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January, 2008 Newsletter

+++++++++++ January 1, 2008 +++++++++++++++++++

Introduction: Sales, Prices Continue to be Soft
Mortgage Rate Update: Rates Bounce
This Month's Tip: Lessons Learned

Introduction: Sales, Prices Continue to be Soft

Welcome to the January, 2008 edition of the
Home Buyer's Newsletter. First off, very warm wishes
for a happy new year to all readers and visitors!

Sales of existing homes inched up slightly in the month
of November while sales of new homes showed a fairly
significant drop. Prices of both continue to erode,
a trend that we have seen for most of the year.

Existing home sales rose 0.4% in November over a revised
October number, coming in at a 5.00 million annual sales
rate. Prices, however, continued to erode with the median
price of a previously owned home $210,200 in November,
down 3.3% from $217,300 in November 2006.

Sales of new one-family houses in November 2007 were at
a seasonally adjusted annual rate of 647,000, according to
estimates released jointly on December 28th by the U.S. Census
Bureau and the Department of Housing and Urban Development.
This is 9.0 percent (±13.9%) below the revised October rate
of 711,000 and is 34.4 percent (±7.9%) below the
November 2006 estimate of 987,000.

The median sales price of new houses sold in November 2007 was
$239,100; the average sales price was $293,300. The
seasonally adjusted estimate of new houses for sale at the
end of November was 505,000. This represents a supply of 9.3
months at the current sales rate.

Both resale and new home inventories coninued to be at or
near record levels, indicating that the market is not likely
to make a rapid turn-around in the near future. As for the
overall picture going forward in 2008, there are so many
variables in both the market and the overall economy that
predictions are, at best, fairly tentative.


Mortgage Rate Update: Rates Bounce

After several weeks of declines, mortgage rates moved upward
in the second half of the month of December. 30-year fixed-
rate mortgages averaged 6.17% in the period that ended December
27th after beginning the month at an average of 5.96%,
according to mortgage company Freddie Mac. 15-year fixed-rate
loans also moved up, going from an average of 5.65% at the
beginning of the month to 5.79% at the end.

For the year, rates were all over the board, from a low
under 6.00% for 30-year fixed-rate loans to a high near
7.00%. Although they have risen somewhat in the last
few weeks, rates still are at the low end of the range
for the year.

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: Lessons Learned

It is fairly obvious that the mortgage issues that we have seen in 2007 and
will continue to see in 2008 will be very painful for hundreds of thousands of
homeowners in North America. Going, forward, though, there are many lessons
that can be learned from the numerous mistakes--some minor and some major--
that were made in the previous five years or so. Learning from those mistakes,
for those who have yet to purchase a home, can save a great deal of heartache
(and expense) in the years ahead.

Watching how both the Real Estate and mortgage markets progressed through the
period of roughly 2001 through 2006, many of us knew (and warned) that there
was simply no way that all would end well. Prices rose at a rate never before
seen in history, fueled by "investors" looking for a quick profit, by home
buyers who were not qualified for the debt load they were absorbing and by
artificially low interest rates that compounded the whole problem. Now that
things are returning to more normal activity and pricing levels (brutally
quickly in some areas) some recent buyers have found themselves caught in a
financial pinch--for some a painful situation but for many others it will
unfortunately result in the loss of their home. Although the media focuses
almost completely on the "sub-prime" problem, the difficulties run much
deeper than that.

For those who have yet to purchase, it truly is not that difficult to protect
yourself from almost anything a future market may throw at you. You must
begin by ridding yourself of the notions (promulgated by spin and virtual
non-stop televison series) that energized the mania.

+ "Real Estate ALWAYS goes up"
+ "Push yourself to buy the most house you possibly can"
+ "Real Estate is the world's best investment vehicle"

Numerous "experts" (many with a product to sell) pushed these "truths" almost
everywhere in the first half of this decade. Those who urged restraint were
frequently dismissed as not understanding the "new" market. Unfortunately,
there ware many more Real Estate boosters than there were detractors and the
net result was a market that simply went too far, too fast in many areas of
the world.

"Real Estate ALWAYS goes up"

In the long term (meaning 10 or more years) this is generally true. Unfortunately,
in the short term (meaning 1-9 years) this is not always the case, which is fairly
evident today. What we arex experiencing in many areas now is not all that unusual
except that it there are steeper declines in more areas than would be considered
normal. In the past, we've seen declines in California, Texas, New England and
other localities, long before the current price drops.

In the real world, price fluctuations are only a problem if your structure your
purchase in anticipation of large and steady price appreciation. A couple of
examples would be paying too much for a house while waiting for big price jumps
or getting a large home equity loan assuming that you would be protected by
appreciation in the value of the home. In either of these cases, if the value
does not rise substantially, a buyer could be stuck with too much invested in
the property. For more information on setting the value on a home and positioning
yourself not to pay too much, see the discussion on the site on

"Push YOurself to buy the most house you possibly can"

When home prices were much more stable than they are today, this probably was
good advice. When mortgage availability was confined largely to fixed-rate
15-, 20- and 30-year terms,, this may have made sense since loan and underwriting
standards pretty much assured you that you would not buy far beyond your means.
New mortgage "products" such as interest only or negative amortization loans,
though, were based on the continuation of a housing boom. How else could you
justify loans where you balance INCREASED every instead of dropping? In
addition, lending standards were loosened appreciably, compounding the problems.
The result was a lot of people who should not have been purchasing homes did
so, and a number of those who did purchase homes were "qualified" for much more
house than was affordable. You can protect yourself by being certain that the
amount of mortgage, and the monthly payment attached to that mortgage, fits
easily into your personal budget picture. You can find more information on
budgeting here:

"Real Estate is the world's best investment vehicle"

Without a doubt, Real Estate is a great investment since it provides both
your housing AND is an appreciating asset. It should, however, be only
a part of a bigger savings and investment plan. As the old adage warned,
"don't put all your eggs in one basket," devoting an overzealous percentage
of your investment portfolio in Real Estate can have negative consequences
if the market continues to either contract or stagnate. Protecting yourself
means diversifying your investments over a wide range of options rather than
betting on previous performance.

Summing Up

A purchase of a home can be one of the wisest financial moves you can possibly
make, if the purchase is made with research, common sense and a bit of vision
firmly in hand.

Next Month's Tip: Setting a Timeline


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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