Tucson Monthly Real Estate Statistical Digest

By Todd Abelson NMLS #180858 on .

april mls stats

Below is a link to the 2008 April real estate sales overview. There are a few encourage things in the April report.

  1. April pending contracts were up
  2. Active listings were down

This is encouraging because as the Tucson housing inventory levels decrease the average days a home is on the market will also decrease and values will begin to stabilize. It is all about supply and demand.

Click here for the April 2008 report:  mls digest april 2008

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Brought to you by Tyler Ford and Todd Abelson – Tucson’s home loan experts!


How We Know That Prime Rate Will Likely Rise Before It Falls

By Todd Abelson NMLS #180858 on .

Three weeks after adjourning, Federal Reserve officials release detailed minutes of their most recent meeting.  The April 30, 2008 minutes were released WednesdayThree weeks after adjourning, Federal Reserve officials release detailed minutes of their most recent meeting. 

The April 30, 2008 minutes were released Wednesday and it affirmed traders’ beliefs that the Federal Reserve will not be in a hurry to lower the Fed Funds Rate again.

This is bad news for two groups of people whose borrowing costs are tied to Prime Rate, the interest rate that is 3 percentage points higher than the Fed Funds Rate:

  1. Homeowners with home equity lines of credit
  2. Americans with credit card debt

Because Prime Rate moves in lock-step with the Fed Funds Rate, it, too, has fallen by 3.25 percent since September and now rests at 5.000 percent.

With the release of the April FOMC Minutes, though, it appears that Prime Rate is more likely to increase than to decrease moving forward.

If your home equity line of credit offers a “convert-to-fixed-rate” option, now may be a good time to consider switching over.  Be sure to talk with your loan officer first, though — he/she may have alternate options for you.

(Image courtesy: The Wall Street Journal Online)

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Tyler Ford Tucson’s Home Loan Specialist

Closing In May, June, July, And August Deserves Advance Planning

By Todd Abelson NMLS #180858 on .

Choosing a home purchase closing date is not a random event -- plan carefullyBetween Memorial Day and Labor Day, home buyers should take special care to schedule their purchase closings with three simple rules in mind:

  1. Don’t close on a Friday
  2. Don’t close in the afternoon
  3. Don’t close on the last day of the month

You stick with that, the rest is cream cheese.

These are three rules to live by because home purchases require a lot of man-hours and during the summertime, man-hours are in short supply. 

And, if you didn’t already know, home purchases are a carefully orchestrated dance.

Check out the people involved in a typical home purchase:

  1. Home purchases are a carefully orchestrated dance requiring up to 20 different peopleThe buyer(s) of the home
  2. The seller(s) of the home
  3. The buyer’s real estate agent
  4. The seller’s real estate agent
  5. The buyer’s attorney
  6. The seller’s attorney
  7. The buyer’s mortgage lender
  8. The title company agent
  9. The buyer’s appraiser

And that’s before we count assistants, interns, and the other staffers involved.  Closing on a home purchase is a 20-person collaboration and each is needed to make the process smooth.

This is why mid-week closings are preferable in the summer months — it’s more likely that all 20 people will be around.  By the time Friday rolls around, at least one person will have started their weekend early.  You can count on that. 

And often, it’s more than one.

Cooking with Caitlin makes amazing cookiesIt’s also why mornings closings are preferred to afternoon ones.  In the summer, people leave their offices early for all sorts of reasons — baseball games, golf outings, Caitlin’s Cooking on Fountain Square. 

It’s harder to reach people when they’re oat and a boat and not tethered to their desks.  That’s bad news if you need to reach somebody now.

So, let’s say you’ve scheduled a 9:00 A.M. closing on a Wednesday and all parties to your purchase are standing by, ready to assist.  There’s another issue about which to be aware — title company agents are overworked.

Every day, title agents work hard to close home purchase and have to work even harder as the month goes on.  This is because home buyers tend to schedule closings at month-end. 

When there is more work to finish, there is less room for error. 

Unfortunately, mistakes happen and title companies on their busiest days are a lot like airports on Thanksgiving — a delayed landing in the morning starts a chain reaction that delays every other landing later that day.

