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June, 2005 Newsletter

+++++++++++ June 1, 2005 +++++++++++++++++++

Introduction: New Record for Existing and New Home Sales
Mortgage Rate Update: Rates See-Saw
This Month's Tip: A Smart Approach to Pricing

Welcome to the June edition of the Home Buyer's
Newsletter, brought to you by the
Home Buyer's Information Center.

Existing-home sales hit a record high in April, defying expectations of a modest
slowing trend in 2005, according to the National Association of Realtors®.
Single-family home sales rose 4.5 percent in April to a record seasonally adjusted
annual rate of 6.28 million from a level of 6.01 million in March. Last month’s sales
activity was 5.0 percent above the 5.98 million-unit pace in April 2004. The median
single-family home price was $203,800 in April, up 15.1 percent from a year earlier.

Total existing-home sales – including single-family, townhomes, condominiums and
co-ops – rose 4.5 percent in April to a seasonally adjusted annual rate* of 7.18 million
from a downwardly revised pace of 6.87 million in March. April sales were 5.7 percent
above the 6.79 million-unit pace in April 2004. The previous record was a sales rate of
7.02 million in June 2004.

David Lereah, NAR’s chief economist, said sales had been expected to hold at high levels.
“A new record is a bit unexpected, but so is the performance of mortgage interest rates
which have been lower than forecast,” he said. “When we look at recent job gains, we
see all the positive factors coming together to coincide with a powerful demographic
demand for housing.”

Sales of new one-family houses in April 2005 were at a seasonally adjusted annual
rate of 1,316,000, according to estimates released jointly on May 25th by the U.S.
Census Bureau and the Department of Housing and Urban Development. This is 0.2
percent (±8.8%)* above the revised March rate of 1,313,000 and is 13.3 percent
(±13.8%)* above the revised April 2004 estimate of 1,162,000.

The median sales price of new houses sold in April 2005 was $230,800; the average
sales price was $283,500. The seasonally adjusted estimate of new houses for sale
at the end of April was 440,000. This represents a supply of 4.1 months at the current sales rate.

Summing up? The Real Estate market remains red-hot in virtually all areas of the
U.S. Can the momentum continue? Stay tuned....

Mortgage Rate Update: Rates See-Saw

As they have done for much of this year, mortgage rates see-
sawed during the month of May. In a three week period, according to
mortgage company Freddie Mac, 30-year fixed-rate mortgages dropped
from 5.78% to 5.75% then rose to 5.77% and dropped again to 5.71%.
The trend in 15-year fixed-rate mortgages was similar during the same
time period. The story with adjustable-rate mortgages, though, is a
bit different. Since these mortgages are closely tied to short-term
interest rates (those rates that you hear so much about when the Federal
Reserve Board either raises or lowers them) they have showed a fairly
steady increase throughout 2005. Since so many mortgages being
originated this year are based on adjustable rates, it is important for
home buyer's to keep a close eye on this trend.

For current average mortgage rates, see
Current Rates

For more information on mortgages, visit the
Mortgage Section



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This Month's Tip: A Smart Approach to Pricing

One of the most common concerns of someone considering
the purchase of a home relates to the price--"how do I
know if I am paying the right amount?" The fear of
paying too much can cause a buyer to make some major
mistakes, or even purchase a home that is totally
inadequate for their needs. The other side of the coin,
though can also have potential pitfalls. By not paying
enough attention to pricing concerns, a buyer can find
themselves paying considerably more for a home than it is
worth--money that may take years and years of price
appreciation to recoup.

Home, and, to some degree, used cars, are two of only a
handful of "products" that do not have an established
price. In North America, most of our purchases have a
clearly established cost. When you go to the grocery or
electronics store, the price is clearly stated and if it
varies from store to store, you can make comparisons.

Real estate, though, is quite different. First, there is no
"Suggested Manufacturer's Retail Price" for resale houses.
A seller can legally price their home for whatever they
choose. And second, since negotiation is involved with most
real estate transactions, there can be a wide variance in what
two different buyers will pay for similar properties in the
same neighborhood. Obviously, then, it makes sense to have
your pricing gameplan in place prior to, and during, the search
for a home as well as during the period of negotiations.

Pricing Strategies

Since real estate pricing is fairly fluid and can change from
month-to-month, it is important to have the most up-to-date
information at your disposal. At the very least, you will need
to know what comparable homes (in location, size and condition)
have been selling for recently. The most common way to determine
this pricing information is a CMA--a Comparable (or Comparative)
Market Analysis. The most common source of a CMA is your real
estate Buyer's Agent. The Agent should have access, through the
local multi-listing system (MLS), to data on all recent activity
in the area. This information will include price for properties
that have sold (and closed) as well as those currently on the
market, those that have a sale pending as well as expired or
withdrawn listings (those that did not sell). This data should
include the size of the homes, number of rooms including bedrooms
and baths, types of systems and amenities installed (for example,
central air conditioning, swimming pools, etc.) With this
information in hand, and with the assistance of your Agent, you
should be able to determine fairly accurately what a similar
home should be selling for, taking into account any additions
or subtractions from the price due to condition, size or amenities.
This is important knowledge you will need when preparing to
negotiate for a specific property.

Using the Information

Once you have a fairly clear idea of what a property should be
selling for, based on the CMA, you will be much better prepared
to make a decision on whether a particular home, price-wise,
should be considered. This information will also give you a
basis (and justification) for your negotiation when you narrow
your focus to a specific property. A sincere seller should be
much more likely to consider your offer if it is the general range
of what homes are selling for in the neighborhood (assuming similar
size and condition). If a seller insists on a price that is
considerably in excess of the average, it is possibly a good idea
to move on.

Hints on Pricing

+ When you have an idea of what houses are selling for, drive
by some of the sold properties to take a look at the condition
and appearance, since these are big determinants of value.

+ Don't pay a great deal extra for amenities that really don't
add much to the true value--examples might be trendy (and very
expensive) kitchen appliances, swimming pools and spas.

+ Don't put as much weight on prices of homes currently for
sale as you do on homes that have sold and closed. "Sold" prices
reflect what a buyer is actually willing to pay (and a lender is
willing to finance). "For Sale" prices may be nothing more than
the wishful thinking of an uninformed (or dreaming) seller.

For more resources on this topic, see
Setting a Value on a Home

Next Month's Topic: Making Comparisons


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
Home Buyer's 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 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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