Bubble Watch: Could the Housing Markets in These Top Cities Be Getting Too Hot?

If this isn’t the hottest topic in Real Estate – I don’t know what is.  Enjoy this article from Realtor.com

 

Bubble Watch: Could the Housing Markets in These Top Cities Be Getting Too Hot?

Home prices are skyrocketing faster than inflation. Bidding wars are breaking out. Shacks in the nation’s most scorching real estate markets are selling for over a million bucks. Things seem to be heading up, up, up. Sound familiar?

Déjà vu can be a spooky thing. Some folks these days are beginning to wonder whether the U.S. is seeing another housing bubble, like the one we suffered through beginning in 2007—and a reprise of the bloody financial carnage that followed when it burst.

Well, let’s get this out of the way right now, Chicken Littles of America: The sky isn’t falling, and the real estate market isn’t crashing. There are indeed a few warning clouds on the horizon (more on that below), but things in the world of residential housing are generally safe and steady and continuing to grow. Got that?

Those sky-high prices and ultracompetitive bids we at realtor.com® report on daily are mostly the result of a housing shortage rather than ominous signs of another real estate meltdown. The factors that led to the historic bust—easy-peasy credit for all, rampant flipping, frantic overbuilding—simply aren’t happening today.

In fact, the opposite is true these days.

“Only the most qualified buyers are able to get financing” for mortgages, says our chief economist, Jonathan Smoke.  “Flipping is back to normal. And we’re building about half as many homes as we need.”

As it turns out, not a single big metropolis in the good ol’ USA—that’s right, not even San Francisco or New York—appears to be “bubblicious,” says Smoke, who carried out an analysis of the 50 largest metropolitan markets in the country. During the bubble, home values were dramatically inflated, making the high prices unsustainable.

There are, however, a few super-duper expensive cities (San Jose, we’re looking at you) where the real estate market is showing signs of overheating, according to Smoke’s analysis. That means the high prices can’t be sustained—because as we all learned from high school (grade school?) science class, what heats up must eventually cool down.

In those smoking-hot markets, Smoke expects the relentless rate of price increases to eventually slow, or even dip, when prices hit a point that buyers can no longer afford.

“There are places that have risks,” Smoke says. “But even those places do not resemble what they looked like in their actual bubble years.”

To reach this conclusion, Smoke and the realtor.com data team analyzed 50 major housing markets from 2001 through 2015, using 2001 as a baseline year.

(Critics will be quick to point out that the country was just coming out of the dot-com bust in 2001, and then there were the terrorist attacks of 9/11. But despite those factors, housing experts consider 2001 to be the most normal, recent year before the bust, when homes were considered fairly valued. It is also the earliest year for which all the data were available.)

Smoke and his team then created an index of the six factors that create a housing bubble to assess whether any of these 50 markets were overheating. Here are the criteria:

  • Price appreciation: Are home values shooting up to abnormally high levels, outpacing inflation?
  • Home flipping: Are more homes being bought and sold for a profit within a year?
  • Mortgages:Is there a larger share of buyers getting mortgages, which they potentially could default on? Or are they paying in cash?
  • Home prices compared with wages:Are homes more expensive now for locals earning the local median income than they were in the past?
  • Home prices compared with rent prices:How do the costs of buying today compare with the costs of renting historically?
  • Construction: Are too many homes being built to meet the needs of the area’s population? If so, that could spell trouble.

We’ll say it again: None of the cities below is in a bubble. However, the top six cities—San Jose and San Francisco, CA; Austin, TX; Salt Lake City; Dallas; and Los Angeles—do show signs of overheating as prices continue to zoom up. The next four on the list—Fresno, CA; Buffalo, NY; Charleston, SC; and Portland, OR—show some elevated risk, but they seem to still have plenty of room to grow.

Let’s go to the list!

  1. San Jose, CA

Median list price: $981,500

Bubble index compared with 2001: +19%

Bubble index compared with market peak: -18%

This Silicon Valley hot spot shows the most signs of overheating, no doubt because prices jumped a whopping 10% last year when adjusted for inflation. That’s a year of seriously accelerated growth, even for the San Francisco Bay Area. Buyers are paying a premium to live in San Jose because there simply aren’t enough homes to go around, even with new construction.

