Another great article I had to share… Americans Sees Biggest Home Equity Jump In 60 Years: Mortgages

Americans Sees Biggest Home Equity Jump In 60 Years: Mortgages

 Shared article from Bloomburg and LinkedIn

Home equity in the first quarter rose to $6.7 trillion, the highest level since 2008, as homeowners taking advantage of record-low borrowing costs to refinance their loans brought cash to the table to pay down principal. The 7.3 percent gain was the biggest jump in more than 60 years, according to an analysis by Bloomberg of Federal Reserve data.

It’s the strongest sign yet that Americans’ home-loan debt burden is beginning to ease after the record borrowing that created, and ultimately popped, the housing bubble, leaving almost a quarter of homeowners with mortgages owing more than their properties were worth, said Richard DeKaser, deputy chief economist at Parthenon Group LLC in Boston. Half the mortgages refinanced in the fourth quarter reduced loan size, a record, according to Freddie Mac, the government-owned mortgage buyer.

“The willingness of homeowners to carry housing debt has been radically altered,” said DeKaser, former chairman of the American Bankers Association’s Economic Advisory Committee. “When the market was booming, a mortgage was used as a leveraging tool, and now it’s seen as a risk.”

Measured as a share, rather than in dollars, homeowner equity was 41 percent of U.S. residential property value in the first quarter, including homeowners who don’t have mortgages, according to the Fed study released last week. The last time the share was that high was in the third quarter of 2008 when it was 43 percent.

‘Bubble Burst’

“People got too overleveraged in the boom years, and that left them with too much debt when the bubble burst,” said Paul Miller, a managing director with FBR Capital Markets in Arlington, Virginia. “Now, they’re trying to put themselves back on solid ground.”

Residential mortgage debt peaked in 2007 at $10.6 trillion, doubling in six years, according to Fed data. Since then, it has fallen 7 percent as the value of all residential property has dropped 23 percent.

Americans aren’t just bringing money to the table when they refinance their mortgages. Many also are choosing to shorten the term of their loans, which increases monthly payments. The average mortgage term fell to 27 years in March and April from 29 years February. Almost all U.S. mortgages have either 30-year or 15-year terms. When the average falls, it shows more people are choosing the shorter period.

The average U.S. rate for a 30-year fixed mortgage has tumbled since early 2011 to 3.71 percent this week, rising from last week’s record-low 3.67 percent. Refinancing applications, meanwhile, are at a three-year high.

Lackluster Recovery

DeKaser of Parthenon attributes the reduction in mortgage debt to a “fear factor.” A lackluster recovery that still has one of every 15 people unemployed has persuaded some borrowers of the wisdom of thriftiness, he said.

“People are worried about falling home prices and they’re worried about the economy,” said DeKaser. “If they can afford it, they’re paying down their mortgages instead of buying things because it makes them feel like they’ll sleep better at night.”

Home prices tumbled for six straight months through March to the lowest level in a decade, 35 percent below the peak prices of the housing boom, according to the S&P/Case-Shiller price index of 20 U.S. metropolitan areas. A 3.4 percent increase in home sales last month may signal prices are beginning to stabilize, according to Eric Belsky, managing director of Harvard University’s Joint Center for Housing Studies, in its “State of the Nation’s Housing” report issued today.

Economic Growth

The U.S. economy probably will grow at a 2.2 percent pace in 2012, the third year after the end of the recession, according to the median forecast of 93 economists surveyed by Bloomberg. That compares with a 3.9 percent average expansion rate in the third-year period following the 1982, 1994, and 2001 recessions. In 2013, the growth rate probably will be 2.4 percent, according to the economists’ average estimate.

Homeowners who are able to shorten the terms of their loans or reduce their balances when they refinance are the lucky ones, said Chris Christopher, a senior economist at IHS Global Insight in Lexington, Massachusetts.

“Homeowners who are paying down mortgage debt are the survivors,” said Christopher. “They probably didn’t lose their jobs, so they’re in a better position to do that.”

About 23 percent of mortgage holders are underwater on their loans, meaning they owe more than their homes are worth, according to CoreLogic Inc., a mortgage data and software firm in Santa Ana, California. About 2.1 million properties were in foreclosure in April, according to Lender Processing Services, a mortgage data firm in Jacksonville, Florida.

