Archive for May, 2009

If Case-Shiller March Figures were accurate…

I know, I’ve been on this rant before … but every year or so, I just have to vent again.  Mostly because I get tired of hearing one of my very good friends and/or highly intelligent financial advisors my clients are working with quote the index … ‘According to the Case-Schiller index prices are down over 40% in SF.’

Case-Schiller, oft touted as being the most unbiased, thereby accurate measurement of home prices is an index that started 21 years ago.  There are no data points prior to 1988.  It uses the year 2000 as it’s base-line and tracks the same single family homes that have re-sold.   According to the Case-Shiller index for March 2009 home prices in San Francisco are down 46.1% from their peak in 2006.
Which means, if you are going to rely on those numbers literally, according to the Case-Schiller index, a Single Family Home that sold for $1,000,000 in San Francisco in 2006, was as of March 2009 selling for $539,000.  
Now go find that sale!
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Prices over the Years: 2 Bedroom Tenancies-in-Common

2 Bedroom Tenancies-in-Common
Click on graph

The periods in which both the lowest and highest number of sales occurred in each area are noted. When the number of sales is very low, statistical analysis is generally not meaningful.

The Median Sales Price is that price at which half the properties sold for more and half for less. It may be affected by “unusual” events in any particular period or by changes in buying trends, such as a market shift to lower-end home sales (such as is happening today — to a large degree due to the current difficulty in financing the purchase of more expensive homes, and for houses, due to the significant increase in foreclosure sales in some neighborhoods).

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$10,000 CA Tax Credit more than 65% gone in 3 months

As of May 20th 2009 the new home California $10,000 tax credit is over 65% gone.  May has seen a huge spike in new home sales and being as the credit cannot be applied for until escrow closes, and is on a first come first serve basis, the window to qualify may be gone as early as mid June.   New numbers are updated every Friday.

Two state lawmakers have applied to extend that credit from $100m, to $300m (the argument being the state takes in more money per new home sale then it loses issuing the credit) but it remains to be seen whether that measure will fly.  


Just purchasing a home that has never been lived in does not automatically qualify you.  You must close escrow and submit your application to the Franchise Tax board via Fax only, within 7 days of close of escrow.  Clear instructions and forms for applying for the credit can be found here

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Credit Cards and FICO Scores

This one has always bugged me. And the FICO folks don’t seem to see the irony in it (meaning, they have no plans to change it)…

NPR’s Planet Money blogged about this today, and I think it’s worth posting, as I imagine that many are not aware of the ramifications of doing something that would seem like the ‘right thing to do’.

Basically, if you close a credit card account, it hits you negatively in multiple ways. First, it stays on your credit record, even though it’s listed as closed. Second, you reduce your ‘available credit’ (which is obviously the whole point of closing the account), but this negatively affects your ratio of credit to available credit. If you have a second mortgage on your home for $50,000 (remember when you could still get those?), you are using 100% of your available credit on that line. It is looked at as a revolving line of credit, just like a credit card, and really hurts your credit score to have 100% (or even 90% if you’ve paid some of that down) of that line used.

Apparently, you want to have a 30% ratio of credit used to credit available. I currently don’t have any second loans, and am carrying a bit on my credit cards. But since I no longer have any second mortgages, my credit score has shot up. Doesn’t make sense to me, but FICO thinks otherwise. I still have flawless credit, never missed a payment on anything, etc, but from time to time have carried MUCH more debt (both secured and unsecured). Strangely, with less secured debt right now and more unsecured debt, I’m apparently a more viable borrower. Go figure.

And third, it results in putting an end date on the ‘longevity’ of that account, regardless of why you closed the account. You ‘could’ have kept the account open, but you didn’t, so you get dinged for not having greater longevity with that card.

From the Planet Money blog today…

Gail Cunningham of the National Foundation for Credit Counseling has an answer. FICO scores, which banks and other lenders use to consider how risky a borrower you are, weigh five major categories, Cunningham says.

1) Paying your bills on time — 35 percent of your FICO score.
2) Ratio of credit available to credit used — 30 percent.
3) Longevity of credit accounts — 15 percent.
4) Applications for new credit — 10 percent.
5) Using a range of credit, from fixed payments like a house note to open-ended payments like credit cards — 10 percent.

Canceling a credit card would nick your points in the second and third categories. If you close an account, you obviously affect its longevity — bad for that portion.

If you close an account worth $5,000, Cunningham says, that means you have less overall credit available, which would affect the ratio of credit available to credit used.

So yes, closing accounts and applying for new ones threaten your FICO score.

What’s the optimum ratio of credit available to credit used? “I don’t want to see anyone use more than 30 percent of their available credit,” Cunningham says. “That makes you look as though you don’t have any cash and you’re desperate for credit.”

And a note to people like me who have cards but almost never use them: Take those cards out and buy a little something, Cunningham says. Pay them off at the end of the month, but do use them. “New credit is hard to come by these days,” she says. “You want to keep all of your existing lines of credit. All in the world you represent to a credit card company with your unused card is risk — because you could go out tonight and spend it all.”

So, even though it seems incredibly counter-intuitive right now to keep unused credit card accounts open, that might be your best bet (if you’re looking to buy a home, refinance your home, or do anything that involves your FICO score). Unless you have little or no will power when it comes to buying that new flat-screen TV, and then can’t pay your cards off every month… Then that credit score ding might be worth it.

A Credit Card Dilemma [Planet Money – NPR]
Some good info on how your credit cards relate to your credit score [SFHomeBlog]

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Prices Over the Years: Appreciation & Depreciation in Selected San Francisco Neighborhoods

3 Bedroom Houses*
Click on Graph

* For St. Francis Woods, both 3 and 4 bedroom houses are included in the analysis to achieve a statistically meaningful number of sales.
** With so few sales in these areas during this period, the median price is not statistically meaningful.

The Median Sales Price is that price at which half the properties sold for more and half for less. It may be affected by “unusual” events in any particular period or by changes in buying trends, such as a market shift to lower-end home sales (such as is happening today — to a large degree due to the current difficulty in financing the purchase of more expensive homes, and for houses, due to the significant increase in foreclosure sales in some neighborhoods).

Changes in median price do not necessarily reflect changes in value for any particular property.
Different neighborhoods may feature larger or smaller 3-BR houses and 2-BR condos on a square footage basis, as well as radically different eras of construction. Some neighborhoods have a much greater quantity of sales or may be impacted by large new-development sales. The data herein is from the San Francisco Multiple Listing Service and subject to errors, omissions or revisions and not warranted.

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