But unlike the subprime borrowers who were scooping up homes before 2007, today’s buyers can actually afford the higher prices. About a quarter to a third of local real estate agent Nicki Brown’s sales are all-cash. Or the buyers are plunking down 30% to 50% on properties going for $2 million and up, says Brown, who’s with Alain Pinel Realtors.

  1. San Francisco, CA

Median list price: $855,000

Bubble index compared with 2001: +19%

Bubble index compared with market peak: -26%

Prices in neighboring San Francisco are likewise out of reach for many buyers due to the lack of residences for sale. But like their neighbors to the south in San Jose, plenty of well-paid San Franciscans can afford these properties.

Still, the insane bidding wars of previous years are tapering off as more newly constructed condos are coming online, says Patrick Carlisle, chief market analyst at local brokerage Paragon Real Estate. Luxury homes in the multimillion-dollar range are sitting on the market longer. And the area, which has seen a flood of new residents move in for work over the past few years, has recently been shedding tech jobs.

“After four years of a desperate, overheated, overbidding market … we’re in a transition to a more normal market,” Carlisle says.

  1. Austin, TX

Median list price: $400,000

Bubble index compared with 2001: +17%

Bubble index compared with market peak: -1%

The funky city, a bright blue spot in a deeply red state, may appear riskier than ever at just 1% below its peak. But it’s important to note that the recession didn’t hit Austin nearly as hard as other parts of the country. The city, with its growing tech sector, earned a spot on this list, because the cost of homeownership has since shot up as more people move to the recently crowned top city for millennial buyers.

But rather than crashing, prices will cool, says local real estate agent Josh Bushner of Private Label Realty. “The rate of increases has to slow down, unless everyone gets a 20% raise tomorrow,” he says.

  1. Salt Lake City, UT

Median list price: $347,200

Bubble index compared with 2001: +14%

Bubble index compared with market peak: -20%

The outdoorsy metropolis earned a spot on this list because home prices and rents have been rising faster than in the past, but prices are already starting to cool. Last year, they rose 6%—a full percentage point below the 7% national average. And unlike in many other cities, builders are actually putting up more of those sorely needed new homes.

Many of these residences are rising in new subdivisions about 30 minutes from the city limits, says local real estate agent Brook Bernier of Equity Real Estate. There are also new condo and apartment buildings under construction within Salt Lake City.

“Our economy is booming,” Bernier says, noting that more companies are moving to the area. That, combined with still relatively lower prices, means even “people with student loans can still afford a home.”

  1. Dallas, TX

Median list price: $335,000

Bubble index compared with 2001: +13%

Bubble index compared with market peak: -2%

Being so close to the previous peak of the real estate market, right before it crashed, may give Dallas homeowners and buyers the sweats. But it’s worth noting that, like Austin, the city wasn’t socked quite as hard as other major metros by that housing bust.

Although the local oil industry took a beating, prices in the Texas city still ballooned 9% last year. That’s because more companies are moving and expanding into the area, such as Toyota relocating its North American headquarters from California to nearby Plano, TX. Life beyond oil—it’s a wonderful thing!

“Is it scary that prices are up [9%]? Yes, it is,” says local real estate agent Debbie Murray of Allie Beth Allman & Associates. “But if the demand stays where we are, I don’t see prices coming down anytime soon.”

  1. Los Angeles, CA

Median list price: $690,000

Bubble index compared with 2001: +10%

Bubble index compared with market peak: -35%

The City of Angels shows signs of overheating as prices are up, construction is lagging demand, and there’s more home flipping in the celebrity hot spot than in most other parts of the country,

But the palm tree–lined West Coast mecca has steadily been moving out of the housing bubble danger zone, says Smoke.

“The Los Angeles market looked more overheated two years ago than it does now,” he says. “Price gains and flipping activity have both moderated from more intense levels.”

  1. Fresno, CA

Median list price: $272,100

Bubble index compared with 2001: +9%

Bubble index compared with market peak: -31%

While Fresno doesn’t appear to be overheating, prices are rising at higher rates than they have historically.

But the agricultural area, which is still reasonably priced, doesn’t appear headed for a bust.

“There were a lot of [home] flips three years ago,” says local real estate broker Alejandra Charest of Guarantee Real Estate. “Now it’s a struggle to find one.”

