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March, 2004 Newsletter

+++++++++++ March 1, 2004 +++++++++++++++++++

Introduction: Resale and New Home Sales Decline in January
Mortgage Rate Update: Rates Remain Low
This Month's Tip: Prepare First, Then Negotiate

Introduction: Welcome to the March edition of the
Home Buyer's Newsletter, brought to you by the
Home Buyer's Information Center.
The Home Buyer's Information Center

Sales of homes are still very high historically, but both new and resale
home activity declined during the month of January.

Existing-home sales declined 5.2 percent in January to a seasonally
adjusted annual rate of 6.04 million units from a downwardly revised
level of 6.37 million in December, which was the third highest pace
on record. Last month's sales activity was 2.0 percent above the 5.92
million-unit pace in January 2003. The record was a 6.68 million sales
rate in September 2003.

David Lereah, NAR's chief economist, said monthly changes at this
volume of home sales are relative. "We have to keep in mind that the
level of home-sales activity over the last six months has been the
strongest on record," he said. "The January pace was the sixth-highest
ever and is above the total forecast for this year. We can expect
month-to-month ups and downs, but the long-term trend is for home
sales to stay close to record territory this year.

"Given the high level of sales in January, it's hard to read much into a
monthly decline. However, unusually bad weather in much of the
country may have postponed some sales," Lereah said.

As for new homes, sales of new one-family houses in January 2004
were at a seasonally adjusted annual rate of 1,106,000, according to
estimates released jointly on February 26th by the U.S. Census Bureau
and the U.S. Department of Housing and Urban Development.
This is 1.7 percent (±13.6%) below the revised December rate of
1,125,000, but is 9.6 percent (±12.8%) above the January
2003 estimate of 1,009,000.

The median sales price of new houses sold in January 2004 was
$197,000; the average sales price was $258,600. The
seasonally adjusted estimate of new houses for sale at the end of
January was 370,000. This represents a supply of 4.1
months at the current sales rate.

Mortgage Rate Update: Rates Remain Low

Mortgage interest rates remained on the low side during the month
of February, ending the period close to the range in which they
began. 30-year fixed-rated mortgages averaged 5.58% at the end
of the month, according to mortgage company Freddie Mac, after
beginning the month averaging 5.68%. 15-year fixed-rate mortgages
trended similarly, ending the month averaging 4.89% after beginning
the period averaging 4.97%.

There appear to be some mixed signals here, with many indicators
signifying an expanding economy (which will translate into higher
mortgage interest rates) with other indicators (most notably the bond
market) signifying a continuation of rates at the lower end of the

For current average mortgage rates, see:
Mortgage Rates
For more information on mortgages, visit the Mortgage
Section at:


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This Month's Tip: Prepare First, then Negotiate

There are two major components of the home buying process:
preparation and negotiation. The preparation phase is extremely
important, since this is where you will determine what you want
to buy, where, as well as how. The negotiation phase will determine,
in essence, how much you will pay for the home. Preparation
and negotiation work hand in hand in the purchase of a home--
ignoring one (or even putting too much emphasis on one of the
processes) is usually self-defeating. Prepartion sets up the
negotiation. Likewise, negotiation of a fair price is the reward
for effective preparation.

What preparation is best suited as a precursor to the negotiation

+ A clear idea of your needs and wants
+ The type of home desired
+ A home in tune with your budget
+ A CMA (Comparable Market Analysis)

A clear idea of your wants and needs

Having a clear picture of what you need and want in a home (and
knowing how to distinguish between a need and a want) is an
important first step in your preparation process. By having a good
grip here, you will increase the chances that you buy the right
home and decrease the odds that you purchase a home that is
not in sync with your lifestyle. See an article devoted to
distinguishing between your wants and needs:
Your Needs and Wants

Know the type of home you want

We're often amazed at the number of people who do little or no
comparisons of the types of homes available--single family, condo,
townhouse, co-op--and then proceed to purchase a home with which
they are not happy with. Too often, they are forced to sell this "mistake"
and buy another home, having to absorb expensive transaction
costs in the meantime. Different types of homes will be better suited
to different types of people than others. Take the time to investigate
which fits the best into your comfort level. As an example, someone
who absolutely hates yard work and home maintenance probably is
better off NOT considering a single family home, especially one that
is not maintenance free! See more information on the various types
of housing available:
Types of Homes

Have a CMA in hand

We discussed Comparable Market Analyses (CMAs) in last month's
newsletter, but in the context of preparing for negotiation, a CMA is
one of the most important pieces of preparation at your disposal.
Before you sail into negotiation, it is imperative that you have a very
good idea what the prospective property is worth. This can be
accomplished fairly easily, especially if you are being represented
by a Buyer's Agent. The Agent will be able to develop a comparative
analysis on the property in which you have an interest, detailing:

* Listing prices of houses currently on the market
* Listing prices of houses currently under contract but not closed
* Listing prices of houses where the listings have either expired or
been withdrawn from the market

and, the most important statistic of all,

* Actual selling prices of houses that have closed in the last 6 months
to a year in the neighborhood

With this data, you will be able to compare the selling price of the
house in which you are interested to the prices of homes for sale,
or sold, in the immediate area. Obviously, the most important
consideration is to the properties that have sold--and closed--
most recently.

As an alternative, you may want to go to the expense of having the
prospective home professionally appraised. A licensed appraiser
can give you an opinion of value (they will use essentially the same
data as a CMA). They will visit the home and assess the value
and the condition in relation to other properties nearby. The cost
of such an appraisal (generally $300-500 or so) would usually be
the responsibility of the buyer.
CMA example

Armed with these preparations, you will be in a much better
position in the negotiation process. Not only will you be sure that the
house meets your need and wants and is the type of home that fits
your lifestyle, you will have a fairly clear picture of its value. Just as
important, with this preparation and a good dose of common sense,
you should be able to negotiate effectively. If a home is listed at
$200,000 for example, it meets your needs and the CMA shows an
average price in the neighborhood (same size, type, condition and
age of home) of $194,000, you will not make an offer (hopefully)
of $150,000, especially if the market is active and homes in the
area are selling quickly. Sure, you will want to open negotiations
lower than the listing price (and somewhat lower than what the
CMA indicates for pricing) but making a ridiculous offer often does
nothing but upset the seller and stop negotiations before they
even begin. The idea, after all, is to get the right house at the
right price. For more information on the mechanics of
negotiation, see the article on the site:

Summing Up

In negotiation for real estate, a simple fact is almost always true--
the best prepared are the best negotiators. Remember that and you
will greatly increase your odds of being sucessful!

Next Month's Topic: Don't Mortgage Your Life Away!

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:
Email Us
or access our feedback page at:
Home Buyers Information Center 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

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