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May, 2003 Newsletter


+++++++++++ May 1, 2003 +++++++++++++++++++

CONTENTS:
Introduction: Resales Decline, New Home Sales
Rise
Mortgage Rate Update: Rates Stable in April
This Month's Tip: Buying "Fixer-Uppers"

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Introduction: Welcome to the May edition of the
Home Buyer's Newsletter. Although the sales rates
remain strong, resale home activity slipped in
the month of March. After surging to an
unprecedented record at the beginning of the year,
existing single-family home sales declined in
March but remain at a historically strong level,
according to the National Association of Realtors®.

Existing-home sales fell 5.6 percent to a seasonally
adjusted annual rate of 5.53 million units in March
from an upwardly revised pace of 5.86 million units
in February. Last month's sales activity was 2.0
percent above the 5.42-million unit level in March 2002,
and was the 11th best month on record.

David Lereah, NAR's chief economist, expected the
decline. "When we exceeded a 6-million unit pace for
existing-home sales in January, it was clear that
monthly sales rates would come off of that peak,"
Lereah said. "However, there's a huge momentum of
sales activity continuing, and we're now at a much
more sustainable level for home sales going forward.
We believe this will be the second-best year on
record for housing."

Sales of new one-family houses in March 2003 were
at a seasonally adjusted annual rate of 1,012,000,
according to estimates released jointly by the U.S.
Census Bureau and the U.S. Department of Housing
and Urban Development. This is 7.3 percent (±14.2%)
above the revised February rate of 943,000 and is
10.6 percent (±13.3%) above the March 2002
estimate of 915,000.
The median sales price of new houses sold in March
2003 was $182,000; the average sales price was $229,900.

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Mortgage Rate Update: Rates Stable in April

Although there was a little movement in the
middle of the month, mortgage rates ended
the month of April where almost exactly
where they started. According to mortgage company
Freddie Mac, 30-year fixed-rate mortgages
averaged 5.79% for the period ending April
24, 2003, exactly where they stood at the
beginning of the month. 15-year fixed-rate
mortgages averaged 5.12% as on the same period
at the end of the month. These rates do not
include fees paid as points to the lender.

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

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Get a Copy of Your Credit Report

IPlace.com, the largest supplier of credit reports
on the Internet, has a number of options to quickly
get a copy of your report. You can get a single
report, your credit score, a full 3-bureau report or
even a free copy of your credit report, quickly and
easily. See more information at:
Sources of Credit Reports

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This Month's Tip: Buying "Fixer-Uppers"

Ask many a home buyer about the type of house they
are looking for and many will reply "We are looking
for something we can fix up and live in (or resell).
We like the idea of gaining some quick sweat
equity." The classic "fixer-upper" home.
Unfortunately, there is a bit of fantasy in the
notion, though. First of all, there are many more
fixer-upper buyers than there are fixer-upper
properties. Second, the current thinking in many
minds is that anyone can make a killing in the Real
Estate market, which is not always the case. Third,
many buyers totally mis-estimate both the cost and
the time involved in fixer-uppers, severely
impacting (and in some cases destroying) the profit
potential. Unless you are fully prepared to deal
with the realities of fixer-uppers rather than the
fantasies, it probably is a good idea to look
elsewhere for a home.

This does not mean that there isn't equity to be
gained (or profit to be made) by purchasing the
RIGHT property at the RIGHT price. The important
notion is to understand that there are several
factors that will make the difference between
winning and losing in such a transaction.

The Mindset

The first factor that must be understood is that
it isn't going to be easy. The only people who
think that finding, buying, fixing and selling
a home is an easy task are those who have never
done it. Those with any experience (even if
only once) will tell you that it rarely is as
simple as it appears. In general, it is best to
assume that repairs will cost twice what you
estimated, take double the amount of time and,
when finished, the house will be worth less
than expected. If you keep that in the forefront
of your thinking, the chances of being burned
are much less.

Start Out Small

Some of the worst examples of mistakes made by
buyers of fixer-uppers are first-time buyers who
bite off way more than they can chew. Examples
of this are houses that have structural problems
or will take an exceptionally long time to
repair, or are located somewhere other than a
desirable neighborhood. These can be a horrible
drain on finances, time and peace of mind.

A much better strategy for the inexperienced is
to purchase a home in a desirable neighborhood
that is in need of cosmetic attention--new paint,
carpeting, appliances, landscaping and the like.
These repairs can either be handled by the
homeowner or are easily contracted out, saving
time, effort and money. Yes, money can be made
on homes needing major renovations, even if they
are in less popular neighborhoods, but these are
jobs for professionals, not homeowners (and
definitely not for first-time homeowners!)

Avoid Surprises

The most expensive situations are often those
that are the least expected--those nasty little
(and often big) surprises that jump out at you.
You can avoid many of these surprises, though, with
a couple of easy steps taken BEFORE final
commitment to a property.

1) Have the property thoroughly inspected. Have
the inspector detail all obvious (as well as potential)
defects in the property. NOTE: The seller may
say "we are selling the house as-is, so NO
inspections." Avoid this property like the
plague.

2) Run the numbers. You must know the market
values for houses in the neighborhood in which you
are interested that need no repairs. Running the
numbers means working them backwards to see how
much equity or profit may be available (or even IF
there will be any) in the deal. You will need to
begin by computing the realistic value of the home
when all repairs are made. From that point, you
will need to subtract any selling expenses you will
incur (commissions and the like) as well as the full
cost of repairs and, most importantly, the amount
of desired profit or equity. Example:

$120,000: Expected Sale Price, Repaired
-7,500: Selling Expenses
-17,500: Repair Expenses
-10,000: Desired Profit/Equity
_________
$85,000: Maximum Property Purchase Price

Don't be deluded into thinking that you'll be able
to sell for more than the market value or do the
repairs for less than the estimates. If the
numbers don't fit--with a good amount of "wiggle
room" for more expense or handling costs or if the
property does not sell quickly--don't waste your
time or your money!

Summing Up

When considering a fixer-upper, whether for resale
or to live in with increased equity, go into the
process fully prepared so you will avoid many
surprises. For your first project, only consider
structurally sound homes in good neighborhoods
requiring cosmetic repairs only. Have any property
you are considering fully inspected and then get
firm estimates for all needed repairs. Most
importantly, "run the numbers" to be certain that
the potential for gain is truly there. If you are
satisfied on all counts, you may very well be able
to be successful with your fixer-upper project!

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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:
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),
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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