July, 2003 Newsletter
+++++++++++ July 1, 2003 +++++++++++++++++++
Introduction: Existing and New Home Sales Soar
Mortgage Rate Update: Rates Stabilize
This Month's Tip: Understanding Offers
Introduction: Welcome to the July edition of the
Home Buyer's Newsletter. Sales of both existing homes and new homes
soared in the month of May, bettering virtually all forecasts and predictions.
Existing single-family home sales rose in May and were at the third-highest
monthly pace on record, according to the National Association of Realtors®.
Existing-home sales increased 1.2 percent to a seasonally adjusted annual
rate of 5.92 million units in May from an upwardly revised level of 5.85 million
units in April. Last month's sales activity was 4.4 percent above the 5.67-million
unit pace in May 2002. The record is a 6.10-million unit sales rate in January
2003, while the second highest is 5.96 million in January 2002.
David Lereah, NAR's chief economist, said home sales defy earlier expectations.
"The pace of home sales so far this year has been higher than projected,
and we still expect sales activity to ease a little but to end this year with a new
annual record," he said. "It all comes down to historically low mortgage interest
rates, which have increased the purchasing power for a growing number of
households. Strong activity by first-time buyers is the key to the overall health
of the market because it provides liquidity for people wishing to trade to another
home. All sectors of the market are experiencing brisk activity."
Sales of new one-family houses in May 2003 were at a seasonally adjusted
annual rate of 1,157,000, according to estimates released jointly on May 25th
by the U.S. Census Bureau and the U.S. Department of Housing and Urban
Development. This is 12.5 percent (±10.4%) above the revised April rate of
1,028,000 and is 17.9 percent (±13.2%) above the May 2002 estimate
The median sales price of new houses sold in May 2003 was $195,200;
the average sales price was $242,500. The seasonally adjusted estimate of
new houses for sale at the end of May was 336,000. This represents a supply of
3.5 months at the current sales rate.
Mortgage Rate Update: Rates Stabilize
Although rates dropped to a multi-decade low during the month of June,
they ended the month virtually where they began due to a small rise
during the final week. According to mortgage company Freddie
Mac, 30-year fixed-rate mortgages averaged 5.24% for the period
ending June 26th. Rates started the month of June averaging 5.26%.
In comparison, rates one year ago averaged 6.55%, demonstating
the deep drop in mortgage rates over the last 12 months. For the same
period ending June 26th, 15-year fixed-rate mortgages averaged 4.63%,
also down considerably from the rates of 5.99% a year earlier.
What is on the horizon for mortgage rates? Analyists differ in their
assessment, with some believing that we have already seen the
lowest of the rates with increases very likely, while others believe
that until there are certain signs of improvement in the U.S. economy,
low rates will be the norm rather than the exception.
For current average mortgage rates, see the Mortgage
For more information on mortgages, visit the Mortgage
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This Month's Tip: Understanding Offers
A fairly common misconception about purchasing a home
--especially among first-time buyers--concerns the
process of making an offer on a property. Some buyers
will assume that, as in many other forms of negotiation,
they can make verbal offers below the listing price to
"test the water" and get a feel for what the seller
may take for the home. Unlike an automobile purchase,
for example, where it may be perfectly normal to make
a low verbal offer and have it accepted without any
obligation on the part of the buyer, real estate
purchase offers are quite different.
First off, verbal offers, if accepted by the seller,
are virtually impossible to enforce. To have any
legal weight, an offer for a home must be in writing
and be accompanied by "earnest money"--a deposit that
accompanies the offer. Second, if this written offer IS
accepted by the seller, and you are notified of the
acceptance, then negotiations are concluded. You
have, for all intents and purposes, purchased a home.
The "offer" has become a legally binding contract,
requiring you, in most cases, to proceed with
the purchase. The offer, when accepted, becomes an
contractual agreement that is enforceable from both the
seller's and the buyer's perspective. It is for this
reason that it is never advisable to "go fishing" with
an offer to see what a seller may accept. Unless you
have done all your preparation and are completely
aware of values, you may find yourself with a fully
executed contract on a less than desirable home.
If you are aware of all aspects of your purchase and
are prepared to proceed with an offer and contract,
there are safeguards which can protect you.
These are commonly known as "contingencies" and
become part of the offer (and therefore the
contract). Some examples of contingencies that
can protect you should there be problems with
the home or the agreement:
"Subject to a whole house inspection report that
is acceptable to the purchaser" (as well as specifics
as to who will pay if defects are found). This protects
the purchaser from contracting to purchase a home
with major defects.
"Subject to purchaser obtaining a mortgage in the
amount of $XXXX with an interest rate of no more than
X.XX%." This protects the purchaser from being
forced to proceed with a mortgage loan with terms
that are unacceptable.
Real Estate Agents will generally have purchase
agreements that are pre-written and incorporate
all of the legal aspects as well as additional
components that are necessary for an acceptable
contract. Some examples:
* A complete legal description of the property.
* The proposed selling price.
* Any concessions you desire the seller to make.
* Any financing contingencies.
* Any home inspection contingencies.
* A clear definition of precisely what is to be
included in the sale. Don't simply assume that items
such as porch swings, fireplace doors and refrigerators
are included. Doing so usually causes some unpleasant
surprises on moving day. If there is any question,
* The amount of earnest money (your deposit) that is
being tendered with the offer.
For more discussion on the subjects of offers and
contracts, see the sections devoted to those
subjects on the site:
Next Month's Topic: Overbuying: When Is it Too Much?
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:<A HREF="http://www.ourfamilyplace.com/homebuyer/checklist.html">Home Buyer's Checklist</A>
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 or access our feedback
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 your home buying process!
The Team at the Home Buyer's Information Center