Why is my FICO credit score falling?

For the past five years, my FICO credit score has been above 825. This month, I checked my credit score again, as I do annually, and it dropped to the 755 range. Nothing has changed, except that I applied for and received six new credit cards in less than three months. They all are cash-back rewards cards. What happened?
-- Pat

Dear Pat,
Your FICO credit score fell because you opened those six credit cards in a short time. Every time you open an account, you're allowing creditors to pull your credit report, and you're lowering the average age of your credit accounts.

Both of those actions will sink your score.

Here's how it works: When you apply for a new credit card, a lender will pull your credit report and score. This is called a "hard" credit inquiry, and it'll hurt your score. (It doesn't hurt your score, by the way, when you pull your own credit report. It also doesn't hurt when an employer pulls your credit report or when a lender pulls your credit report for marketing purposes. Those are called "soft" inquiries.)

If you have several hard credit inquiries in a short amount of time, the damage to your credit score increases dramatically, says Anthony Sprauve, spokesman for myFICO.com, the consumer education division of FICO.

"Our data shows that someone opening multiple credit accounts in a short period of time is at a higher risk for default," he says.

It's unclear how much a hard inquiry -- or several of them -- will hurt your credit score. It depends on the cardholder, Sprauve says. Typically, the higher your credit score, the harder it gets hit by any credit transgression, he says. Consumers with low credit scores will find that a hard inquiry doesn't hurt their already low credit score by the same amount.

The damage from these hard inquiries will lessen over time as long as you manage the new credit responsibly. That means paying your bills on time and keeping the balances below 20 percent of the total available credit, Sprauve says.

New credit accounts also hurt your FICO credit score by lowering the average length of your overall credit history. The average age of all your accounts, the age of individual accounts and the length of time since you used certain accounts all contribute 15 percent to your FICO credit score. As the accounts age, and if you manage them responsibly, those new accounts will eventually boost your credit score.

So be careful with those credit card offers. While it's attractive to sign up for rewards credit cards, especially since many of them offer cash bonuses for new cardholders, do so with prudence and only when you need new credit.

"In addition to paying bills on time and keeping revolving credit balances low," Sprauve says, "the third most important thing a person can do to improve their credit is only open new accounts when necessary."

Source: Yahoo Finance

Prices are up, but homes are in short supply

The supply of homes for sale has been shrinking for six months and shows no improvement so far in January a bad sign for buyers. New listings of existing homes for sale were down 14% year-over-year in the first two weeks of January, according to Realtor.com, which tracks 143 markets nationwide.

In Phoenix, where prices were up 24% in November from a year earlier, new listings through the first three weeks of January hit their lowest level in 13 years, says Mike Orr, real estate expert at the W.P. Carey School of Business at Arizona State University.

That's bad news for buyers, and it means "prices need to go up more" to bring more sellers to market, Orr says.

Nationwide, the supply of existing homes for sale fell to 4.4 months in December, based on the current monthly sales pace, says the National Association of Realtors. That's the lowest level in more than seven years. A six-month supply is generally considered balanced between buyers and sellers.

Home prices in November were 7.4% higher on average than a year earlier, according to CoreLogic. Real estate experts had expected that rising prices would spur more sellers trapped by years of falling prices.

Instead, January's listing data "is the same sad story," says Glenn Kelman, CEO of online brokerage Redfin. If sellers don't have to sell, "they're holding on, thinking they'll wait for prices to go up even more."

Redfin's data, covering 19 major markets mostly in the West, shows new listings down 29% the first two weeks of January vs. last year.

Scarce sellers aren't the only driver of shrinking supplies. There are fewer distressed properties for sale. Foreclosure sales were down 7% through the first nine months of last year from the same period in 2011, RealtyTrac says.

Meanwhile, demand is up. Existing home sales were up 9.2% last year, NAR's preliminary data show. New-home sales rose almost 20% in 2012, the government reported Friday, while supply fell to 4.9 months in December from 5.4 months a year before.

New home construction is still weak. In each of the past three years, builders completed fewer than 500,000 single-family homes. That's less than half the number built annually between 1993 and 2007, according to the Census Bureau.

