July, 2008 Newsletter
+++++++++++ July 1, 2008 +++++++++++++++++++
Introduction: Sales and Prices Continue to Slip
Mortgage Rate Update: Rates Moving Upward
This Month's Tip: What A House Is (And What It Isn't)
Introduction: Sales and Prices Continue to Slip
Welcome to the July edition of the
Home Buyer's Newsletter.
Existing-home sales increased in May with buyers responding to
lower home prices, according to the National Association of Realtors®.
Existing-home sales – including single-family, townhomes, condominiums
and co-ops – increased 2.0 percent to a seasonally adjusted annual rate
of 4.99 million units in May from a level of 4.89 million in April, but
are 15.9 percent below the 5.93 million-unit pace in May 2007.
The national median existing-home price for all housing types was
$208,600 in May, down 6.3 percent from a year ago when the median was $222,700.
Lawrence Yun, NAR chief economist, said there’s still a lot of inventory
in the market. “The large supply of homes on the market clearly favors buyers,
and it should take several months to draw the inventory down,” he said.
“Stabilization in home prices can only occur with buyers returning to the
market, so we are encouraged by rising home sales, particularly in distressed
markets. Foreclosures and short sales appear to be a larger part of the market,
particularly in California, and are creating a drag on current home prices.”
The picture was similar on the new home side of the market. Sales of new
one-family houses in May 2008 were at a seasonally adjusted annual rate
of 512,000, according to estimates released jointly on June 25th by the
U.S. Census Bureau and the Department of Housing and Urban Development.
This is 2.5 percent (±13.7%) below the revised April rate of 525,000 and
is 40.3 percent (±6.9%) below the May 2007 estimate of 857,000.
The median sales price of new houses sold in May 2008 was $231,000; the
average sales price was $311,300. The seasonally adjusted estimate of new
houses for sale at the end of May was 453,000. This represents a supply of 10.9
months at the current sales rate.
All in all, this continues to be a challenging market in respect to sales
volume, sales prices and most importantly, in the amount of inventory that
remains on the market. Until the inventory level returns to more normal
levels, we will likely continue to see current forces in play.
Mortgage Rate Update: Rates Continue To Rise
We continued to see increases in average mortgage rates in the month of
June. According to mortgage company Freddie Mac, 30-year fixed-rate
mortgage averaged 6.45%, a farily healthy increase from the average of
6.08% when the month began. Likewise, 15-year fixed-rate mortgages
went from an average of 5.66% at the beginning of June to an average
of 6.04% at the end.
For the next month or so, analysts are largely in a couple of camps
when looking at the upcoming trend for mortgage rates. Some see rates
staying relatively steady while others forecast a slight
increase in rates. Very few analysts expect to see a decrease in rates
in the near future.
For current average mortgage rates, see the rates page.
For more information on mortgages, visit the Mortgage
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This Month's Tip: A House: What It Is (And What It Isn't)
For thousands of years, a house, the place where you lived, was just that: a place
where you lived. Buying a house carried some very important additional benefits,
but largely those who purchased property did so in order to have a "place to hang
their hat" that they could call their own.
Fueled by a flood of marketing for products and entertainment, the notion of home
ownership took a distinct turn around the beginning of the 21st century. Suddenly,
a house was considered, by many, to be much more than an abode. It began to take
on many new qualities that changed the way that some people viewed their house. For
those who looked at these "changes" with a critical eye, or those who ignored them
completely, their ownership experience likely will not be affected. For those who
bought the "story" completely, there may be some rough sledding ahead.
What A House IS
As mentioned above, a house is, by its very nature, a place that you can call home.
In its most simple form, it is a collection of rooms with specific purposes:
sleeping, preparing food, eating, gathering etc. There are some really nice added
benefits that come with ownership, including:
+ Pride of owning your own home
+ A chance to build equity, although fairly slowly
+ A canvas on which many wonderful memories are often painted
For most people (and for many years) this was more than enough. They bought a
house as a place to call home and perhaps raise a family with some very tangible
bonuses added in.
What A House Is NOT
It is not a quick investment vehicle. Aound the year 2000, at just about the time
of the dot com implosion, Real Estate began to take on, in the minds of many,
several whole new dimensions. As more and more money moved out of the equities
market and into property, houses began to look less like a place to live (where
you could gradually and steadily build equity) to a place where you could turn
a quick buck. You need to look no further than the plethora of television shows,
internet sites, books and seminars designed to show you how to take advantage of
the big boom in Real Estate. "Be a serial homeowner!" (keep moving from one
property to the next, pocketing the cash as you went along). "Be a Real Estate
Tycoon!", "Flip a house for massive profits" and the like screamed from the
airwaves, the web and bookshelves.
Like most schemes, those who participated very early in this game made out (they
sold to those who got in later). But unfortunately many were caught holding
the bag, both those who bought strictly for investment as well as those who
bought personal homes with hugely inflated notions of future appreciation. Now,
nearly 2 years after the downward trend began, there are still thousands trying
to right themselves from the continued effects of the downturn.
A house is not your sole retirement plan. Your home can (and always has been) a
part of a good retirement investment program. You purchase a home, often
relatively early in life, and either stay there or gradually trade up, as
situations demand, moving the equity with you. As you reach retirement age, you
sell a paid-off home and the proceeds become a part of your retirement. What we
have seen recently, though, is many whose ONLY retirement funds are tied up in big,
expensive houses that may be losing value. Many cashed in other retirement
accounts to pour even more money into Real Estate. As long as prices continued
to escalate this was an acceptable--but dangerous--plan. As soon as prices
stagnated or fell, however, having the proverbial "all eggs in one basket"
A house is not an ATM. In one of the most foolhardy trends of the early 2000s,
millions decided that their home was the ultimate ATM--a place where cash could
be extracted through home equity loans fo fund home improvements, vacations,
new cars or even, in many scenarios, basic living expenses. The whole notion
that a house was a place to GAIN equity, not extract it, was thrown out the
window by millions of these homeowners. Now, with a high percentage of today's
Real Estate transactions being "short sales" (the selling price is less than the
mortgage(s) owed) the ATM model has largely died a deserved death.
A house is not an ego boost. Again as a result of thousands of hours of
television programming and dozens of books, the notion that you can improve your
life via you house took firm root. No matter what direction you turned, you
heard the symphony: You simply CAN NOT live with a 15 year-old kitchen. You
will need the latest in stainless steel appliances, granite countertops and
cherry cabinets in order to cook effectively. Your house has no media room?
Your friends will think you are living in poverty! Hundreds of ads and
marketing plans were developed with the concept of "make them jealous!"
Billions of dollars were poured into houses, much of which accomplished
neither a lasting boost to the ego nor an appreciable increase in value.
Plus, when tastes change (as they always do, even more quickly in our modern
environment) that kitchen that looked so cutting edge this year may look
very dated (and ready for a remodel) in just a few short years.
In the current environment of slowing sales and pricing challenges, it
probably makes more sense than ever to stick to the basics when purchasing
a home. In the long run, you almost certainly will come out further
Next Month's Tip: Buying Foreclosures
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
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