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May, 2008 Newsletter

+++++++++++ May 1, 2008 +++++++++++++++++++

Introduction: Sales and Prices Continue Downward Trend
Mortgage Rate Update: Rate Volatility Eases
This Month's Tip: Buying With Common Sense


Introduction: Welcome to the May edition of the
Home Buyer's Newsletter.

Sales and pricing of both existing-homes and new homes continued
their declines in the month of March.

Existing-home sales edged down in March, remaining within a narrow
range of sales activity that has persisted since last September,
according to the National Association of Realtors®.

Existing-home sales including single-family, townhomes, condominiums
and co-ops were down 2.0 percent to a seasonally adjusted annual
rate of 4.93 million units in March from a level of 5.03 million
in February, and remain 19.3 percent below the 6.11 million-unit
pace in March 2007. A rise in condo sales in March was offset by
a drop in single-family sales. Regionally, sales rose in the Northeast
and West but fell in the Midwest and South.

The national median existing-home price for all housing types was
$200,700 in March, down 7.7 percent from a year ago when the median was
$217,400. Because the slowdown in sales from a year ago is greater in
high-cost areas, there is a downward pull to the national median with
relatively higher sales activity in low-cost markets.

There were similar results on the new home side, where sales of new
one-family houses in March 2008 were at a seasonally adjusted annual
rate of 526,000, according to estimates released jointly on April 24
by the U.S. Census Bureau and the Department of Housing and Urban
Development. This is 8.5 percent (±16.1%) below the revised February
rate of 575,000 and is 36.6 percent (±11.1%) below the March 2007
estimate of 830,000.

The median sales price of new houses sold in March 2008 was $227,600;
the average sales price was $292,200. The seasonally adjusted estimate
of new houses for sale at the end of March was 468,000. This represents
a supply of 11.0 months at the current sales rate.


Mortgage Rate Update: Rate Volatility Eases

Although mortgage rates coninued to rise during the month of April, there
was a bit less volitility in the average rates. 30-year fixed-rate mortgages
averaged 6.03% for the period ending April 24, according to mortgage
company Freddie Mac, after beginning the period at an average of 5.85%.
15-year fixed-rate mortgages showed a bit more of an increase, rising
from an average of 5.34% at the beginning of the period to 5.62% at
the end of the month.

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: Buying With Common Sense

The purchase of a home is such an emotional experience that common sense
often gets overrun in the process. So many forces of emotion are in
play--financial, social, just the pure excitement of buying a home
and more--that unless they are reined in there is the possibility
that these emotions will do the talking while common sense sits
quietly in the corner. When emotions rule, mistakes are frequently
made--sometimes minor and inconsequential, but more often major and very

In our opinion, it is precisely this lack of common sense that is,
at least to some degree, responsible for the current real estate mess
that we find ourselves in so many areas of North America. Add a dose of
greed and you have the recipe for the situation many are now experiencing.

How did common sense float away? How can we prevent the same thing from
happening in the future? Some key touchpoints:

+ Do not have unrealistic expectations for real estate

Somehow a huge misconception took root in the period of 1999-2005, namely
that "real estate ONLY goes up." We cannot even count how many times
we heard such statements, from "experts" and buyers alike, during that
period. Not only was this fallacy firmly embraced, but untenable expectations
of appreciation--10%, 20% or more annually on a sustained basis--were
touted. Historically, real estate appreciation in North America has been
in the 3-4% range when annualized, which means the net gain, after
increases and decreases and over a number of years, appreciation rates
should be somewhere in the 3.5% range. With the huge runups that we
saw in recent years, even with the subsequent declines, this may be
optimistic for the near future according to many analysts.

+ Do not buy more house than you need

Sizes of homes have absolutely exploded over the last decade or so, as more
and more purchasers bought larger and larger houses. Often, this extra
space made homes that were far more than the buyers needed. Exceptionally
(and many say artificially) low mortgage rates compounded the problem by
facilitating this extra expenditure. As low rates evaporated and
unsustainable mortgage products (no-interest, negative amortization, et al)
waned, previously affordable houses got less so, meaning all that extra
space, when converted to real dollars and cents, became a burden for
many. As we enter a more realistic price and interest rate environment,
buying for your actual needs (rather than just what you want)) takes on
much more importance.

+ Buy for the long term

Another outgrowth of the recent booming market is the curious(and fairly new)
notion that real estate is a short-term investment. Yes, there have always
been those who purchaed houses that need work and then either rented or resold
them, but these purchases were often made by contractors who developed quick
sweat equity. Instead, during the past few years we saw lots of
activity by those who had absolutely no experience in any of the necessary
skils--construction and negotiation primarily--jumping into the market after
watching a TV show. Fueling the market to even more stratospheric levels
because of this inexperience, these "flippers" and speculators pushed
real estate values far out of the reach of traditional home buyers. When
the market tanked in short order, the fall was more severe due to a large
amount of unsold inventory in the hands of these speculators.

There are few investment vehicles that are more illiquid than real estate,
which is why it is rarely a good short term investment. Sales and settlements
take time and effort, unlike equities or bonds which can be turned in a
moment's notice. In addition, equity and bond sales are final immediately,
unlike real estate which has a fallout rate (a rate that is rising
almost daily). If you buy a house with its long-term prospects in mind,
you stand a much better chance of prospering with it.

Summing Up

It is probably a good idea to pay more attention to the advice that was
distilled over hundreds of years and less to the "advice" that was cooked
up (usually with an ulterior motive in mind) over the past couple of years.
In the investment field, there are no "sure things"--not stocks, not bonds,
not precious metals and not real estate. By letting your common sense
prevail, you considerably increase your chances of enjoying ALL of your
home ownership experience.

Next Month's Tip: Protect Your Investment:

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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