‘Bubble Days’

“Consumers’ view of the housing market clearly has been radically changed since the bubble days,” said Dean Maki, chief U.S. economist at Barclays Plc in New York. “We saw what happened to people who were way overleveraged.”

“Paying down mortgage debt is bad for economic growth — putting your money into your house usually means you’re spending less,” said FBR’s Miller. “It’s good for our economic health in the long run, though, because it improves household balance sheets.”

Retail sales in the U.S. fell in May for a second month, prompting economists to cut forecasts for economic growth as limited job growth and income gains hold back consumers. The 0.2 percent decrease matched April’s drop that was previously reported as a gain, Commerce Department figures showed yesterday in Washington.

National Income

Annual increases in national income slowed to $581 billion in 2011 from $693 billion in the prior year, according to the Bureau of Economic Analysis. The first quarter’s $127.7 billion gain puts 2012 on course for a $510.8 billion increase, the lowest since income dropped in 2009.

“People are looking around them and seeing people they know getting their salaries cut or losing their jobs,” said Miller, a former examiner with the Federal Reserve Bank of Philadelphia. “If you want security, you can put your money in a savings bank for half a percentage point, or you can pay down your mortgage.”

FBR’s Miller said when he refinanced his home loan last year, he “brought a big check to the table” to reduce his mortgage balance. The reason?

“So my wife would leave me alone,” said Miller. “Just like a lot of people, she wants to have no mortgage debt.”

To contact the reporter on this column: Kathleen M. Howley in Boston at kmhowley@bloomberg.net.

To contact the editor responsible for this story: Rob Urban at robprag@bloomberg.net

I read this article at: http://www.linkedin.com/news?actionBar=&articleID=5618900800320319555&ids=e3sMd30TdjsVdzsRd3sQc38SdiMNcP0UdzkVc3sVc3gMdz0NczoRb3cRdzwTdPATejoOe3oVe30OdzkIdPAMe30VdjkNd3wUe38Nej4SdiMRdjkVcjcMczcMc3wMc3AUcjoR&aag=true&freq=weekly&trk=eml-tod2-b-ttl-0&ut=2jlgJTY8XTUBg1

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Thanks for reading – Sabrina

California for-sale inventory at 2005 levels – great article – had to share…

California for-sale inventory at 2005 levels

Homes on the market in May represented just 3.5 months of supply

By Inman News

Inventories of homes for sale in California continued to shrink in May, as the highest pace of sales since February 2009 reduced the supply of available homes to just 3.5 months — down from 4.2 months in April and 5.7 months at the same time a year ago.

Many housing analysts view a six-month supply of homes as a good balance of supply and demand — anything less means there are not enough homes to meet demand.

“Low housing inventory continues to be the critical issue in the California market,” said California Association of REALTORS® Chief Economist Leslie Appleton-Young in a statement accompanying the release of the latest numbers. “Inventory levels have not been this low since December 2005, when the supply matched the current level.”

Sales of existing, single-family detached homes were up 3.4 percent from April, to a seasonally adjusted annual rate of 572,260 in May, CAR said. That’s the fastest pace of sales since February 2009, when homes were selling at a seasonally adjusted rate of 598,770 per year.

The San Francisco Bay Area had the greatest shortage of homes for sale, with inventory levels in the two- to three-month range for Santa Clara, San Mateo, Alameda and Contra Costa counties, Appleton-Young said. A seven-month supply is normal, CAR said in releasing data from more than 90 REALTOR® associations and multiple listing services.

The inventory figures could provide ammunition to critics of plans to allow bulk sales of Fannie Mae and Freddie Mac real estate owned (REO) properties. The National Association of REALTORS® has urged that such programs be “implemented on a strictly limited, as-needed basis,” citing estimates by analysts at Barclays Capital that private investors are converting 800,000 homes a year into rentals.

Fannie and Freddie’s federal regulator, the Federal Housing Finance Authority (FHFA), has said it will approve bulk sales only in markets where there’s a glut of properties on the market.

The first “REO to rental” sale of 2,490 Fannie Mae “real estate owned” (REO) properties will be limited to eight markets: Atlanta (572 properties); Los Angeles-Riverside, Calif. (484 properties); Phoenix (341 properties); Las Vegas (219 properties); Chicago (99 properties); Southeast Florida (418 properties); Central and Northeast Florida (190 properties); and Western Florida (167 properties).