Home purchases require a lot of man-hours and man-hours are in short supply in the summertime.Therefore, to minimize the chance that of closing delays, avoid closing during peak hours, the time when everyone else is trying to close, too. 

Peak title company hours are:

  • Fridays
  • Afternoon
  • The end of the month

Purchase closings are complicated because there are loads of moving pieces and 20 different people are working to coordinate them.  It won’t always be perfect, but you can make your home purchase closing easier by scheduling for an appropriate date and time.

(Image courtesy: Think Twice)

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Smart Money Magazine Says Renters Have Lame Excuses

By Todd Abelson NMLS #180858 on .

5 (Lame) Excuses for Not Buying a Home from Smart Money MagazineIt’s not often that a mainstream media publication taunts renters into buying homes, but that’s exactly what Smart Money does in its latest issue.

The Smart Money Web site “lead-in” reads 5 (Lame) Excuses for Not Buying a Home.  That’s a forceful title!

It’s unfortunate that renters could feel antagonized by the author’s tone because the article raises very good counter-points to the more popular reasons why renters avoid homeownership.

Owning a home is a serious responsibility and does require commitment.  However, a renter should not feel bullied or hurried into buying because for as much as personal economics are at play, personal emotions are at play, too.  Both deserve respect.

So, renters: Put your blinders on and give the Smart Money article a read.  There’s good advice in there once you get past the author’s bias.

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Simple Real Estate Definitions : Loan-to-Value

By Todd Abelson NMLS #180858 on .

Loan-to-value is often abbreviated as 'LTV' and is one of the many factors that lenders consider when underwriting a mortgage applicationLoan-to-value is a math formula that represents the relationship between how much a home is “worth” and how much money is borrowed against it.

Loan-to-value is often abbreviated as “LTV” and is one of the many factors that lenders consider when underwriting a mortgage application. 

The math formula is straightforward:

Loan-to-value calculation

In the LTV equation, Loan Size is the amount of money borrowed from the bank and Home Value is the lower of the home’s purchase price or appraised value.

Home loans with low loan-to-value ratios are usually less risky for banks.  This is one reason why mortgage rates tend to be more favorable for home buyers and homeowners when their respective LTVs are low.

Typically, a “low” LTV loan is one in which the loan-to-value is 80 percent or less.  In some instances, however, 70 percent is considered “low”.  The cut-off point depends on the mortgage lender and the mortgage product.

On a home purchase, the one way to lower LTV is to make a larger downpayment, thereby reducing the LTV equation’s numerator.  Buying a home for below-market value would not reduce LTV, for example, because the purchase price would be used as the equation’s denominator.

On a home loan refinance, the denominator is always the home’s appraised value.

For more info on the Tucson Mortgae team of Tyler Ford and Todd Abelson click on the link below.

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Simple Real Estate Definitions: Average Days On Market

By Todd Abelson NMLS #180858 on .

The Average Days On Market statistic can help identify the pulse of a real estate marketIn the world of real estate, Days On Market is the number of days between when a home lists for sale and when it goes under contract. 

It is often abbreviated as DOM.

Average Days on Market is a similar statistic but instead of applying to one home in particular, it applies to all homes in a given neighborhood, ZIP code, or city. 

Average DOM is calculated by adding the number of days for which every listed home in an area was available for sale, and then dividing that number by the total number of listings.

In a buyer’s market, Average Days On Market is often elevated.  This is because homes don’t sell as fast as during a seller’s market when the Average DOM can be quite low.

For buyers and sellers of real estate, Average Days On Market can be a strong indicator of home prices.  When Average DOM falls, home prices tend to increase.

Tucson Mortgage Blog  – Tyler Ford and Todd Abelson. Give us a call with your Tucson Mortgage Needs by calling 520-331-LEND.

If History Is An Indicator, Gas Prices Have Another 10 Percent To Rise

By Todd Abelson NMLS #180858 on .

Gas prices have risen every April since 2003

Average gas prices reached an all-time U.S. high Tuesday, touching $3.40 per gallon.  San Francisco and Tulsa are the nation’s bookends at $3.94 per gallon and $3.11 per gallon, respectively.

But before you wonder if relief is coming to your family budget, remember that “rising gas prices” is a conversation we have every April.

