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June, 2009 Newsletter

+++++++++++ June 1, 2009 +++++++++++++++++++

Introduction: Is the Market Bottoming?
Mortgage Rate Update: Rates Remain Low
This Month's Tip: Fast Track Your Mortgage


Introduction: Is the Market Bottoming?

Welcome to the June, 2009 edition of the Home Buyer's Newsletter.

More and more, signs appear to be pointing to the beginning of a
bottoming of the market. By no means does this signal a large uptick,
but indications may be showing a slowdown in the deep declines in
both prices and sales activity.

Existing-home sales – including single-family, townhomes, condominiums
and co-ops – increased 2.9 percent to a seasonally adjusted annual rate
of 4.68 million units in April from a downwardly revised pace of 4.55
million units in March, but were 3.5 percent below the 4.85 million-unit
level in April 2008.

Lawrence Yun, NAR chief economist, said first-time buyers continue to
influence the market but there also is a seasonal rise of repeat buyers.
“Most of the sales are taking place in lower price ranges and activity
is beginning to pick up in the midprice ranges, but high-end home sales
remain sluggish,” he said. “The Federal Reserve needs to help restore
liquidity for the jumbo mortgage market by buying these loans under
the TALF program.”

“Because foreclosed properties will likely be released into the market
over the rest of year, it is critical that distressed homes be quickly
cleared from the market,” Yun said. “Fortunately, home buyers are being
attracted to deeply discounted prices and are bidding up many foreclosed
listings, particularly in California, Nevada, and Florida – this will
set the stage for healthy market conditions going forward.”

In new home activity, Sales of new one-family houses in April 2009
were at a seasonally adjusted annual rate of 352,000, according to
estimates released jointly May 28th by the U.S. Census Bureau and
the Department of Housing and Urban Development. This is 0.3 percent
(±14.5%) above the revised March rate of 351,000, but is 34.0 percent
(±11.0%) below the April 2008 estimate of 533,000.

The median sales price of new houses sold in April 2009 was $209,700;
the average sales price was $254,000. The seasonally adjusted estimate
of new houses for sale at the end of April was 297,000. This represents
a supply of 10.1 months at the current sales rate.


Mortgage Rate Update: Rates Remain Low

Although there has been some movement both ways in long-term mortgage rates
during the month of May, they continue to remain at or near historic lows.
According to mortgage company Freddie Mac, 30-year fixed-rate mortgages
averaged 4.91% in the period that ended May 29th. These rates began the
month at an average of 4.84%. 15-year fixed-rate mortgages began the month
of May at an average of 4.51% and ended the month at an average of 4.53%.

With prices having fallen anywhere from 10-40%, depending on location, and
interest rates continuing to be extremely advantageous, a potential buyer
needs to keep a keen eye on the market. There is no guarantee, of course,
that prices will not continue to moderate (or that interest rates won't see
an additional drop), but likewise there is no guarantee that prices will not
begin to rise again along with long-term interest rates.

Mortgage Rate Update:
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: Fast Track Your Mortgage

For many homeowners, one of the most satisfying moments in their lives
is the day that they pay off their mortgage, meaning that their home
truly and finally belongs to them. For others, though, for a variety
of reasons, their homes will never be paid off. Their entire home
ownership experience will be spent shackled to a mortgage. For most
younger homeowners and those who need ot move frequently, there may be
no other option. But for the majority of us, the joy of a free and
clear home (and the freedom that it brings) is quite often just a few
smart moves (and years) away.

One of the most basic tenets of retirement planning has been that you
will want to enter your retirement years free of a mortgage payment,
unless you have been assured that your income will be equal to or
greater than your income while working. In most situations, obviously,
this would be a pretty rare occurrence. A free and clear house leaves
a retiree with two options, both of them positive:
1) Remain in the house with much lower expenses since the biggest
component of housing costs--the mortgage--has been eliminated, or
2) Sell the house and use the proceeds (the 100% equity) to pay
expenses going forward--renting, independent or assisted living,
Those who enter retirement with huge outstanding mortgages can
take advantage of neither of these options. In many cases, it
will mean that they will need to either postpone--or perhaps
eliminate--any thoughts of retirement.

For those in their twenties or thirties, this may not be an
immediate concern, but we see many within 10 or 15 years of
retirement taking on huge, long-term mortgages that they will
likely never be able to pay off. Even younger buyers, those
in their forties for example, who take on 40-year mortgages
or loans in which their payments do not even cover the principal
portion of the loan (where the balance rises each and every
month) could be in for a nasty surprise as they make preparations
for their later years. By eliminating what traditionally has
been a bullwark of rational retirement planning--a free and
clear home--they may be putting themselves into a difficult situation
unless they want to continue working full-time. Combine this situation
with evaporating (or disappearing) pension fund and the potential
instability of social security and the retirement prospects of many--
at all ages and incomes--may be severely challenged.

How, then, to combat the ever increasing problem of skyrocketing
prices, at best moderate income gains, and a red-hot housing market?
There are a few alternatives, but for some they may be a little
difficult to accept.

First, consider purchasing a less expensive home. Instead of
taking your qualification to the maximum with a creative financing
program, secure a traditional mortgage, where you will begin to
gain equity quickly. The shorter the mortgage term, the quicker your
equity position will improve.

Second, if you have an acceptable mortgage where you are making
strides toward increased equity, do not be a "serial refinancer."
Even though you may lower your payment a bit or "cash out" some
equity, you are doing damage to your long term financial picture
since your balance will, in most cases, increase and, since you are
beginning a new loan, you start again at "0". A new 30-year loan
means 360 more monthly payments, even though you may have made
numerous payments on the previous loan.

Third, if you have not yet purchased, you may want to consider
renting. Obviously, to many, "renting" is a dirty word in today's
Real Estate environment. Historically, home buyers have almost
always fared better than renters in the long term. Unfortunately,
though, we are very possibly in a new situation where, in many
areas of the continent, home sale prices are experiencing huge
increases while at the same time, rental prices are stagnent or
actually falling. We've seen studies where renters, due to much
lower monthly costs, will not only due better than purchasers in
the short, medium and long term, but in some cases do MUCH better.
Although these renters will not have the advantage of a paid off
home, with efficient investing they can enjoy much better financial
rewards than someone who is still shackled with a heavy mortgage

Fourth, in areas where prices have gone through the roof, you
may want to wait for prices to stabilize or decrease. Obviously,
there is no guarantee that either will happen--prices may continue
to rise, but at what rate and for how long is fairly questionable.
Obviously, waiting is a gamble, but if you can economically rent
while "waiting it out" this may well serve your purposes.

Summing Up

One of the happiest moments of your life will probably be when
you purchase a home, especially your first. With effective planning
and a little restraint when you do purchase that home, you can enjoy
one of life's other happiest moments--when you pay off the home and
it finally is "yours!"


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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