But last month, California REALTORS® got behind a bill introduced by Rep. Gary Miller, R-Brea, that would prohibit bulk sales of Fannie Mae REO homes in the state.

For housing statistics please visit the link below:

I read this article at:  http://lowes.inman.com/newsletter/2012/06/19/news/191356

Got Questions? – The Caton Team is here to help.  Email Sabrina & Susan at:  Info@TheCatonTeam.com

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The Advantages of Preapproval – great article had to share…

The Advantages of Preapproval

By VICKIE ELMER

WITH the housing market warming up in many areas, and multiple offers becoming more commonplace, buyers who want an advantage in the bidding process will need more than a mortgage prequalification. They will need a preapproval.

The difference is significant. Prequalifying for a mortgage is based solely on what you disclose to the loan officer or broker about your earnings, credit score and total assets, including what is available for a down payment.

“It’s verbal — it doesn’t really mean anything,” beyond providing some basic guidance on the range of prices you may be able to afford, said Kevin Chittenden, a vice president and regional sales manager in Paramus, N.J., for Wells Fargo Home Mortgage.

A preapproval, by contrast, requires borrowers to provide documentation of their income and their assets.

The lender typically pulls your credit report and score, and you should gather together almost everything you will need for the actual mortgage underwriting: W-2 wage statements; 1099s, which show things like dividends and interest income; recent pay stubs; bank statements; and statements from Individual Retirement Accounts and 401(k)s and other assets that could show you have the resources to buy and maintain a home.

At Wells Fargo, one of the country’s largest mortgage lenders, the first quick review provided by an underwriter constitutes an agreement to lend. “It’s a real commitment, a commitment to lend,” Mr. Chittenden said.

Other lenders may treat preapprovals as more of an opinion on the person’s ability to borrow, not a guarantee to lend, said Jack Guttentag, who runs the Mortgage Professor Web site. Generally, borrowers need to have chosen a property and have it appraised before they can expect a firm commitment from a lender, he said.

Still, a preapproval is more important now, with so many more homes receiving multiple bids, and because the housing market in many parts of the New York region has been getting stronger.

“Preapproval carries more weight when you go to negotiate a deal,” said Ray Mignone, a certified financial planner in Little Neck, Queens. “It gives them bargaining power.”

Borrowers should ask the lender to provide a good-faith estimate on closing costs and fees along with the preapproval. Many will provide this only once you have a home under contract, but some will give you an estimate of those costs, said Sofi Cordero, a senior housing counselor with La Casa De Don Pedro, which works on affordable housing and neighborhood development in Newark.

The preapproval letter should include the amount a borrower is qualified to borrow, as well as the loan officer’s contact information. Some letters may have an estimated monthly payment. But details about the loan type and interest rate will not be included; those are filled in when you are ready to receive the loan, experts say.

Timing is important. Buyers should aim for obtaining a preapproval letter from a lender within 30 to 60 days of the expected purchase date, Ms. Cordero said. That is because some letters expire in 90 days or so. (Wells Fargo’s, for instance, last for 120 days.)

Your income and bank statements may also need to be updated if it has been a few months between preapproval and the signed contract for buying, Mr. Chittenden said.

Wells Fargo charges would-be borrowers $18 for the credit report for a preapproval; the other costs of the mortgage start once you have a purchase agreement, he said.

Other lenders may waive the preapproval and application fees because they want to sign you on as a customer, Ms. Cordero noted, adding that if you find another lender with better terms, you are under no obligation to use the lender that provided the preapproval.

I read this article at: http://www.nytimes.com/2012/06/10/realestate/mortgages-the-advantages-of-preapproval.html?_r=2&ref=realestate

Got Questions? – The Caton Team is here to help.  Email Sabrina & Susan at:  Info@TheCatonTeam.com

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Thanks for reading – Sabrina

Sharing a Terrific Article on 4 Ways a Buyer Can Compete In Today’s Market By Dian Hymer

Hello Blog Readers.  Sabrina here –  had to share this right away.  I’ve been meaning to write my own blog update about our local real estate market when I can came across this article.  Please enjoy – Dian is spot on for the SF Peninsula Real Estate market.