Using data from gasbuddy.com and looking back to 2004, we can see that gas prices tend to rise during the Spring season.  

If the pattern holds, we’ll should see another 10 percent increase at the pump before gas prices settle back down over the summer and fall months.

Brought to you by Tucson Mortgage Blog.

A Simple Explanation Of “Credit Crunch”

By Todd Abelson NMLS #180858 on .

A credit crunch is when the amount of available loans suddenly decreases over a very short period of time

News sources like to use the term “credit crunch” in describing the U.S. economy, but they rarely define what a credit crunch is and what it means for Americans. 

A credit crunch is when the amount of available loans suddenly decreases over a very short period of time.

Usually, it follows a period of lending which, in hindsight, becomes known for its “easy money”. 

The start of a credit crunch often coincides with consumer loans starting to go bad and lenders losses starting to mount. 

The realization that more losses are ahead forces lending institutions to tightening their respective lending guidelines.

Since the current credit crunch began in mid-2007, Americans looking for credit now face:

  • Higher credit score requirements on auto loan applications
  • Higher fees and interest rates on credit cards
  • Larger down payment requirements on their home purchases

And now, the newest symptom of the credit crunch: the largest buyer of mortgage loans — Fannie Mae — has instituted a new, 580 minimum score requirement for all mortgage applicants.

As consumer delinquencies mount and the economy continues to sputter, getting access to credit will likely get tougher for every American — good credit and bad.

And that’s the defining characteristic of a credit crunch. 

Credit Crunch
Wikipedia, April 8, 2008

Tyler Ford and Todd Abelson Tucson’s Home Loan Experts

How Mortgage Rates Benefit From 3 Months Of Worsening Employment Data

By Todd Abelson NMLS #180858 on .

March's monthly loss of 80,000 jobs is the largest since March 2003 and follows January and February's losses of 76,000 each.

For the third month in a row, the economy shed jobs, suggesting that the U.S. is in a recession.

March’s monthly loss of 80,000 jobs is the largest since March 2003 and follows January and February’s losses of 76,000 each. 

The weak data is edging mortgage rates lower as we head into the weekend. 

The connection between poor jobs data and today’s falling mortgage rates is a little bit strained, but worth discussing.  It all comes down to expectations.

Prior to today, there was an expectation that the Federal Reserve’s recent rate cuts would over-ignite the economy sometime this Summer.  The Fed has cut 3 percent from the benchmark rate since September 2007.

Meanwhile, consumer spending makes up two-thirds of the economy and people can’t spend if they don’t earn.

So, after today’s report showing fewer workers (and falling confidence levels to boot), the largest component of the economy is expected to sag for a while. 

This lack of spending should offset the cumulative impact of the Fed’s rate cuts and lowers the expectation for runaway inflation later this year.

Now for the connection: If inflation causes mortgage rates to rise, it’s the absence of inflation that causes them to fall. 

And that’s precisely what we’re seeing today.

In 2008, Home Loans Are One Day Cheap And The Next Day Expensive

By Todd Abelson NMLS #180858 on .

Through last week, the S&P 500 Index advanced or declined more than 1 percent per day 28 times this year.  The represents 52 percent of all trading days and is the most volatile measurement since 1938's 57 percent.

When mortgage rates change rapidly, it’s a fiscal challenge to shop for a home and/or home loan.

Lately, mortgage rates have been especially volatile, mirroring the wild moves of the stock market. 

Here’s how up-and-down stock markets have been in 2008: Through last week, the S&P 500 Index changed more than 1 percent per day on 28 separate days. 

This represents 52 percent of all trading days and is the most volatile measurement since 1938.

Mortgage financing is impacted by stock market changes because when money flows into stocks, it tends to come from bond markets.  And, when money leaves stocks, it tends to “gets parked” in bond markets.

Because mortgage bonds set mortgage rates, you can understand how stock market volatility can make it difficult to predict what home loan payments might look like.

Volatility is expected to continue for the next several quarters so if you see a mortgage rate you like today, consider locking it right away — it probably won’t last long.

U.S. Stock Volatility Climbs to Highest in 70 Years, S&P Says
Jeff Kearns
Bloomberg, March 20, 2008