  1. Buffalo, NY

Median list price: $159,900

Bubble index compared with 2001: +7%

Bubble index compared with market peak: -1%

The former industrial powerhouse has fallen on hard times as manufacturing jobs have moved abroad, so it may come as a surprise that Buffalo made this list.

But although locals are still moving out (freeing up homes for buyers), home flipping and the number of new residences under construction are up.

“This could simply be [because] the housing stock needs an upgrade,” Smoke says of the construction. “Its age of housing is substantially older than the rest of the country.”

The city has also been experiencing a resurgence of sorts. Rundown buildings along the waterfront are being transformed into condos and apartments. Nearby shops and restaurants and a green space for outdoor events have sprouted.

“Buffalo has turned a corner,” says local real estate broker Ryan Connolly of Re/Max North.

  1. Charleston, SC

Median list price: $322,300

Bubble index compared with 2001: +7%

Bubble index compared with market peak: -20%

Prices in this coastal city, where horse-drawn carriages still run on the cobblestone streets, have been shooting up faster than they have historically. But the city’s economy is growing and unemployment has been steadily falling, reaching its lowest level in May since early 2008, according to the U.S. Bureau of Labor Statistics.

“We’re not really seeing incomes go up at the same rate as [home] prices,” Smoke says. But Charleston also has more high-paying jobs now than it has in the past. And compared with, say, Silicon Valley, buying a home in Charleston is still a relative bargain.

  1. Portland, OR

Median list price: $428,600

Bubble index compared with 2001: +6%

Bubble index compared with market peak: -26%

Portland may be known for its laid-back vibe, but lately, local buyers have been anything but. The housing shortage has led to fierce bidding wars and soaring prices—11% just in 2015—as more people move into the city while local laws and sluggish construction still limit the number of new residences that can be built.

However, buyers are still able to afford the price tags that are heavy on the zeroes.

“Buyers are concerned because prices have gone up so dramatically,” says local real estate agent Deb Counts-Tabor of Oregon Realty. “But this is basic Econ 101: supply and demand. And until one of those eases, prices will stay higher.”

 

I read this article at: http://www.realtor.com/news/trends/housing-bubble-2/?identityID=9851214&MID=2016_0722_WeeklyNL&RID=353497822&cid=eml-2016-0715-WeeklyNL-blog_1_housingbubble2-blogs_trends

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Berkshire Hathaway HomeServices – Drysdale Properties

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10 Ways Homebuyers can Improve Credit Scores

10 ways homebuyers can improve credit scores

Buyers will find it easier to get a home loan using these tips…

 

by Johnson Fedrick

 

Key Takeaways

  • It’s better to have two credit cards if you are a definite credit card spender.
  • Maintain a good mix of good and bad loan, AKA a healthy credit mix.
  • Close your unwanted savings bank accounts.

 

Real estate is a booming business in the world. To get loans quickly, potential homebuyers need to keep an eye on their finances and credit.

 

Below, you will find 10 general tips that will help ease the process of acquiring a home loan by improving credit scores.

 

  1. Always pay on time

No lender likes to lend money to an individual who has a repeated record of missing his payments. This indicates a lack of discipline and poor financial management, and it leads to a bad impression on paper.

Whether it was intentional or due to genuine reasons is immaterial. If you have a frequent history of missing your equated monthly installment (EMI), you will end up with a lower FICO score.

 

  1. Keep your credit owed within limits

A good ratio is not having your unsecured credit outstanding above 50 percent of your annual salary. Keep your credit card balances within half of the allowed limit. If you have $10,000 as your limit, then it is wise to restrict your statement amount to $5,000.

 

  1. Always pay your dues on time, in full

This is one of the most important tips to improve credit score: On-time payments improve your credit score tremendously. It carries almost a 40 percent weight on your score. So try not to miss your due dates for EMIs and monthly payments.

Nobody likes a person who cannot keep up his or her word, especially with banks. So pay in full and on time. Why should you suffer unnecessary late payment charges and interest?

 

  1. Use two credit cards if you are a definite credit card spender

This is good and bad advice at the same time. FICO does not consider spending money on two credit cards as one. But if you have two credit cards, you can keep your usage percentage in control.

