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November, 2007 Newsletter

+++++++++++ November 1, 2007 +++++++++++++++++++

Introduction: New and Resale Prices and Volumes Decrease
Mortgage Rate Update: Rates Fluctuate
This Month's Tip: What Determines Price?

Introduction: New and Resale Prices and Volumes Decrease

Overall, September was not a particularly positive month for either
sales or prices in many areas of the United States.

According to the National Association of Realtors, total existing-home
sales – including single-family, townhomes, condominiums and co-ops –
fell 8.0 percent to a seasonally adjusted annual rate of 5.04
million units in September from a downwardly revised pace of 5.48 million
in August, and are 19.1 percent below the 6.23 million-unit level in September

The third quarter finished better than expected, with a 5.42 million annual
rate of existing-home sales versus the 5.38 million forecast by NAR.

Lawrence Yun, NAR senior economist, said the decline is understandable.
“Mortgage problems were peaking back in August when many of the September
closings were being negotiated, and that slowed sales notably in higher
priced areas that rely more on jumbo loans,” he said. “The good news is
that mortgage availability has markedly improved in recent weeks with
interest rates on jumbo loans falling, and more people are applying for
safer and conforming FHA mortgage products. Some of the cancelled
transactions will move forward as buyers apply for other loans.”

The national median existing-home price2 for all housing types was $211,700
in September, down 4.2 percent from September 2006 when the median was $220,900;
this follows three months of stability in comparing with year-ago prices.
The median is a typical market price where half of the homes sold for more
and half sold for less.

Sales of new one-family houses in September 2007 were at a seasonally
adjusted annual rate of 770,000, according to estimates released jointly
October 25 by the U.S. Census Bureau and the Department of Housing and
Urban Development.

This is 4.8 percent (±10.3%) above the revised August rate of 735,000,
but is 23.3 percent (±8.0%) below the September 2006 estimate of 1,004,000.
The median sales price of new houses sold in September 2007 was $238,000;
the average sales price was $288,000. The seasonally adjusted estimate of
new houses for sale at the end of September was 523,000. This represents a
supply of 8.3 months at the current sales rate.

So, have we reached bottom in sales and prices? Some analyists believe we
have, but remember that many have been saying this all the way down. It
is important to remember what we have been suggesting for nearly 10 years
now: If you are prudent with your purchase, if you do not buy over your
head and if you use a good buyer's agent who will develop a current CMA--
Comparative Market Analysis--to show what homes are selling for today,
you can protect yourself from the worst of any market upheavals.


Mortgage Rate Update: Rates Fluctuate

Mortgage rates fluctuated a bit during the month of October as
somewhat conflicting reports of economic activity affected both
the bond market and the mortgage market. 30-year fixed-rate mortgages
averaged 6.33% in the last period of October after an average of 6.37%
at the beginning of the period after a rise to 6.40% mid-month, according
to mortgage company Freddie Mac. 15-year fixed-rate loans tracked in a
similar fashion, starting the month with an average of 6.03% and ending at
an average of 5.99%. For the year, the current rates are fairly advantageous
for borrowers since they are averaging quite a bit lower than at the peak
this summer when 30-year fixed-rates were in the 6.75% range.

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: What Determines Price?

One of the most common concerns of someone considering
the purchase of a home relates to the price--"how do I
know if I am paying the right amount?" The fear of
paying too much can cause a buyer to make some major
mistakes, or even purchase a home that is totally
inadequate for their needs. The other side of the coin,
though can also have potential pitfalls. By not paying
enough attention to pricing concerns, a buyer can find
themselves paying considerably more for a home than it is
worth--money that may take years and years of price
appreciation to recoup.

Home, and, to some degree, used cars, are two of only a
handful of "products" that do not have an established
price. In North America, most of our purchases have a
clearly established cost. When you go to the grocery or
electronics store, the price is clearly stated and if it
varies from store to store, you can make comparisons.

Real estate, though, is quite different. First, there is no
"Suggested Manufacturer's Retail Price" for resale houses.
A seller can legally price their home for whatever they
choose. And second, since negotiation is involved with most
real estate transactions, there can be a wide variance in what
two different buyers will pay for similar properties in the
same neighborhood. Obviously, then, it makes sense to have
your pricing gameplan in place prior to, and during, the search
for a home as well as during the period of negotiations.

Pricing Strategies

Since real estate pricing is fairly fluid and can change from
month-to-month, it is important to have the most up-to-date
information at your disposal. At the very least, you will need
to know what comparable homes (in location, size and condition)
have been selling for recently. The most common way to determine
this pricing information is a CMA--a Comparable (or Comparative)
Market Analysis. The most common source of a CMA is your real
estate Buyer's Agent. The Agent should have access, through the
local multi-listing system (MLS), to data on all recent activity
in the area. This information will include price for properties
that have sold (and closed) as well as those currently on the
market, those that have a sale pending as well as expired or
withdrawn listings (those that did not sell). This data should
include the size of the homes, number of rooms including bedrooms
and baths, types of systems and amenities installed (for example,
central air conditioning, swimming pools, etc.) With this
information in hand, and with the assistance of your Agent, you
should be able to determine fairly accurately what a similar
home should be selling for, taking into account any additions
or subtractions from the price due to condition, size or amenities.
This is important knowledge you will need when preparing to
negotiate for a specific property.

Using the Information

Once you have a fairly clear idea of what a property should be
selling for, based on the CMA, you will be much better prepared
to make a decision on whether a particular home, price-wise,
should be considered. This information will also give you a
basis (and justification) for your negotiation when you narrow
your focus to a specific property. A sincere seller should be
much more likely to consider your offer if it is the general range
of what homes are selling for in the neighborhood (assuming similar
size and condition). If a seller insists on a price that is
considerably in excess of the average, it is possibly a good idea
to move on.

Hints on Pricing

+ When you have an idea of what houses are selling for, drive
by some of the sold properties to take a look at the condition
and appearance, since these are big determinants of value.

+ Don't pay a great deal extra for amenities that really don't
add much to the true value--examples might be trendy (and very
expensive) kitchen appliances, swimming pools and spas.

+ Don't put as much weight on prices of homes currently for
sale as you do on homes that have sold and closed. "Sold" prices
reflect what a buyer is actually willing to pay (and a lender is
willing to finance). "For Sale" prices may be nothing more than
the wishful thinking of an uninformed (or dreaming) seller.

For more resources on this topic, see Setting a Value on a Home
and CMAs

Next Month's Tip: Understanding Closing/Settlement Costs

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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