Enjoy, Sabrina

 

4 Ways Buyers Can Compete In Today’s Market

Don’t be intimidated by all-cash offers

By Dian Hymer

Inventories of homes for sale are dropping in areas where they’ve recently been high like in Oakland, Calif., Phoenix and Miami. Interest rates are approximately 0.75 percent lower than they were a year ago. It seems like a good time to get off the fence and into the action if you can find a house that reasonably matches your wish list and you don’t find yourself bucking other buyers who have the same idea.

Months’ supply of inventory is an estimate of how long it would take to sell all of the homes in a given market at the current sales pace. A six-month supply of unsold inventory is thought to represent a balanced market.

In California, there was a 4.2-month supply of inventory in April 2012, down from 5.6 months a year ago. When buyer demand increases, the unsold inventory drops, and multiple offers often enter the picture — sometimes in a big way.

In the hills above Berkeley, Calif., buyers are chasing too few homes for sale. But not all homes are coveted. The best homes that are priced right for the market are drawing attention. The multiple-offer activity can be fierce. Recently, a home that was perhaps underpriced for the market was bid up significantly with 17 offers. Four of the top offers included no contingencies.

The first step to successfully compete in a sizzling market is to know the inventory. Pricing low to generate multiple offers is a strategy commonly used in a low-inventory, high-demand market. You need to be familiar with how much listings in your area are selling for in order to determine if a listing is priced at, above or below market value.

HOUSE HUNTING TIP: You might have only one opportunity to grab the sellers’ attention, which means that your first offer may need to be your best. You need to feel confident that the price you’re offering — particularly if it’s significantly over the list price — is reasonable in terms of your long-term housing needs and in light of the fact that the current uptick in many segments of the market may not be a sustained recovery.

Before writing an offer, find out how many offers the agent anticipates. If you can barely afford the asking price and there are seven offers, you might reconsider and wait for an opportunity that will allow you to move up in price, if necessary.

It’s hard to compete with an all-cash offer if you need to qualify for a mortgage. Make sure to get preapproved for the financing you need. Some sellers will accept an offer with a loan contingency from a well-qualified buyer over a cash offer if the price is higher. A large cash down payment makes your offer more attractive.

Make the cleanest offer you can without taking on too much risk. Offers made contingent on the sale of the buyers’ home have little chance of being accepted. In the example above, four buyers were willing to make offers without any contingencies. That’s as clean as it gets.

In this case, the buyers preinspected the property. In 2005 and 2006, buyers waived inspection contingencies to compete. Sometime negative consequences such as drainage or foundation problems were discovered after closing.

But if you’re willing to pay to inspect a home before the sellers have accepted your offer, you can gain the information about the property’s condition before moving forward. Be sure to ask for the sellers’ permission before preinspecting their home.

It’s always a good idea to find out as much as possible about the sellers’ situation. This may allow you to offer a perk that could swing the deal your way. Recently, buyers of a Piedmont, Calif., home offered the seller 30 days to rent back at no cost.

THE CLOSING: This clinched the deal.

Dian Hymer, a real estate broker with more than 30 years’ experience, is a nationally syndicated real estate columnist and author of “House Hunting: The Take-Along Workbook for Home Buyers” and “Starting Out, The Complete Home Buyer’s Guide.”

I read this article at:  http://lowes.inman.com/newsletter/2012/06/13/news/190914

Got Questions? – The Caton Team is here to help.  Email Sabrina & Susan at:  Info@TheCatonTeam.com

Visit my Website at:   http://thecatonteam.com/

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Please enjoy my personal journey through homeownership at:  http://ajourneythroughhomeownership.wordpress.com

Thanks for reading – Sabrina

Offer Subject to Inspection – What Does That Mean?

As a Realtor I have a whole dictionary for just real estate jargon.  One of the most confusing terms, and often buyers will get the wrong idea about their agent, is “offer subject to inspection.”  So allow me a moment to explain what on earth this means.

“Offer subject to inspection” is a typical hurdle for buyers to overcome when shopping for homes that are tenant occupied.  The term means – the buyer can physically go in and SEE the home AFTER an offer is accepted.  Sounds a little backwards right?

And no – your agent is NOT trying to strong arm you and force you to buy a home without evening seeing it!

