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October, 2004 Newsletter

+++++++++++ October 1, 2004 +++++++++++++++++++

Introduction: New Home Sales Jump, Resales Slip
Mortgage Rate Update: Rates Steady
This Month's Tip: Understanding CMAs

Introduction: New Home Sales Jump, Resales Slip

Welcome to the October edition of the
Home Buyer's Newsletter, brought to you by the
Home Buyer's Information Center.
The Home Buyer's Information Center

Sales of new one-family houses in August 2004 were at a
seasonally adjusted annual rate of 1,184,000, according to
estimates released jointly on September 25th by the U.S. Census
Bureau and the U.S. Department of Housing and Urban
Development. This is 9.4 percent (±12.3%) above the revised
July rate of 1,082,000, but is 0.4 percent (±11.4%) below the August 2003
estimate of 1,189,000.

The median sales price of new houses sold in August 2004
was $208,900; the average sales price was $267,000. The
seasonally adjusted estimate of new houses for sale at the
end of August was 404,000. This represents a supply of 4.2
months at the current sales rate.

On the resale side, sales of existing single-family homes slipped
last month but remain at historically high levels, according to the
National Association of Realtors®.

Existing-home sales declined 2.7 percent in August to a
seasonally adjusted annual rate* of 6.54 million units from
a level of 6.72 million units in July. Last month's sales
activity was 2.3 percent above the 6.39-million unit pace
in August 2003.

David Lereah, NAR's chief economist, said the market is
adjusting to a more sustainable pace. "Since April we've
experienced three out of the four strongest months on
record for existing-home sales, and August was the sixth
highest," he said. "We're at a more sustainable level now,
but long-term there should be some additional easing
toward the end of the year. In fact, the August sales pace
is close to what we project for total sales this year."


Mortgage Rate Update: Rates Steady

Mortgage rates first rose a little during the month of September,
then fell toward the end of the month, but the net effect was
that the averages were very close at the end of the month as
to where they were at the beginning of the month. 30-year
fixed-rate mortgages averaged 5.72% in the period ending
September 30th, according to mortgage company Freddie Mac,
after beginning the month at an average rate of 5.77%. Results
were similar for 15-year fixed-rate mortgages, which began the
month averaging 5.15% and ended at 5.12%.

Going forward, there is a bit of disagreement on the future
trend of rates. Some analyists believe rates will remain in
the same general range for the next 6-12 months. Others
see improvements in economic conditions virtually dictating
at least a gradual rise in rates as we go through the end of
2004 and into 2005. As a buyer, your best bet is to find a
home that suits your needs and is comfortably in your budget
with existing rates. To wait for a sizeable drop in rates is
most likely unrealistic, but the chances are fairly good that
we maintain current rates or head upward. With housing
prices continuing to escalate in most markets, waiting could
end up being fairly expensive.

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



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Loan Center:
Mortgage Loans


This Month's Tip: Understanding CMAs

Don't want to pay too much for a home? Want to be sure that you
aren't paying more than market value for your home purchase?
A CMA--Comparative (or Comparable) Market Analysis--is the
strongest tool in your home buying arsenal to give assurance
that you are not overpaying.

A CMA is a recap of housing activity in the area in which you are
interested, focusing on 3-10 properties that are similar in size and
amenities located in the same neighborhood or nearby. The CMA
will list specific details (number of bedrooms, number of baths,
total room count, square footage, age, etc.) for similar properties
that are currently on the market (active listings), those that are under
contract but not yet closed (pending listings), have closed and transferred
ownership (sold listings) as well as those listings that have either
expired without selling or have been withdrawn by the seller (taken off
the market). Because a CMA compares similar properties it can
give a buyer a pretty clear snapshot of current housing values in a
specific housing market. Although the CMA is very important, it
cannot be used as an absolute determination of value, since it generally
does not put a lot of weight on condition, an obviously important

While the CMA will list homes that are currently on the market as well
as those that are pending or have expired, it is those properties that
have sold and closed that give the most information. Sold and closed
information is important, since these detail specifically what buyers
are willing to pay (and lenders are willing to lend) for specific properties.
Don't make the mistake of putting too much weight on the prices
of properties currently on the market. These homes could be wildly
overpriced compared to the price for which they eventually sell for.
Likewise, one of the biggest reasons that a property listing will
expire without selling is because it is overpriced, so the prices of these
expired listings should be taken with a grain of salt.

What does a CMA include? You will find at least the following information
on the "subject property" (the one you want to buy) and anywhere from
3 to 10 additional properties:

+ Street address
+ Square footage
+ Number of bedrooms, number of baths, number of total rooms
+ Age
+ Listing price and sold price if closed

To see an example of a CMA, visit that page on the Home Buyer's
Information Center site:

Where can you get a CMA? If you are being represented by a Buyer's
Agent, they should be able to develop a CMA for you in a short amount of
time. Since virtually all Multiple Listing organizations are computerized,
the Buyer's Agent can pull a CMA up on their home or office computer
and have it available to you. If you are dealing with an Agent who is
representing the seller (the home in which you are interested is their
listing) it may be that the Agent cannot develop a CMA for you, since
their representation of (and loyalty to) the seller may preclude releasing
any information that could compromise the seller's position. For example,
if a CMA showed that the average property in the neighborhood was
selling for $147,000 and the home was listed for $165,000, it is highly
unlikely that the seller's Agent would give that information to a buyer.
This is one of the many reasons that a home buyer should always
strongly consider using a Buyer's Agent, if one is available. See a
discussion on the site:
Buyer's Agency

Summing Up

A CMA can be your most important tool in negotiation, since it will detail
exactly where, price-wise, the house in which you are interested is positioned.
Is it underpriced (a bargain), priced "on the money" (a fair price for both buyer
and seller) or overpriced (time to either negotiate hard or walk away). As
we have mentioned many times in the past, if you overpay for a home in a strongly
appreciating market, the market will eventually cover your mistake. If, however,
you overpay in a flat or declining market, you will end up holding the financial

Next Month's Topic: Qualifying for a Mortgage

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
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),
drop us a quick line here:
Home Buyer's 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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