For example, if you have a credit card with a limit of $20,000, and you charge $15,000 on it, you’ve used 75 percent of your credit limit.

Now if you split your amount into two, and spend $7,500 each, then the percentage of usage will be around 37 percent. So it helps you in the eyes of FICO.

Now, don’t go on a credit card shopping spree.

 

  1. Maintain a good mix of good and bad loans — AKA, a healthy credit mix

Home loans and business loans are considered good loans. Personal loans and credit are considered bad loans.

That is why investing in a home loan if you are a spendthrift is a better decision. You will have a good credit mix and be building an asset.

 

  1. Pay high-interest loans and small loans first

It is a prudent decision to pay your home loans over longer periods. Pay off your personal loans, credit cards and private loans first, as they tend to have a higher interest (typically 15 percent to 36 percent) with no asset creation.

Home loans, on the other hand, are just 9 percent to 11 percent, but they build an asset. This is one of the underutilized logical tips to improve credit score.

 

  1. Close your unwanted savings accounts

Many people tend to abandon their savings accounts without closing them. If you have less than your Minimum Average Balance (MAB), it will start to affect your credit score. Also, when you finish a loan, it’s imperative to get the loan closure certificate.

 

  1. Check your credit reports regularly

Credit reports can be availed for a minimal cost. You can obtain them from the official FICO site. Just pay online and check your credit score at least once in a year, so that you can seek clarification on any mistake and have it sorted. There have been cases when banks report you to FICO by mistake.

 

  1. Monitor your co-signed joint accounts properly

In instances of co-signing a loan or maintaining a joint credit account, be careful when dealing with someone outside your close family. You need to monitor the statements closely to make sure everything is in order.

There is no use complaining if you chose the wrong joint holder who was careless.

 

  1. Negotiate if you cannot pay on time

This is also one of best tips to improve credit score. People often know that they would not be able to pay their bills in advance. Regardless, they do not take any action.

If you know you will not be able to pay on time, negotiate with your bank. Banks will be willing to extend your loan period and reduce the EMI if they see a genuine customer.

It might hurt, but you will make a good impression, and the bank will see you are honest.

 

So these are some of the tips to keep your credit score in check and get a home loan easily.

I read this article at: http://www.inman.com/2016/07/13/10-ways-homebuyers-can-improve-credit-scores/?utm_source=emailsubscribers&utm_medium=email&utm_campaign=inmanbest&utm_content=1

Remember to follow our Blog at: https://therealestatebeat.wordpress.com/

Got Questions? – The Caton Team is here to help.  

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Thanks for reading – Sabrina

The Caton Team – Susan & Sabrina – A Family of Realtors

Berkshire Hathaway HomeServices – Drysdale Properties

Sabrina BRE# 01413526 / Susan BRE #01238225 / Team BRE# 70000218/ Office BRE #01499008

Homebuyers Worry Most About Cost and Competition in Latest Survey

Homebuyers Worry Most About Cost and Competition in Latest Survey

 One in Four Buyers Looking to Flee Expensive Rental Market

Affordability is the main concern keeping homebuyers up at night, according to a survey of 975 buyers conducted this month by Redfin, the next-generation real estate brokerage.

One in four respondents cited affordability as their top concern in buying a home, making it the most common response. Competition was the next-most common worry, cited by one in five homebuyers, a number that has increased from one in 10 in November. These concerns are justified: last month home prices were up 5 percent from a year ago, and 60 percent of Redfin offers have faced competition thus far in May.

Many of those looking to buy are fleeing an expensive rental market. About one in four homebuyers surveyed this month cited high rent as their reason for house hunting, a significant jump since last summer.

The change is attributable to first-time buyers. In the most recent survey, more than fifty percent said high rent led them to the market, as compared to only 25 percent of first-timers in August.

“Though enticed by high rents and low mortgage rates to begin a home search, first-time buyers face a number of obstacles in todays competitive market,” said Redfin chief economist Nela Richardson. “In many cities, starter homes have seen the largest price increases because the supply of affordable homes on the market is so low and the demand for these homes is so high.”

Buyers were asked to choose up to three of the most important factors in a home, beyond square footage and price. Three choices rose to the top: the layout, finishes and design were most important (46%), followed by school quality (41%) and a yard or green space (39%). Ease of commute came in fourth, checked off by 32 percent of respondents.