Generally this clause is for homes which are tenant occupied.  In order to preserve the rights of the tenant to have the quite enjoyment of their home – the tenant has the right to refuse prospective buyers to come in and see the home.  That is – until an offer is accepted by the seller, then the buyers has the right to inspect the home.

How does this work you ask?  The buyer must write a REAL offer since the terms are binding once accepted.  When the seller accepts the offer, the buyer will have a certain amount of days which is written into the contract to actually go in and see the home for the first time.  If the home is to their liking and the buyer wants to proceed with the contract – they do.  If the home is NOT to the buyers liking – for just about any reason – during the agreed upon days – the buyer will have the right to cancel the deal and walk away without any harm to both buyer and seller.

So you found a home you like – how do you write an offer?  If there are inspections available before hand – it makes our job of writing the offer a bit easier since we have a good idea of what the condition is.  If there are no inspections, and we haven’t seen the home, we drive by and gather as much info as we can with our eyes from the safety of the car.  We write the offer as best we can with the information provided and once the buyer has seen the home and had inspections we proceed with the new information – either by moving forward or discussing the new information with all parties and find a common and suitable outcome for all parties.

As strange as it seems – it happens more than you know.  For some buyers, they cannot imagine writing an offer for a home without ever seeing the home.  For investment buyers, this very typical and generally have no issues writing up a fair offer to get in.  Of course, what happens after a buyer gets to see the home is a far different story.  I have experienced both follow throughs on the contract and recessions – so truly we cross that bridge together when we get to it.

Which is truly at the root of what us Realtors do.  We are the buyers and sellers guides through Real Estate – what can The Caton Team do for you?

Got Questions? – The Caton Team is here to help.  Email us at:

Info@TheCatonTeam.com

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The Home Seller Love Letter – why a buyer should buy YOUR house…

Found another great article from Inman News that I had to share.  A new twist on setting your home to shine on the market.

6 elements of a compelling home seller love letter

Recent reports suggest that the real estate market might be picking up. That said, sellers from coast to coast are still doing everything within their power to differentiate their home from the scads of other competitive listings.

As someone who has been inside probably thousands of homes with buyers over the years, I’ve always thought there was one super-simple, vastly underrated marketing technique for homes that are having a hard time standing out from the rest of the market: the seller love letter.

A seller love letter is a note, personally written or typed up by the home’s seller. Among other things, it expresses the love the seller’s family has had for the home, and explains the facts and events underlying that sentiment.

I’ve seen these be as short as a single page, and as long as a binder containing a 10-page letter and a collection of supporting pictures and other documents.

If the power of staging lies in depersonalizing the property so buyers can picture their own family living out their own lives in the home, the power of a seller love letter is that it leaves buyers with a warm feeling that the home has a positive energy and history, which is especially desirable on today’s distressed property-riddled market.

Here are six things smart sellers should consider including in their love letters about their homes to their buyers:

1. Fond family memories. Now, there’s no reason to get all “TMI” (too much information) about it, but the fact is that buyers do love to hear sweet, fond family memories about a property. I’ve watched with my own two eyes as buyers who liked a 100-year-old home fell desperately in love with it as they read about the seller’s parents’ building the home, and then raising a flourishing family there.

Even much newer homes can have their own endearing stories, whether they be about a hard-charging professional bachelor who is moving out of a loft to start a family; about retirees who raised their kids there and are now moving to downsize and be near their grandkids; or about a smart, single woman who was the first person in her family to own a home.

The goal here is to create warm fuzzies while you satisfy the buyer’s craving to know why on earth anyone would want to move from such a lovely place. And if you can tell a happy story, you can kill another bird with a single stone – distinguishing your place from all the tragic stories and sadness surrounding the short sales and foreclosures with which your home is competing.

2. Favorite neighborhood vendors and local businesses. One reason people dread moving so much is that it forces them to find new vendors for everything, especially for the practicalities and minutiae that can derail our schedules and lives if they don’t run well. If you have neighborhood businesses you love, making a list of them and including them with your love letter is very much appreciated by buyers.

Take care to include things like: dry cleaners, house cleaners, landscapers, carpet cleaners, produce markets and butchers, and especially restaurants that have great take-out and delivery services.

You get extra points if you know the proprietor and authorize the buyer to drop your name, or you include menus with your list of restaurants that deliver to the property address.

