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March, 2009 Newsletter

+++++++++++ March 1, 2009 +++++++++++++++++++

CONTENTS:
Introduction: Sales Fall, Existing Home Inventory Falls
Mortgage Rate Update: Rates Continue to Ease
This Month's Tip: Going Forward

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Introduction: Sales Fall, Existing Home Inventory Falls

Welcome to the March, 2009 edition of the Home Buyer's Newsletter.
Another month of history making impacts in the Real Estate market,
the equity market and in the worldwide economic climate.

Existing-home sales declined in January with some buyers waiting to
see how details of the economic stimulus package would affect them,
according to the National Association of Realtors®. At the same time,
inventories fell to a two-year low.

Existing-home sales – including single-family, townhomes, condominiums
and co-ops – fell 5.3 percent to a seasonally adjusted annual rate of
4.49 million units in January from a level of 4.74 million units in
December, and are 8.6 percent lower the 4.91 million-unit pace in January
2008.

Lawrence Yun, NAR chief economist, said there was understandable hesitation
by some home buyers. “Given so much stimulus package discussion in January,
some would-be buyers simply sat out for clarity and certainty on the nature
of housing stimulus,” he said. “The housing market will soon get a lift from
very favorable buying conditions – not only from improved affordability, but
also from the stimulus of an $8,000 first-time home buyer tax credit, and
higher conforming loan limits that will allow more people to tap into 50-year
low mortgage rates.”

A high prevalence of distressed home sales, and of those in lower price ranges,
has skewed the median price to be markedly lower than under normal market
conditions. The national median existing-home price3 for all housing types was
$170,300 in January, down 14.8 percent from a year earlier when the median was
$199,800; the median is where half of the homes sold for more and half sold for
less.

On the new construction side, sales of new one-family houses in January 2009
were at a seasonally adjusted annual rate of 309,000, according to estimates
released jointly on February 26th by the U.S. Census Bureau and the Department
of Housing and Urban Development. This is 10.2 percent (±15.4%) below the
revised December rate of 344,000 and is 48.2 percent (±6.8%) below the
January 2008 estimate of 597,000.

The median sales price of new houses sold in January 2009 was $201,100; the
average sales price was $234,600. The seasonally adjusted estimate of new houses
for sale at the end of January was 342,000. This represents a supply of 13.3
months at the current sales rate.

These reports contain both good news and bad news. Good in the fact that, at
least with existing homes, the inventory levels are continuing to decrease,
a positive sign. For buyers, the ongoing price erosion works in their favor.
Bad news in the fact that as long as sales numbers are coninuing to slide.
there is the potential for additional market softening.

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Mortgage Rate Update: Rates Continue to Ease

Although January saw a modest drop in mortgage rates, they did see-saw a bit
during the month. According to mortgage company Freddie Mac, 30-year
fixed-rate mortgages averaged 5.07% in the period that ended on February
26th after beginning the month at an average rate of 5.10%. The decrease was
more pronounced in 15-year fixed-rates, which declined from an average of 4.80%
at the beginning of February to an average of 4.68% at the end of the period.

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: Going Forward

You don't have to look very far to see the wreckage that the Real
Estate "mania" of 2002 to 2007 has left. Hundreds of thousands of vacant
new houses, inventory levels that appoach or breach a one-year supply,
foreclosures at the highest level in history. Although signals vary on
whether or not we are nearer to the end or the beginning of our housing
issues, it still remains that there has been much damage done and there
is, unfortunately, nothing that can be done to make that go away. The
concentration, then, must be on what can be done to prevent the same
mistakes--amd financial carnage--going forward.

In our view, there are several main factors contributing to the Real
Estate bubble--and it's aftermath--that many in the United States
(and in other areas of the world) have recently experienced.

1) Living far beyond your means
2) Artificially low interest rates
3) Lax lending standards, or, worse, NO lending standards
4) The mistaken notion--fueled by speculators, mindless TV shows and
"housing gurus" that Real Estate values only go one way--up
5) The fear of being "left out"--you would be left behind if you
didn't buy a house NOW

And, the most pervasive of all the contributing factors,
6) Greed

Property values in many areas rose far beyond affordability, as well as
sustainabiiity, due to the convergence of many (or all) of these factors.
Unsustainable prices became commonplace, while buyers who were totally
unqualified to make a purchase moved into too-large homes with too-large
mortgages.

Although the Real Estate situation is only part of the problem, a new
disease had swept over the U.S. and in many other areas of the world in
recent years: Living far above your means. Somehow the notion got planted
into many psyches that you can achieve your goals by spending more than
what you earn. Cheap credit allowed millions to borrow their way into
untenable debt, all the while nurturing a notion that they had discovered
that they were "rich." They weren't, they aren't and now their spendthrift
ways are coming due, as the U.S. and the world struggle with an enormous
financial crisis.

So, now it is early 2009 and you are in the market to buy a home. What steps
will bring the greatest chances for reward and carry the least amount of
risks? How can you take advantage of the current situation without putting
yourself in financial danger going forward?

On the
Home Buyer's Information Center website
our advice has been consistent since 1998: You must get your finances in
line before even thinking about purchasing a home. If your budget is not
in order, then a home purchase should not be anywhere on your personal radar.
It is fairly obvious that the days of buying a home without a thorough
financial checkup--both by the buyer and the lender--are, thankfully, most
likely a relic of the past.

This means that you will need to get a clear picture of your current financial
situation as step number one. You must take an honest look at exactly how
your financial health is faring. There is no sense sugar-coating the
situation--in today's environment, virtually no lender will be willing to
take a chance on someone on uncertain financial footing. Therefore, you
will want to to a "check-up" of both your current financial situation and
how your budget will be impacted by a home purchase. You can find extensive
discussions on these topics on the site in the following areas:
Finances
Budgets
Saving Money

To protect yourself going forward, your next focus needs to be pricing
considerations. Overpaying for a property is never wise, but paying too much
in the current environment can carry even more risks. Housing prices have
dropped precipitously in some areas, eased mildly in others and, in some
markets, have remained relatively constant. It is imperative, then, that you
are completely familiar with the price trends in the area in which you are
interested. As they say, "all Real Estate is local," meaning that national or
regional trends may--or may not--have a bearing on the situation in your
preferred neighborhood. You must, then, have a firm grasp on what homes are
actually selling for (rather than on the market for) in the area in which
you want to buy. Looking for more information on pricing? See our discussions
on the subject
here:
In addition, next month's tip will focus extensively on the whole spectrum of
pricing.

As we go forward, much of the excesses that we experienced recently will be
handled by the market: Unqualified buyers will not be able to purchase too-
expensive homes. Appraisals of value will have a much larger impact on what
can be financed. If buyers concentrate on their own financial and pricing
considerations, we will likely be able to prevent the same types of issues
occuring in the future.

Next Month's Tip: Pricing Considerations

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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
here
.

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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