I read this article at: http://press.redfin.com/phoenix.zhtml?c=252734&p=irol-newsArticle&ID=217296

Remember to follow our Blog at: https://therealestatebeat.wordpress.com/

Got Questions? – The Caton Team is here to help.  

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Thanks for reading – Sabrina

The Caton Team – Susan & Sabrina – A Family of Realtors

Berkshire Hathaway HomeServices – Drysdale Properties

Sabrina BRE# 01413526 / Susan BRE #01238225 / Team BRE# 70000218/ Office BRE #01499008

 

Homeownership More Profitable for Single Men Than Single Women

Well this headline got my attention… 

Homeownership More Profitable for Single Men Than Single Women

Single Men Owners Have Gained $10,000 (16 Percent) More in Home Value Since Purchase;

Housing Gender Gap Widens with More Years of Homeownership

IRVINE, Calif. – May 26, 2016 — RealtyTrac® (www.realtytrac.com), the nation’s leading source for comprehensive housing data, today released an analysis showing homes owned by single men on average are valued 10 percent more and have appreciated $10,112 (16 percent) more since purchase than homes owned by single women.

The analysis covered more than 2.1 million single family homes nationwide owned by either single men (1,139,493) or single women (1,011,572) based on public record tax assessor data collected by RealtyTrac.

The average estimated current market value of homes owned by single men was $255,226 — 10 percent higher than the average current market value of homes owned by single women: $229,094.

Homes owned by single men have gained an average of $63,921 since purchase, a 33 percent return on purchase price. That was $10,112 (16 percent) more than the average $53,809 gain since purchase for homes owned by single women, a 31 percent return on purchase price.

“Women earn less than men on average — 19 percent less in 2015 according to the Bureau of Labor Statistics — giving them less purchasing power when it comes to buying a home,” said Daren Blomquist, senior vice president at RealtyTrac. “So it’s not surprising to see the 10 percent gender gap in average home values between single men and single women homeowners; however, the slower home price appreciation for homes owned by single women demonstrates that less purchasing power is also having on a domino effect on their ability to build wealth through homeownership as quickly as single men.”

Housing gender gap widens with more years of homeownership

Among homes owned for at least 15 years, those owned by single men on average had a current market value of $288,912 — 17 percent higher than the average current market value of homes owned by single women: $240,166.

Homes owned for at least 15 years by single men have gained an average of $170,765 since purchase — a 145 percent return on purchase price. That was $36,496 more than the average $134,269 gain since purchase for homes owned at least 15 years by single women — a 127 percent return on purchase price.

Years Owned Home Value Gender Gap Home Value Gain Gender Gap Home Value ROI Gender Gap
10 Years or Fewer $18,185

 

(7 percent)

$6,266

 

(16 percent)

209 basis points
More Than 10 Years $38,872

 

(14 percent)

$19,781

 

(20 percent)

569 basis points
More Than 15 Years $48,746

 

(17 percent)

$36,496

 

(21 percent)

1774 basis points
All Years $26,132

 

(10 percent)

$10,112

 

(16 percent)

272 basis points

Markets with biggest housing gender gap

Average values of homes owned by single men were the highest above average values of homes owned by single women in the District of Columbia (14 percent higher), followed by Florida (12 percent higher), West Virginia (12 percent higher), Wisconsin (12 percent higher), Texas (10 percent higher), and Alabama (10 percent higher).

There were three states where the average values of homes owned by single women were higher than the average values of homes owned by single men: Massachusetts (11 percent higher), Kentucky (2 percent higher), and Kansas (1 percent higher).

Average home value gains for homes owned by single men were highest above average home value gains for homes owned by single women in West Virginia (72 percent higher), Wisconsin (41 percent higher), Alabama (40 percent higher), Maine (35 percent higher), and Minnesota (34 percent higher).

There were eight states where single women homeowners have realized bigger home value gains since purchase than single men homeowners, led by New York (30 percent more), New Jersey (29 percent more), North Dakota (22 percent more), Massachusetts (11 percent more) and Virginia (8 percent more).

