Rates, Credit Score Hints, Sales Stats and Risk Factors

Interest rates continue to be very attractive…in the 4’s to low 5’s depending on loan amount, loan-to-value, purpose of loan, and credit scores. But they have nowhere to go but up, and the market reacted poorly this week to the news that the government is definitely ending the purchase program for mortgage-backed securities as of March 31, 2010.

Speaking of credit scores, I have seen a number of credit reports recently where my client’s scores were hurt because they had closed credit card accounts. They THOUGHT they were doing the right thing, but they inadvertently hurt themselves. If you pay off a credit card, it isn’t smart to close the account. Keep it open, with a zero balance, and use it once every few months for minimal purchases such as gas or food, and pay it off. In this fashion you are increasing the credit “available” to you, but not using it. The goal is to have all balances on revolving credit at or below 30% of total credit available. High balances to total credit available are the primary culprit in driving down FICO scores, right behind collections or delinquent payments.

Interest rates today are very sensitive to FICO scores, and you will pay a price for any score below 720, and in some cases with larger loan amounts, scores below 740. It is tough out there!

Sales stats for Orange County show that home sales at the “low end” of the housing market – below $500,000 – consisted primarily of foreclosures and short sales, and accounted for all of the sales gains (increases in volume) seen in the last year.

The median sale price for single family homes in Orange County was $496,070 in December. Newport Beach posted a median price of $938,500 and Laguna Beach was at $1.23 million. The sales at the higher end of the spectrum, although much lower in volume, still helped to push the median prices up.

DataQuick reported that 20% of homes sold are going to investors (vs. primary housing) and almost 25% of homes sold to all-cash buyers.

What’s The Risk?

The recent terrorist attempt on a Northwest flight bound for Detroit hit close to home for me. My daughter, who lives in Ann Arbor, Michigan, was in Europe at the time and heading for Amsterdam where the fateful flight originated. Further, she was flying home to Detroit after the holidays.

So, what are the real chances of being involved in a terrorist event on an airplane? In the decade of the 2000’s, the only American fatalities occurred on 9/11, and including those stats, only one passenger in every 25 million was killed in a terrorist attack on an American airplane during the past ten years.

Contrast that with the chance of being hit by lightening…one in 500,000 each year. Further, the stats show that these violent passenger incidents –bombing, hijacking or sabotage- were five times less common in the 2000’s than in any decade from the 40’s through the 80’s. Source: Nate Silver http://www.FiveThirtyEight.com.

Mr. Silver opines that we would be more rational to focus on prevention of a nuclear terrorist attack that could affect millions.

So the bottom line, as I always reminded my children, is to be far more worried and cautious when driving your car than flying. And don’t stand under trees in a lightening storm!