Home builders would need to double production this year to alleviate the tight supply, estimates Lawrence Yun, NAR's chief economist. That's not expected. Home supplies nationally will stay at about the five-month level much of the year, Yun predicts. Some markets are far below that. California's supply of existing single-family homes for sale stood at 2.6 months in December, the California Association of Realtors says.

"Nobody is selling because no one has anywhere to go," says Barbara Hendrickson, of Red Oak Realty in Berkeley, in the San Francisco Bay Area, which had a 1.8-month supply in December.

The low supply is feeding bidding wars. One of Hendrickson's clients recently lost a bid despite offering $130,000 above the home's $775,000 asking price, Hendrickson says.

Whether the supply of homes for sale will expand to meet rising demand is a "big question for the market" in 2013, says Jed Kolko, economist with real estate website Trulia.

This year is also the first since the housing bust began that falling inventories are not necessarily a good thing, he says.

Listings may still swell in time for the busy spring selling season, says Stan Humphries, Zillow economist.

He says listing activity next month will be key. If it doesn't pick up by then, the spring season is likely to bring a lot of price increases, he says.

Source: USA Today

What's Up in Today's Blog: Home Values See Largest Annual Gain Since 2006

U.S. home values in 2012 rose 5.9 percent over 2011, according to data in Zillow's latest Home Value Index (HVI).

The 5.9 percent appreciation rate is the largest annual gain since August 2006, near the peak of the housing bubble.

While the market still has some ground to cover before its completely healthy again, Zillow said in a release that 2012s appreciation rate far exceeded yearly rates of appreciation typically associated with healthy markets, which can expect annual home value appreciation of roughly 3 percent on average.

Looking ahead, the Zillow Home Value Forecast projects an appreciation rate of 3.3 percent in 2013, more in line with historic norms.

In addition, the fourth quarter of 2012 saw home values rise to an average $157,400, up 2.5 percent over Q3, according to the fourth quarter Zillow Real Estate Market Reports.

Of the 30 largest metros covered in the HVI, only Cincinnati and Chicago failed to report annual and quarterly increases in the fourth quarter, Zillow said. Of the 366 total metros analyzed, 254 (69 percent) registered annual home value gains in 2012, while 278 (76 percent) experienced quarter-over-quarter appreciation.

Though the recovery in home values appears to be widespread, its not balanced among metros, Zillow said. According to the report, growth rates ranged from a high of 22.5 percent yearly appreciation in Phoenix to a low of 0.2 percent depreciation in Cincinnati and Chicago. Seven of the top 30 largest metros posted annual home value appreciation of 10 percent or higher.

We expected 2012 to be a good year for housing, and it delivered in spades, said Zillow chief economist Dr. Stan Humphries. Strong demand paired with limited inventory in many markets helped fuel a robust and often rapid recovery in overall home values, good news for homeowners after years of poor performance.

While home value appreciation is expected to slow down in 2013, Humphries said the anticipated 3.3 percent annual appreciation rate is more sustainable. That said, consumers should be careful to temper their expectations accordingly.

Its important to be cautious moving forward, even as we celebrate the undeniably positive end to 2012, and be careful that consumers dont grow to expect such high appreciation as the norm, Humphries said. Buying a home should be a long-term decision, and these swings between a deep housing recession and higher-than-normal appreciation rates can give consumers whiplash and cause some to lose sight of that.

As home values rose throughout 2012s fourth quarter, foreclosure activity declined, with 5.22 out of every 10,000 homes nationwide facing foreclosure in December (down 2.2 homes per 10,000 year-over-year and 1.2 homes quarter-over-quarter). The share of foreclosure re-sales dropped to 12 percent, down 4 percent from the end of 2011 and 0.3 percent from the third quarter.

Meanwhile, national rents fell 0.6 percent from the third quarter to the fourth; however, rents were up 4.2 percent year-over-year in 2012. The Zillow Rent Index stood at $1,274 at the end of December.

Source: DSNews

Consumer Confidence Presses on Despite Fiscal Uncertainty

Improving news on housing and employment has given a lift to consumer confidence, despite fiscal cliff drama, according Freddie Macs U.S. Economic and Housing Market Outlook for January.

The report noted the 155,000 jobs that were added in December and the overall gain of 1.86 million jobs for all of 2012.

Freddie Mac expects the U.S. economy to see another two million news jobs in 2013, which would eventually lower the unemployment rate. However, the projection was based on the assumption that uncertainty over fiscal policy debates in the first quarter wont derail the economic expansion, the report stated.