Single women tend to own homes in areas with a higher density of criminal offenders

The analysis also looked at neighborhood characteristics in zip codes with a higher share of single men homeownership compared to neighborhood characteristics in zip codes with a higher share of single women homeownership.

In zip codes with a higher share of single women homeownership, the average RealtyTrac Registered Criminal Offender Index was 19.19 — 7 percent higher than the average index of 17.87 in zip codes with a higher share of single man homeownership. The RealtyTrac Registered Criminal Offender Index is based on the number of registered criminal offenders (including sex offenders, child predators, kidnappers and violent offenders) as a percentage of total population.

Single women tend to own homes in areas with lower environmental hazard risk

In zip codes with a higher share of single woman homeownership, the average RealtyTrac Environmental Hazards Housing Risk Index was 45.69 — 23 percent lower than the average index of 59.40 in zip codes with a higher share of single man homeownership. The RealtyTrac Environmental Hazards Housing Risk Index is based on the prevalence of five manmade environmental hazards: air quality, superfund sites, polluters, brownfields and former drug labs.

About RealtyTrac

RealtyTrac collects and licenses multi-sourced public record real estate data — including tax, deed, mortgage, foreclosure, and proprietary neighborhood and parcel-level risk — for more than 150 million U.S. properties, providing access to that data for businesses, consumers, policy makers and the media in a variety of venues all designed to increase real estate transparency: RealtyTrac.com is a property search and research portal for foreclosures and other off-market properties; Homefacts.com is a neighborhood research portal providing hyperlocal risks and amenities; HomeDisclosure.com produces detailed property pre-diligence reports; and RealtyTrac Data Solutions delivers real estate data and analysis to businesses through bulk file licenses, APIs, trend reports, and customized marketing lists. RealtyTrac data is cited by thousands of media outlets each month, including frequent mentions on CBS Evening News, The Today Show, CNBC, CNN, FOX News, PBS NewsHour and in The New York Times, Wall Street Journal, Washington Post, and USA TODAY.

RealtyTrac Media Contact:

Jennifer von Pohlmann

949.502.8300, ext. 139

jennifer.vonpohlmann@realtytrac.com


Data and Report Licensing:

800.462.5193

datasales@realtytrac.com

 

I read this article at: http://www.realtytrac.com/news/home-prices-and-sales/realtytrac-housing-gender-gap-analysis/

Remember to follow our Blog at: https://therealestatebeat.wordpress.com/

Got Questions? – The Caton Team is here to help.  

Email Sabrina & Susan at: Info@TheCatonTeam.com

Call us at: 650-568-5522

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Connect with us professionally at LinkedIn: https://www.linkedin.com/in/sabrinawendtcaton

Please enjoy my personal journey through homeownership at:

http://ajourneythroughhomeownership.wordpress.com

Thanks for reading – Sabrina

The Caton Team – Susan & Sabrina – A Family of Realtors

Berkshire Hathaway HomeServices – Drysdale Properties

Sabrina BRE# 01413526 / Susan BRE #01238225 / Team BRE# 70000218/ Office BRE #01499008

Love, Marriage and Real Estate

The Newlyweds’ Guide to Buying a Home

 

Hey, lovebirds: If you’re newly married, you may be thinking of buying a nest together. Indeed, 35% of married Americans purchased their first home together within two years of tying the knot, according to a study by Coldwell Banker. Yet while we hear plenty about the home-buying challenges faced by unmarried couples, that doesn’t mean that marriage makes this process a walk in the park.

“A lot of factors come into play,” says Brandy Wright, a certified financial planner at Cambridge Wealth Counsel in Atlanta. So before you start swooning over Craftsman bungalows or granite countertops where you envision your bright new future, be sure to sit down and ask each other these crucial questions first.

What’s your credit score?

Back in your dating days, you two probably talked about everything from where you’ve traveled to your favorite movies. But now, as newlyweds, it’s time to get serious and broach a far less romantic topic: your credit scores.

In fact, if you’re truly smart, you will have had this conversation already: Half of married couples in the U.S. say that credit scores were a make-or-break factor when choosing their mate, according to an Experian Consumer Services survey. But for other couples, credit is a taboo subject. Unfortunately, if one person’s credit score is substantially lower than the other’s, that could hinder the couple’s ability to qualify for a loan, or at least get an attractive interest rate.

