundation of a property. It is not designed to be an engineering
analysis (which is a far more detailed--and expensive--inspection).
Nor is it designed to reveal cosmetic issues (such as a room that
needs repainting) which is the responsibility of the buyer in their
personal inspections. Instead, an inspection will be focused on
issues such as insufficient electrical capacity, a roof that has
reached the end of its useful life, plumbing problems or
malfunctioning appliances.

Finding an inspector

Whole house inspectors can be found in every city and most towns
across North America. A large metropolitan area may have as
many as 50 inspection companies or more available. You will want
to spend some time comparing the qualifications and reputations
of several inspectors rather than jumping on the first one you find
in the phone book or that your agent recommends. Our experience
has been that the best inspectors--those that are the most
thorough--are those whose only job is whole house inspections.
Contractors that do inspections "on the side" may have too
specialized experience or may, in fact, be looking at inspections
as a source of potential repair work.

The cost

The cost of a whole house inspection will vary due to a few factors.
First, the area in which you live will influence the price. Second,
the size of the house will be a determining factor. Third, how
extensive the inspection will need to be will increase or decrease
the cost. In general, an inspection will probably run you from
$200 at the low end upwards to $500 or $600 on the high end,
depending on the factors mentioned above. No matter what the
cost, though, it is money well spent. Imagine the price of replacing
a heating and cooling system on a 3000 square foot house.
It would make the price paid for the inspection look like

You can find much more information on what inspections entail and how
to find inspectors
on the site.


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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