The GSE also highlighted the increase in home sales, and said over the first 11 months of 2012, homes sales have climbed 9 percent from the same year ago period. The GSEexpects sales to display similar gains in 2013.

As we begin 2013, the economy is undoubtedly at a better place now than at this time in 2012. And despite the clouds of fiscal uncertainty facing the country, positive jobs reports and the strengthening housing market continue to be the bright spot as we begin the New Year, said Frank Nothaft, Freddie Mac VP and chief economist.

Although the Conference Boards consumer confidence index took a hit in December, falling to 65.1 from Novembers 71.5, Freddie Mac noted some positives.

Regardless, consumer confidence is up from its Great Recession low, and as consumer attitudes on the economic outlook improve, more potential homebuyers will emerge and feel financially secure in making an offer to purchase a home, the report stated.

To answer the question of the role of policy uncertainty in influencing the economy, Freddie Mac pointed to research by economists from Stanford University and the University of Chicago.

According to the research, increases in policy uncertainty precede declines in economic growth and employment.

For instance, increases in policy uncertainty equal to the increase observed from 2006-2011 could cost the US economy up to 2.3 percent in lost GDP and 2.3 million fewer jobs, the report explained.

With the Consumer Financial Protection Bureaus release of a finalized qualified mortgage rule, Freddie Mac says some of the uncertainty regarding mortgage lending guidelines may have cleared.

Source:  DSNews

Four Tips For Making Smart Real Estate Moves In 2013

Working With A Buyer’s Agent Can Help You Find A Home In A Low Inventory Market.

One of the biggest issues in the real estate market across the country is that houses are being snapped up before interested buyers have a chance to act. What should you do when the home you have fallen in love with is listed as contingent or pending? Should you take a chance? There’s no hard and fast rule because every home sale is different and every agent is different. Depending on the home and the offer, a backup offer may be welcomed or ignored.

If you see a house you love but it’s out of your price range, add it to your saved searches on Realtor.com anyway. That way you will know if the price drops and the home that was once only a dream could become a reality.

Doing The Two House Juggle Is Tougher Than Ever.

If you have to sell your house before buying a new one, you may be at a disadvantage. “In a hot market it’s often a deal killer to include in your offer to buy a new home, a contingency to sell your existing home. Sellers will simply take their pick of offers not burdened by such a contingency,” says Lee Dworshak. Depending on your local market it may make sense to put your existing house on the market before you begin the hunt for a new home. An agent can advise you on whether or not this makes sense for you based on the average time on market for homes in your area. If your financial situation allows it, you could also rent your current house out if it doesn’t make sense to sell currently.

Haggle With Care.

Knowing what to offer can often be a delicate dance. Too low and may ruin the deal forever and not seem like a serious potential buyer. Too high and you may miss out on a chance to save some money. Sometimes even if a house seems overpriced, you may have to walk away.“In the end there are only a couple of things that matter to a seller. First and foremost is what they are putting in their pocket. I knew one seller that waited five years until the market finally caught up to his price. I never even talked to the guy about listing, because he wanted so much. About six or seven other agents had his home listed over that time period, but only the last one sold the home. I just suggest making your best offer, and move on. Oh, the second thing sellers like is an easy closing, so make the offer as-is and get your inspections and financing tied up as quickly as possible, “ advises David Welch, Realtor® with Re/Max 200 Realty.

Bear in mind also that there may be other factors influencing the price that the sellers have put on the home . There is a reason that agents often put the words “motivated seller” in a listing description. The truth is that not all sellers are desperate to sell immediately. “If the sellers do not have to move, they will not be incented to take less than they want. If the sellers have that much “into” the home, they will not want to take less. Comps are what buyers use, but sellers always have a reason why their house is better than the comps. One technique I find helpful is to present a very reasonable offer with a cover letter (or in person if possible) extolling the virtues of the home and saying how wonderful it is but expressing concern that the appraisal process might hamper the realization of the price. I then provide comps, excellent evidence of financial strength, and end by saying: “We realize we may not be the right buyer for your lovely home, but we would certainly love to be the new owner.” That last point makes the sellers think twice about who WOULD be the right buyer,” says Linda Walters, a Realtor® with Sage Realty.

