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November, 2002 Newsletter

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CONTENTS:
Introduction: Existing and New Home Sales Increase
Mortgage Rate Update: Rates on the Rise
This Month's Tip: Your Home as an Investment

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Introduction: Existing and New Home Sales Increase

Welcome to the November edition of the Home Buyer's
Newsletter. Sales activity in September remained
strong in both resale and new homes, fueled by
interest rates at multi-decade lowns. With rates
rising in October (see following story) it is
uncertain whether or not these sales gains will
be sustained.

The market for existing single-family homes
experienced rising activity last month as home
buyers responded to lower mortgage interest
rates, according to the National Association
of Realtors®. Existing-home sales increased
1.9 percent to a seasonally adjusted annual rate
of 5.40 million units in September from an
upwardly revised pace of 5.30 million units in
August. Last month's sales activity was 7.8
percent above the 5.01-million unit pace in
September 2001.

New home sales also rose. Sales of new
one-family houses in September 2002 were at a
seasonally adjusted annual rate of 1,021,000,
according to estimates released jointly by the
U.S. Census Bureau and the U.S. Department of
Housing and Urban Development. This is 0.4
percent (±11.0%) above the revised August rate
of 1,017,000 and is 19.3 percent (±13.9%)
above the September 2001 estimate of 856,000.
The median sales price of new houses sold in
September 2002 was $176,300; the average sales
price was $218,100. The seasonally adjusted
estimate of new houses for sale at the
end of September was 332,000. This represents
a supply of 4.0 months at the current sales rate.

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Mortgage Rate Update: Rates on the Rise

Mortgage rates continued to rise at the end of October,
with 30-year fixed rates averaging 6.31%, according
to mortgage company Freddie Mac. This is up from
the low of 5.98% in early October. 15-year fixed-
rate mortgages averaged 5.70%, up from 5.34%
earlier in the month.
For current average mortgage rates, see the
rates section.:

For more information on mortgages, visit the
Mortgage
Section


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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
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easily.
More information

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This Month's Tip: Your Home as an Investment

It has been fairly well established over the last
100 years in North America that residential real
estate is a reasonably safe investment. In the
long term, residential home values have always
increased, generally outpacing inflation and
bringing a decent return on investment.

So, does it follow that a home buyer should look at
their home as a good, solid investment vehicle? A
place where they can put a large portion of their
investment portfolio and watch it grow and grow
and grow, bringing healthy returns year after year.

In our view, absolutely not. We believe that a home
buyer should look at their home as exactly what it is--
a place in which they can live. Yes, a home can viewed
as an enforced savings account, generally increasing
in value while you enjoy its benefits. A home should
not, however, be viewed as the next big hot
investment. (You even hear it on TV ads: "Real Estate
is RED HOT!!") A 3 bedroom ranch home should not be viewed
as a new substitute for 3Com or Amazon stock. We are
absolutely amazed by some of the comments we have heard
from home buyers--and touted by the media--about the
"wonders of real estate investment."

"Real estate values never go down."

Wrong. The trend, whenever you take a 15 to 20 year
window, is up, yes. But there are plenty of instances
where during 5 to 10 year periods prices did not go up
at all or, worse, declined. Ask homeowners in Texas,
California or much of New England in the 1980's if
real estate prices never go down.

"Lost money in the stock market? Putting what you
have left in real estate is the smart move!"

Not if you are buying at the peak of the market
and overpaying for your purchase. Remember all of
the "experts" who said Yahoo! stock was a great buy
at $200 a share? (Currently it is about $10). That
Priceline was a "can't miss" at $120 per share
(now $1.50) when analysts shouted "buy!" Now the
experts are telling your that real estate is a
sure bet. Take it with a grain of salt and a
sense of history.

"Even though it's overpriced and I don't really need
it, I can buy this home for $275,000 now and sell it for
$350,000 in a couple of years. A guy at work
just did it."

This is the same "greater fool" theory that helped
to bring down other investment classes--the notion
that it was okay to overpay for a commodity because
there would always be a "greater fool" that would
pay more for it. Which is great until the market
softens, the buyers disappear and values stop rising
because there was no fundamental reason that they
should continue to rise.

To sum up, if you look at your house as a place
to be enjoyed and cherished, as a home, you should
be pleased that you've gained some appreciation
while you were living there. But if you look as
your home as a "cash cow" destined to bring huge
returns year after year, you will very likely be
disappointed.

We believe that real estate values probably will not
continue to rise at the same exaggerated rates they
have in the last couple of years. A primary reason
for this is the fact that incomes have risen at
nowhere near the rate that home prices have and it will
likely take a few years for wages to catch up
with prices. In addition, historically low interest
rates have helped to blunt much of the increases
in home prices. When rates rise, even moderately,
it most likely will have an effect on the level of
price appreciation.



Check Out The Home Buyer's Checklist

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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:
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feedback page


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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