3. Lifestyle amenities that map to local buyer wish lists. Give some thought to the sorts of things people looking to buy a home like yours might be looking for, from a lifestyle perspective, and include notes about any of those amenities in the neighborhood that you and your family or housemates have especially enjoyed. Things like dog parks, playgrounds, running trails, yoga studios, libraries and bookstores, museums and outdoor recreational opportunities make great fodder for this list.

4. History of upgrades. Of course, your state-required disclosure forms will include a pithy section for relating the repairs and upgrades you’ve done in the time you owned the property, but you can take that to a new level in your seller love letter with a free-form description of the work, color commentary (if it makes sense) around why and how you had it done, and a little appendix that includes any relevant plans, permits warranties, receipts, service contracts and the like.

(Obviously, you don’t want to include the originals of these items if this love letter document will be left out in the property during showings.)

If there are any issues or repairs that are likely to come up in the buyer’s inspection reports that you want to explain in more detail, the love letter can give you your chance to do just that.

5. Property details and tricks. If you have a detailed landscape plan that identifies all the plants and trees in your yards, tricks for how to work the heating and cooling timer or the tricky downstairs doors, details on when the neighborhood trash pickup happens, or info about your alarm, termite or other service contracts, prospective buyers will feel well taken care of if you compile and include all this information with your love letter and let them see it before they even make an offer.

6. Neighbors. If you have particularly close and friendly relationships with any specific neighbors, or there are block parties, online or email Listservs, homeowners association (HOA) or neighborhood watch meetings or other favorites, ones with kids, block party, watch meetings, other things being planned/organized, let the buyers know.

You see, a good seller love letter is equal parts lovey-dovey and logistical, but the care that goes into preparing it and the love that is evident in its content can be a significant selling point to buyers weary of dealing with bank sellers or stressful short-sale situations.

Whatever you do, if you decide to write a seller love letter for your home, review your plans and thoughts about what to include with your local agent first. You want to make sure not to run afoul of any equal opportunity housing laws or disclosure laws.

As well, waxing rhapsodic about all the weekends you invested in the terrible mural on the wall might be more concerning than compelling to buyers who think they could live in your home easily — assuming they paint over the mural on day one as the new owners.

Got Questions? – The Caton Team is here to help.  Email us at:

Info@TheCatonTeam.com

Visit our website at:   http://thecatonteam.com/

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Please enjoy my personal journey through homeownership at:  http://ajourneythroughhomeownership.wordpress.com/

Home Buying – Much Cheaper than Renting in 2012…

On the San Francisco Peninsula I have to agree with this statement – Buying makes more sense than Renting these days.

I’ve had many requests this year to help clients find a rental.  Sadly, when I get the budget and what they need – the search results come up nill.  These days, for a studio (that means one room / no bedroom) rents on the peninsula start at $1500 and go up from there.  Looking to rent a two bedroom?  Better fork over at least $2000 a month – want a house, $3200+ easy – in choice areas.  My eyes jump out of the  head – $3000 a month – now that’s a mortgage payment!

Why are rents increasing?  With the local Real Estate market hit with short sales and bank owned homes, many buyers are afraid to take the purchase plunge since buyers are unsure if we hit bottom. So instead of buying – they are renting.  When demand for rentals rise above the supply of rental property – we see an increase in rents.  It changes all the time.  Real Estate is truly cyclical.   As a Realtor – I can certainly say that Yes, on the SF peninsula we hit bottom in 2009/2010 for the single family homes market.  Condos and Townhomes are on a different level – though they too will recover.

With the future changes in FHA lending, more up front mortgage fees, buying a home now will truly be less expensive for a buyer than in the near future.  Right now Interest Rates are lovely and low – and as they increase, a buyers purchase power decreases.

So if you are on the fence, come in and chat with us.  We’ll connect you with a lender who can give you your purchase price and then The Caton Team takes it from there – finding a home where your mortgage interest is tax-deductible, instead of a renting and paying too much!

Don’t just take my word for it – below is great article from CNN Money.

http://money.cnn.com/2012/03/21/real_estate/homes-buy-rent/index.htm?iid=HP_LN&hpt=hp_t3

Got Questions? – The Caton Team is here to help.  Email us at Info@TheCatonTeam.com or visit our website at:   http://thecatonteam.com/

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