Timing Your Life Is As Important As Timing The Market.

It’s easy to drive yourself mad trying to predict the market. Should I buy now, should I sell now? Is there a right time of the year to buy or sell? The only truth is that when it is right for you, it is right for you. Make your decisions based on your financial and personal situation not on what you think may or may not happen. “It is very difficult to time exactly when it is best to sell… so I always recommend to clients and friends to sell when you know you want to sell. Traditionally, springtime is a very popular time of year to sell one’s home, as the weather enables potential buyers to travel and view listings on weekends with their families. The price of the property is based on income, location, and condition,” states Arlene Gonnella, a Realtor® in Short Hills New Jersey.

Source: Realtor.com

Should Young People Buy Homes?

If there's anything we've learned in the past few years about real estate, it's that property doesn't always go up in value. And because it doesn't, you shouldn't just buy property and assume that you're going to earn equity and wealth from that ownership.

Instead, buying a home should be a personal decision based on your life and financial situation.

So if you are young, should you buy real estate? The answer, as with many things, is that it depends. But for the vast majority of young people, the answer is probably no. Here's why.

Real Estate is Long-Term

We buy real estate in order to hopefully earn wealth and improve our lot in life. The most likely way that you will earn real estate wealth is by owning property for long periods of time, preferably a decade or greater. This long-term ownership does not coincide with the habits and traits of most young people. So if you're not very sure you will own a property for a long time, let a landlord deal with the inherent risks, pains and issues of real estate ownership.

Not Settled in a Career

At a young age, you rarely know whether you'll be living in the same area for a long time. People are very mobile these days, including switching jobs, getting job transfers, changing careers, going back to school, etc. If you buy a property and have to sell it due to a career move in a few years, you're most likely going to lose money on your real estate ownership.

Can't Afford a Place You Love

Additionally, you might not have the financial resources to afford a place that you really love, and you'll end up buying in anticipation that you'll earn equity and trade up in a few years. Now you probably will trade up in a few years, but you probably won't earn any equity. In fact, you'll likely lose money -- primarily due to steep transaction costs. The better way to go is to save your money for several years and buy a place you really love when you have the savings and income to be a homeowner.

Not Settled in Life

You finish school, get a job and work a few years. Then you realize you've got to move somewhere else, "see the world," if you will! That house you bought would hinder your ability to relocate, and if you did move, you'd probably lose money.

So if you are young, wild and free -- and not sure of your 5- to 10-year plan -- you'll probably do better as a renter.

When might it make sense to buy young? If you're sure you'll own the property a long time, then it's probably a good idea to buy. Just make sure you can comfortably afford the payments along with all your other bills. Also if you want to be in the landlord business and plan to convert the property from a personal residence to a rental, then buying at a younger age would be a smart move for you.

Just ask yourself before you decide whether to buy real estate, "Am I sure my ownership will be for the long haul?"

Source: Zillow

5 Types Of Buyers Will Be Rushing Into The Housing Market In 2013

With the housing market bottoming in 2012, economists and other experts are becoming increasingly optimistic about the U.S. housing market in 2013.

From John Burns 2013 Real Estate Consulting: "Assuming our leaders in DC come to some sort of agreement that keeps the economy growing and interest rates low, which seems like the most reasonable assumption, here is what will happen,"

• Investors: Investors and, yes, even flippers will continue to grow in numbers as they realize housing is the best risk-adjusted return on their money.
• Boomerang buyers: Foreclosed homeowners, who are currently renting homes, will come back in droves. In Phoenix, they are paying $1,300 in rent for a home whose mortgage payment would be $1,000. That situation is not sustainable. The Federal Housing Administration and Department of Veterans Affairs have low down payment programs with insurance premiums that push rates near 5.0%. Those payments are still very affordable.
• Entry-level buyers: First-time homeowners, who have been sitting on the sidelines waiting for a sign of the bottom, will hear about price increases in their desired neighborhood and rush to become homeowners.
• Move-down buyers: Empty nesters and retirees, who have plenty of equity in their existing home, will buy a home that is more suitable to their current lifestyle, which may or may not include adult children as well as their aging parents.
• Moveup buyers: The price appreciation that occurred in the last year has already lifted 1 million underwater homeowners above water with future price appreciation to lift them even more.

All good signs.

Source: Business Insider