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January, 2006 Newsletter

+++++++++++ January 1, 2006 +++++++++++++++++++

CONTENTS:
Introduction: Existing and New Home Sales Cool
Mortgage Rate Update: Rates Stabilize a Bit
This Month's Tip: Cosmetic Improvements Can Reap Big Rewards
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Introduction: Both Existing Home and New Home Sales Cool

Welcome to the January, 2006 edition of the Home Buyer's
Newsletter. A very happy New Year to all of our visitors
and subscribers!

Both existing home and new home sales cooled during the
month of November. This could be a sign that the housing
market in the U.S. is beginning to soften, or it could be nothing
more than a temporary slowdown. We will want to see at least
a full quarter's worth of activity before making any prognostications
of the health of the market.

Existing-home sales declined in November while home prices
sustained double-digit annual gains, according to the National
Association of Realtors®.

Total existing-home sales including single-family, townhomes,
condominiums and co-ops eased 1.7 percent to a seasonally
adjusted annual rate of 6.97 million units in November from a
pace of 7.09 million in October. Sales were 0.1 percent below
the 6.98 million-unit level in November 2004.

David Lereah, NARs chief economist, said higher mortgage
interest rates were responsible for moderating sales, but noted
its important to keep an eye on the actual level of home sales
given the market surge this year. The current pace of home
sales activity remains historically strong only eight months
have had a higher sales pace, he said. A modest downtrend,
to a sales volume that is expected to be the second-best year
ever in 2006, will be good for the long-term health of the housing
sector.

On the new home side, sales of new one-family houses in November
2005 were at a seasonally adjusted annual rate of 1,245,000, according
to estimates released jointly on December 23rd by the U.S. Census Bureau
and the Department of Housing and Urban Development. This is 11.3 percent
(±8.9%) below the revised October rate of 1,404,000, but is 6.0 percent
(±13.8%) above the November 2004 estimate of 1,175,000.

The median sales price of new houses sold in November 2005 was
$225,200; the average sales price was $283,300. The seasonally
adjusted estimate of new houses for sale at the end of November was
503,000. This represents a supply of 4.9 months at the current sales rate.

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

Mortgage Rate Update: Rates Stabilize in December

Mortgage rates were reasonably stable in the month of December,
after increasing in the prior 60 day period. According to mortgage
company Freddie Mac, 30-year fixed-rate mortgages averaged 6.22%
after beginning the month at an average of 6.26%. 15-year fixed-rate
mortgages trended in a similar fashion, ending the month at an
average of 5.76% after beginning December at an average of 5.81%.

Many analyists see rates in the same general range for the next
few months, barring any shocks to the economy--either positive
or negative--which would move the mortgage rate market.

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: Cosmetic Improvements Can Reap Big Rewards

Want to be way ahead of the majority of home buyers AND save yourself
a bundle of money to boot? Be less concerned about the "cream puff"
houses that need little or no work (and command a premium price) and
focua on the "ugly ducklings" (those properties that need a bit of TLC
and are under many buyer's radar).

It is a fact of home buying that many buyers simply have no "vision" when
it comes to looking for (and at) a house. They often cannot see past a
wall that needs painted, a door that needs replaced, shubbery that is in
need of trimming. This is especially true of first time buyers who, quite
naturally, are looking for their "dream house." In most buyer's eyes, a
dream house does not arrive dressed in ugly colors or with worn out
appliances. As a result, the best looking and "best dressed" houses get
the most activity, the most offers and the highest prices. The advantage,
though, often goes to the buyer of those properties that DO need a bit
of cosmetic work, since frequently the cost of those repairs is considerably
less than the amount of price saving that is available when compared to
"ready to go" houses, especially if you are willing and able to do much of
the work yourself.

When we speak of "cosmetic improvements" we are referring to those repairs
or improvements that do not involve the need for major construction nor have
structural elements. For example, we would consider new carpeting throughout
the house as a cosmetic improvement. In contrast, repairing a rotted
bandboard--part of a house's support--should not be attempted by the average
home purchaser.

Some examples of cosmetic improvements:

+ New paint: Interior, exterior or both
+ New carpeting
+ New appliances
+ New plumbing fixtures (faucets and the like)
+ New electrical fixtures (vanity lights, hall and kitchen lights, etc.)
+ Landscape improvements (cleanup, planting lawns and shrubbery)

If you do some or all of this work yourself, you can compound your savings
appreciably. Obviously, you should leave certain jobs to the professionals
(eleictrical repairs, for example) but painting, landscaping and some minor
repairs can usually be handled fairly easily.

Here is an example of how cosmetic improvements can bring fairly decent
rewards. These are not actual property histories but are used for demonstration.

Property A is a "heart-stopper." The exterior has just been painted, the yard
and grounds are just about perfect with a well trimmed lawn, manicured
shrubbery and fresh mulch. Beautiful flowers are blooming everywhere. As
soon as you open the front door the smell of new carpeting and fresh paint
envelop you. This property screams "Doll House!" and the high level of
buyer activity proves this out. Listed for $209,000, there are several competing
offers and eventually the house settles for $217,500, all in just over a month's
time.

Property B has very little of what Property A had going for it. Although it is
in the same neighborhood and actually is slightly larger than Property A,
"deferred maintenance" is the keyword here. The exterior is badly in need of
painting, the carpeting inside is a dull gold shag, the walls, although not
badly damaged, are in various 1970's shades of paint. In the kitchen, the
cabinets are in need of cleaning but are in good shape, and the rest of the
room looks very dated with the avocado green refrigerator, stove and
dishwasher. Although there is some buyer activity on the house at first,
it tails off fairly rapidly as the word gets around that the property "needs
some work." The listing gets a little tired, and gets shown less and less
as the weeks draw on. Originally put on the market for $195,000, the price
is reduced to $189,000 and finally settles, after another 60 days on the
market, at $183,000.

Because of the very competitive real estate market that exists in many areas
today, even though the original list price of Property A-- the "doll house"--was
only $14,000 more than Property B, there was a $34,500 difference in the final
selling prices. Depending on the market conditions, average selling prices and
the level and cost of cosmetic improvements, the difference could be more or
less, requiring a buyer to do some research prior to committing.

An Important Caveat

As always, we strongly recommend a whole house inspection by a competant
and experienced professional before the purchase of any home. This is
especially important in the case of properties in need of cosmetic improvements
for a couple of reasons. First, when cosmetic repairs are needed, it could
signal that there are deeper, more expensive problems with the house. For
example, exterior siding that is weak and in need of paint could be hiding much
more expensive water damage behind the siding. Second, if the previous owner
deferred maintenance of the easy, less expensive improvements and repairs
(painting and the like) it is pretty likely that they also deferred much more
expensive repairs and maintenance (like roofs and heating systems). A complete
whole house inspection will give you a much clearer picture of what needs to be
done to the house and a general idea of the expense involved.

For more information on whole house inspections, see the
article on the site
devoted to that subject


Next Month's Tip: The Housing "Gold Rush"
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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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