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Buy less house than you can afford

Don't base decision on low interest rates alone

Unsettling economic news at the beginning of July caused some economists to fear a double-dip recession. The stock market sold off, pushing the Dow below 10,000. A weak employment report increased fears of a tepid jobs recovery. Manufacturing activity fell to its lowest level since December.The National Association of Realtors' Pending Home Sales Index (PHSI) dropped a record 30 percent in May -- almost 16 percent below its 2009 level. NAR's PHSI is an indicator of future home sales activity. The index is based on executed purchase contracts that have not yet closed. A drop in the May index was not unexpected. The federal homebuyer tax credits that were generally recognized as stimulating a struggling home-sale market expired on April 30. The large drop in pending sales indicates a drop-off in buyer demand. It's impossible to know whether this will develop into a trend as buyers pull back in the face of worrisome economic news or until prices fall to a level they can't pas...