In 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.
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.
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.
Source
Credit Crunch
Wikipedia, April 8, 2008
https://en.wikipedia.org/wiki/Credit_crunch
Tyler Ford and Todd Abelson Tucson’s Home Loan Experts
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.
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.
Source
U.S. Stock Volatility Climbs to Highest in 70 Years, S&P Says
Jeff Kearns
Bloomberg, March 20, 2008
https://www.bloomberg.com/apps/news?pid=20601213&sid=av840GLwE4UA&refer=home
The Fed lowered the Fed Funds Rate by 0.750% to 2.250% yesterday.
Because it is tied to the Fed Funds Rate, Prime Rate also fell by 0.750% yesterday. Prime Rate is now to 5.250%.
Holders of home equity lines of credit and credit card debt benefited from the change and will see lower interest costs in next month’s statements.
Mortgage rate shoppers didn’t.
In the statement above — as explained by The Wall Street Journal — the Fed expresses a growing concern of inflation from rising commodity prices such as oil. In part, this caused the mortgage bond market to sell off immediately following the press release’s issue.
Mortgage rates rose close to a quarter-percent yesterday.
The Federal Open Market Committee’s statement leaves the possibility of future Fed Funds Rate cuts open. The FOMC’s next scheduled meeting is a two-day affair April 29-30, 2008.
Source
Parsing the Fed Statement
The Wall Street Journal Online
March 18, 2008
https://online.wsj.com/internal/mdc/info-fedparse0803.html
Since December 2007, mortgage lending guidelines have changed very quickly and often without notice.
Some of the more well-known changes include:
- Broad restrictions on stated income home loans
- Broad restrictions on 100 percent financing
- “Risk-based fees” for credit scores under 740
Some of the lesser-known restrictions relate to property type and occupancy status as well as debt-to-income levels and mortgage payment histories.
Because of the number of changes and their collective scope, home buyers should be prudent and get re-pre-approved for their home loan.
Even if you last spoke with your loan officer four weeks ago, it’s important to know how market changes could ultimately impact your home loan approval.
The market really is that different. Talk to your loan officer about a re-pre-approval today.
The Federal Open Market Committee meets today and will issue a press release in addition to cutting the Fed Funds Rate at 2:15 P.M. ET.
The verbiage of the press release will be as widely watched as the rate cut itself because markets are curious about how far the Federal Reserve will go to lessen the impact of an economic recession.
With every Fed Funds Rate cut, recession becomes less likely, but the other side of the equation is that the probability of long-term inflation grows.
Like recession, inflation can be bad for the economy, too.
The Fed Funds Rate now stands at 3.000% this morning and the FOMC is expected to lower it by 0.750% or more this afternoon.
Mortgage rates are rising today because cuts to the Fed Funds Rate weaken the U.S. dollar which, in turn, makes mortgage re-payments less valuable to investors.
Gasoline prices reached an all-time, inflation-adjusted high yesterday, averaging $3.23 per gallon nationwide.
According to GasBuddy.com, this represents a 25% increase in the last 12 months.
Higher gas prices are leaving Americans with fewer discretionary dollars to spend and that is playing a role in the U.S. economy’s slowdown. It’s one reason why mortgage rates have stayed low despite steady upside pressure from inflation.
High gas prices are also a reason why Thursday’s Retail Sales data will be closely watched; markets will gain insight into whether Americans are cutting back on personal spending because of rising energy costs.
Retail Sales are expected to have risen by a slight 0.1%. If the actual number is lower, mortgage rates should fall on recession fears. If it’s higher, rates should rise.
(Image courtesy: GasBuddy.com)
Between Tuesday and Thursday, mortgage rates rose as much as during any three-day period in recent memory before settling back a bit on Friday’s jobs data.
Fourteen speeches from members of the Federal Reserve were partly to blame for the mortgage rate chaos, but several other factors played a part, too.
One of the biggest other factors last week was that multiple big-name investors were “margin-called”.
Now, margin is a basic financial concept, but to do a good job explaining it requires a lot of numbers and math. So — if you’re curious — visit Wikipedia for the complete run-down.
Or, just know that last week’s margin calls forced the investors to sell ther mortgage bond holdings into a falling mortgage bond market. This accelerated the mortgage bond markets freefall for home buyers and rateshoppers alike.
The extra supply from the margin calls created a stronger push downward on mortgage bond prices than markets would have seen without the margin calls.
This, of course, caused mortgage rates to rise faster than they would have without the margin calls, too.
Only after February’s weak job numbers were reported Friday did mortgage rates recover. Overall, rates were higher on the week and — at one point Thursday — touched their highest levels in several months.
This week will be fairly light on data and lacking of Federal Reserve speakers. Therefore, watch for momentum trading to take hold.
The two data points to watch this week are:
- Thursday’s Retail Sales data
- Friday’s Consumer Price Index
Both are reasonable gauges of inflation in the U.S. economy and both are expected to show slowing from their previous readings. Strength will be interpreted as inflationary and should cause mortgage rates to rise.
(Image courtesy: The New York Times)
