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October, 2007 Newsletter

+++++++++++ October 1, 2007 +++++++++++++++++++

Introduction: New and Resale Volumes and Prices Drop
Mortgage Rate Update: Rates Decline Then Rise
This Month's Tip: What Determines Price?

Introduction: New and Resale Volumes and Prices Drop

Welcome to the October edition of the Home Buyer's

Existing-home sales fell in August when mortgage
availability problems were peaking, according to
the National Association of Realtors®.

Total existing-home sales – including single-family,
townhomes, condominiums and co-ops – were down
4.3 percent to a seasonally adjusted annual rate1
of 5.50 million units in August from a level of
5.75 million in July, and are 12.8 percent below
the 6.31 million-unit pace in August 2006.

Lawrence Yun, NAR senior economist, expected the decline.
“The unusual disruptions in the mortgage market,
including a significant rise in jumbo loan rates,
resulted in a fairly high number of postponed or
cancelled sales, with many buyers having to search
for other financing when loan commitments fell through,”
he said. “Lower sales contributed to a buildup of
unsold inventory.”

Yun expects similar results for home sales in September.
“Once we get through these disruptions, we’ll get a
better sense of where the actual market is in late
fall as conditions begin to normalize,” he said.

Total housing inventory rose 0.4 percent at the
end of August to 4.58 million existing homes
available for sale, which represents a 10.0-month
supply at the current sales pace, up from a
9.5-month supply in July.

In new construction, sales of new one-family houses
in August 2007 were at a seasonally adjusted annual
rate of 795,000, according to estimates released jointly
on September 27th by the U.S. Census Bureau and the
Department of Housing and Urban Development. This is
8.3 percent (±12.4%) below the revised July rate
of 867,000 and is 21.2 percent (±9.0%) below the August
2006 estimate of 1,009,000.

The median sales price of new houses sold in August 2007
was $225,700; the average sales price was $292,000.
The seasonally adjusted estimate of new houses for
sale at the end of August was 529,000. This represents a
supply of 8.2 months at the current sales rate.

For sellers, there is not a lot of good news to be
found here. For buyers, however, this may be a boost
both in pricing and in inventory availablity with resale
homes showing a 9.5 month supply and new homes showing
an 8.2 month supply, some of the highest in history.
See this month's tip, "Dealing WIth a Market Upheaval"


Mortgage Rate Update: Rates Decline Then Rise

Mortgage rates declined in the middle of September only
to rise toward the end of the month, ending at virtually
the same point where they began. 30-year fixed-rate
mortgages averaged 6.42% in the period that ended on the
27th of September after starting the month at an average
of 6.45%. The 15-year fixed-rate trend was very similar,
beginning the month at an average of 6.12% and ending it
at an average of 6.09%.

Those who thought the FOMC rate cut would have a big
effect on long term rates were disappointed to see that
rates rose from an average of 6.31% (30-year fixed) before
the meeting to an average of 6.42% after. Although the
"Fed" rate affects short term interest rates, there are
a number of other factors that have a much stronger
effect on long-term loan rates. Going forward, there
is a fair amount of disagreement on prospective rate
trends, so stay tuned!

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: Dealing With a Market Upheaval

For many home purchasers, the current Real Estate situation is
their first introduction to a soft sales market. If you had
been looking to buy a home at virtually any time between 2001
and 2006, almost anywhere in North America, the market you found
was a vibrant one--prices rising strongly and quickly, houses
selling in a matter of hours or days, bidding wars erupting
for even marginal properties. Best described as "that was
then and this is now," what a difference a year makes!

In virtually every area of North America the market has either
stagnated or dipped appreciably, both in the level of activity
as well as pricing. It is by no means unusual to see decreases
of 10% in closed sales, or, in some cases, considerably more.
Prices are generally slipping, more in some areas than in others.

As depressing as this situation is for home sellers and home
owners considering selling their houses, for home buyers
this is likely a big boost to their buying process. Clearly,
we are in the midst of a buyer's market for the first time in
a number of years.

A buyer's market in Real Estate is defined as one where there
are more sellers (and thus more houses) than there are buyers
for them. In contrast, what we saw earlier in this decade was,
in many areas, a raging seller's market where there were many
more home buyers for properties than there were houses available
for sale. As of the beginning of the 4th quarter of 2007, the
tide has definitely changed.

The advantages to a buyer in this market are numerous. A few
important plusses include:

+ There are many properties from which to choose
+ Properties are often in better condition
+ Pricing is much more "buyer friendly"
+ More time is generally available to make a decision

More properties to choose

Inventories of both new and resale homes are at historical
highs. Where a year or so ago a buyer may have had a handful
of homes (or less) to consider, there now may be dozens
available from which to choose. The increase in choices
works in the buyer's best interest in a couple of ways. First,
it obviously means that it is less likely that a buyer will
need to "settle" for a house that does not truly fit their
needs and wants. In addition, because of such a competitive
market, sellers may be more inclined to negotiate on pricing,
added "amenities" and/or closing costs at settlement.

Properties are often in better condition

The more a house stands out in comparison to those it is
in competition with, the more likely it will be seen and
eventually purchased. Houses that are in disrepair
will likely be quickly dismissed by potential purchasers.

Pricing is much more "buyer friendly"

Again, due to competition and supply and demand, the property
that is priced correctly will have a distinct advantage
in this maket over those that are priced considerably over
true market value. It is crucial, therefore, that a buyer
has their Agent develop a CURRENT Comparative Market Analysis
(CMA) to determine what houses are selling for TODAY and not
what they sold for six months or a year ago. The difference
may be striking.

More time available to make a decision

Unlike earlier this decade, when many buyers were pushed
into decision because of a distinct shortage of inventory,
the sheer number of houses available today means that the
pressure to buy, although not eliminated, is much less
intense. This means, most importantly, that the chances of
making the wrong decsion are less if a buyer uses the time
available wisely.

How to make the most of the current market

Spend the time necessary to find the home that best suits
your wants and needs:
Find a Home

Get a clear picture of today's current pricing trends:
Home values

Have any potential home thoroughly inspected:
Home inspections

Next Month's Tip: What Determines Price?


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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