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November, 2008 Newsletter

+++++++++++ November 1, 2008 +++++++++++++++++++

Introduction: A Month for the History Books
Mortgage Rate Update: One of the Most Volatile Months Ever
This Month's Tip: Changes in the Mortgage Market


Introduction: A Month for the History Books

Welcome to the November edition of the Homebuyer's

October, 2008 will likely be written up in economic history
books in the future as an example of how a world's economy can
seem to come unglued in a matter of 30 days. It may take a while
for the entire situation to shake itself out, and, as a result,
the intensity of the effect on the Real Estate market may not be
known for a quarter or longer.

In activity for the month of September, prior to the recent
economic issues, existing-home sales increased last month as
buyers responded to improved housing affordability conditions,
according to the National Association of Realtors®.

Existing-home sales – including single-family, townhomes,
condominiums and co-ops – rose 5.5 percent to a seasonally
adjusted annual rate¹ of 5.18 million units in September from a
level of 4.91 million in August, and are 1.4 percent higher than
the 5.11 million-unit pace in September 2007.

Lawrence Yun, NAR chief economist, said more markets are
seeing year-over-year gains. “The sales turnaround which began
in California several months ago is broadening now to Colorado,
Kansas, Minnesota, Missouri and Rhode Island,” he said. “The
South was hampered by much lower home sales in Houston in the
aftermath of Hurricane Ike.”

On the new home side, Sales of new one-family houses in September
2008 were at a seasonally adjusted annual rate of 464,000, according to
estimates released jointly on October 27th by the U.S. Census Bureau
and the Department of Housing and Urban Development.

This is 2.7 percent (±12.1%) above the revised August rate of 452,000,
but is 33.1 percent (±8.9%) below the September 2007 estimate of 694,000.
The median sales price of new houses sold in September 2008 was $218,400;
the average sales price was $275,500. The seasonally adjusted estimate
of new houses for sale at the end of September was 394,000. This represents
a supply of 10.4 months at the current sales rate.


Mortgage Rate Update: One of the Most Volatile Months Ever

Talk about volatility! October was the most volatile month for mortgage
rates in recent memory, with rates all over the map in the past 30 days.
For example, according to mortgage company Freddie Mac, 30-year fixed-rate
mortgages averaged 6.10% at the beginning of October, fell for one week
then showed one of the highest jumps in history mid-month to an average
of 5.46% then followed with a huge drop in the next week to an average of
6.04%. 30-year fixed-rate mortgages showed a similar trend during the month.

Virtually no one is willing to stand up and forecast a direction for the
future. There simply are too many forces at work, not the least of them
a Presidential election, plus a wildly gyrating equity market and a bond
market that cannot seem to get a footing. Keeping an eye on the trends
is even more important than usual for a potential home buyer.
Mortgage Rate Update:
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: Changes in the Mortgage Market

The last 2 years have seen enormous changes in almost all aspects of
buying a home, from pricing to sales levels to the mindset associated
with home ownership. Many of the biggest changes, though, have come in
the mortgage arena.

In the seven year period from about 2000 to 2008, we watched as the
mortgage industry moved from a few basic loan choices and approaches
to literally hundreds of new (and quite different) offerings. It has
only been recently that the industry recently returned to a offering
a much smaller list of available mortgage products. A few of the mortgage
loan types that quickly appeared and then almost just as quickly either
virtually disappeared, or were severely limited, include:

+ 110% Loan to value mortgages
+ 125% Loan to value mortgages
+ Aggressive interest only mortgages (no down payment)
+ Negative amortization mortgages
+ No document--"liar" loans

In most cases it is "good riddance" to many of these loan products,
since it was their existence that either added to or created the
housing problems we've seen in the last 2 years, depending on whose
analysis you believe. And, the effects of these loans, since they
created so many "upside down" situations (you owe more on the home than
it is worth) will continue to influence the market at least for the
near future.

The changes in the mortgage market have had an influence on the sales
activity levels because, in many cases, loan qualifying is much more
restrictive. Less than 2 years ago it would not be beyond the realm
of possibility for a buyer with marginal credit and no money down
to be able to purchase a home using a interest only loan with an
artificially low interest rate. Plus, the qualification ratios for
this mortgage could have been so lax that a huge portion of the buyer's
income would need to be devoted to mortgage payments. It is no
wonder that we've found ourselves in the mess we are in.

Today, that type of loan is impossible to find, which is a good thing
for long-term housing prospects. A fairly high percentage of the
foreclosures that we are witnessing are results of just the kind of
mortgage loan described above. Quite simply, there were tens of
thousands of buyers who never were able to come close to being able to
afford the homes they had purchased.

In general, the mortgages that will be available today will probably
look more like the mortgages from 10 years ago than they will look
like those of the recent past. Yes, there still is availability of
what are known as "hybrid loans" (a combination of fixed and adjustable
mortgages) as well as some limited down payment loans. However, the
majority of mortgages that are and will be available are much more of
the loan types that were familiar to buyers for many years prior
to 2000. This means a few things for the prospective buyer:

+ You probably will need some sort of minimal downpayment
+ You probably will not be financing more than the value of the home
+ You probably will need to qualify for the purchase--the lender
must feel confident that you will be able to repay the loan
+ Your loan will not be structured on the hope that there will be
a big increase in the home's value in a short period of time

In the short term, this will mean that it may be a bit more difficult
to finance a home than it has been recently. However, in the long
term it will mean that most of those who have no chance of being able
to afford the payment will not be purchasing homes. This converts to
lower rates of foreclosure in the future which means that prices will
eventually begin to stabilize and then start to appreciate again. And
that will be good news for everyone.

Next Month's Tip: Resale or New Build?

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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