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July, 2010 Newsletter

+++++++++++ July 1, 2010 +++++++++++++++++++

Introduction: May Sales Soften
Mortgage Rate Update: Rates Fall to Historic Lows
This Month's Tip: Mortgages: New Market Realities

Introduction: May Sales Soft

Welcome to the July, 2010 issue of the Home Buyer's Newsletter.

As the effect of the home buyer's tax incentive began to wane in
the month of May (the purchase cut-off was April 30), both existing
and new home sales declined in May.

Existing-home sales, which are completed transactions that include
single-family, townhomes, condominiums and co-ops, were at a
seasonally adjusted annual rate of 5.66 million units in May,
down 2.2 percent from an upwardly revised surge of 5.79 million units
in April. May closings are 19.2 percent above the 4.75 million-unit
level in May 2009; April sales were revised to show an 8.0 percent
monthly gain.

Lawrence Yun, NAR chief economist, said he expects one more month of
elevated home sales. “We are witnessing the ongoing effects of the home
buyer tax credit, which we’ll also see in June real estate closings,”
he said. “However, approximately 180,000 home buyers who signed a contract
in good faith to receive the tax credit may not be able to finalize by the
end of June due to delays in the mortgage process, particularly for short

In new home transactions, sales of new single-family houses in May 2010
were at a seasonally adjusted annual rate of 300,000, according to
estimates released jointly on June 23rd by the U.S. Census Bureau and the
Department of Housing and Urban Development. This is 32.7 percent (±9.9%)
below the revised April rate of 446,000 and is 18.3 percent (±13.0%) below
the May 2009 estimate of 367,000.

The median sales price of new houses sold in May 2010 was $200,900; the average
sales price was $263,400. The seasonally adjusted estimate of new houses for s
ale at the end of May was 213,000. This represents a supply of 8.5 months at
the current sales rate.

The next few months will probably answer the biggest market question mark
in many years as the full effect of the expiration of the tax incentives
take hold. Will the market slowly rebound due to lower prices and very
favorable interest rates or will the decline extend through the summer.
Stay tuned!


Mortgage Rate Update: Rates Fall to Historic Lows

Mortgage rates fell to historic lows during the month of June as questions
continued to arise on the strength of the economic recovery. According to
mortgage company Freddie Mac, 30-year fixed-rate mortgages averaged 4.69%
in the period that ended June 24th. Average rates were 4.84% 30 days
earlier. For 15-year fixed-rate mortgages, the average of 4.13%. falling
from 4.24% a month earlier.

Rates likely have very little further room to fall, if at all. For the
millions of potential home buyers who are sitting on the fence, the combination
of extremely low mortgage rates coupled with prices in some areas that are
30-40% lower than they were just 3 years ago, it may be time to take a
hard look at the market again.

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: Mortgages: New Market Realities

It should not be a surprise that the real estate market has changed a
great deal in the last few years. Unsustainable price gains, mortgages that
were granted with little or no qualification and wild overbuilding all were
destined to create a backslide in the market. The depth and breadth of that
reversal, though, has caught some analysts by surprise.

Without question, it is a new landscape for the real estate market as we
move into the second half of 2010. Many assumptions which were taken as
"gospel" in 2007 and 2008 (for example, that property values ALWAYS rise)
have turned out to be widely off the mark. Others, like the qualification
requirements for a mortgage, have been adjusted to fit the present day
market and that of the near future.

For a potential home buyer planning a purchase, it is imperative that they
acquaint themselves with the real estate picture as it exists today, rather
than the way it was just a short time ago. To ignore these new market
realities can mean a painful and expensive lesson may lie ahead.

Beginning with what needs to be most buyer's first concern--securing a
mortgage--this is where some of the most striking and pervasive changes
have occurred recently. Everyone has seen the news stories regarding
purchasers who have lost their homes to foreclosure, largely due to being
unable to afford their mortgage payments. Many of these problems are the
result of mortgage products that attracted buyers who simply were not
qualified to purchase the house they mortgaged. These types of loans--
"liar loans" where there was no documentation of income, loans for well
over the purchase price and "negative amortization" loans where the
unpaid balance went UP every month instead of down, have largely (and
rightfully) disappeared.

When it comes to mortages, it is highly likely that you will need to
qualify for the loan in order to get it. This means that there will be
limits to the amount of your income that you will be able to devote to
your mortgage payment as well as you total monthly debt obligations.
And, it his just as likely that you will need to document that income
with pay stubs, tax returns or both. In addition, it is fairly common
today for lenders to require some sort of downpayment, a change from the
"zero down" loans of the past.

Almost as important as the mortgage picture in the new reality is the
pricing piece of the puzzle. It has become obvious that home prices
are not static and they do not only go in one direction. The constant
drumbeat of "real estate values always go up" that we heard in 2007
and early 2008 has been silenced. Yes, in the long run (meaning 20+
years) house prices do trend upwards. In the short run (meaning 5
years or less) they can fluctuate, as is very clear in most areas in
the last few years.

What this means for a buyer in today's market is that they will need
to get a clear focus on property values as they exist presently. The
worst financial mistake a buyer could make would be to be swayed by
home values from a year or more ago in the area in which they are
interested. Those values may have change drastically in that time
frame. Your Buyer's Agent can easily develop a CMA (Comparative
Market Analysis) for you that will show precisely what properties
are currently selling for, information you will definitely need when
formulating an offer or contract on the home you want.

For more information on mortgages, visit that section on the site:

For more information on CMAs, see:
Comparative Market Analysis

Next Month's Tip: Finding the Right Location


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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