“Knowing your credit scores before you meet with a lender is crucial,” says Wright. Doing so will also give you the opportunity to work on repairing any credit issues before you apply for a mortgage. You can also get a free copy of your full report at AnnualCreditReport.com, although for the exact score you’ll need to pay a small fee. Or check with your credit card company; many offer free access to scores.

Where would you like to live in five years?

Your future goals will affect which type of home—and loan—is right for you. For instance, if you’re planning to stay put for the foreseeable future, then a 30-year mortgage with a fixed interest rate may make the most sense, since this means your interest rate (and monthly payment) remains constant over the life of the loan.

On the other hand, if you’re planning to move within a few years—say, to a larger home to raise a family or move closer to your in-laws—then you should consider other options. For instance, an adjustable-rate mortgage offers a lower interest rate than a fixed mortgage for an initial period of time, such as three to seven years. After that point, it can adjust up or down based on market indexes.

Will one of us stay home to raise the kids?

Fine, you’ve just gotten hitched, so why rush the discussion about kids? Because this question will affect your family’s income, which is the cornerstone for determining how much home you can afford. A good rule of thumb: “Your mortgage expenses should be no more than 30% of your take-home income,” advises Wright. (Use realtor.com’s Home Affordability Calculator to assess your buying power.)

But keep in mind, you could be paying off that mortgage for 30 years, so you should not only tally how much your family makes now, but also what you anticipate your salary to be in the future. What happens if and when you have kids, and one of you wants to stay home to raise them? That could slash your income in half. So when anticipating how much of a mortgage to get, play it safe. Just because you get pre-approved for $1 million doesn’t mean you should buy a $1 million house.

What happens to the home if our marriage hits the rocks?

Although this is a happy time in your relationship, you need to consider all possible outcomes for your marriage. Translation: If you get hit with death or divorce, you’ll need to work out how to divide your assets.

There are several types of homeownership to choose from when purchasing property with your spouse. The most common is joint tenancy, where each person holds equal interest in the property. Its distinguishing factor is that in the event one spouse dies, that person’s interest in the property automatically conveys to the surviving spouse (also know as “right of survivorship”).

Meanwhile, under tenancy in common, each spouse has a distinct, separately transferable interest in the property. This might be a sensible form of ownership if one spouse makes a higher percentage of the down payment or monthly mortgage payments and wants to guard his or her investment in the event of a divorce. Fine, it’s not exactly an upbeat discussion, but you never know what could happen once the honeymoon’s over, so to speak.

I read this article at: http://www.realtor.com/advice/buy/newlyweds-guide-to-home-buying/?link=TD_REALTOR_image_4&cid=soc_editorial62230036&adbid=737799586626969600&adbpl=tw&adbpr=17351940

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The Caton Team – Susan & Sabrina – A Family of Realtors

Berkshire Hathaway HomeServices – Drysdale Properties

Sabrina BRE# 01413526 / Susan BRE #01238225 / Team BRE# 70000218/ Office BRE #01499008

 

High Rents May Force Buyers Into the Market

High Rents May Force Buyers Into the Market

Rents have been on the rise for several months now as demand for rental housing has increased due to a short supply of homes for sale, particularly among starter homes, and high down payments. A recent survey showed that the pendulum may be swinging in the other direction, however.

According to a survey of 975 homebuyers conducted by Redfin in May among 36 states and Washington, D.C., one in four homebuyers reported that it was the high cost of rent that prompted them to go hunting for a house—a substantial increase from the share reported last summer. First time buyers drove the increase, with more than 50 percent of them citing high rents as the reason they were looking to buy a home—more than double the 25 percent reported in August.

The change is attributable to first-time buyers. In the most recent survey, more than fifty percent said high rent led them to the market, compared to only 25 percent of first-timers in August.

“Though enticed by high rents and low mortgage rates to begin a home search, first-time buyers face a number of obstacles in today’s competitive market,” said Redfin chief economist Nela Richardson. “In many cities, starter homes have seen the largest price increases because the supply of affordable homes on the market is so low and the demand for these homes is so high.”

Even so, the most common concern among homebuyers was still affordability, with one in four survey respondents naming that as the chief worry. One in five named competition as the most common concern when buying a home, an increase from one in 10 in November’s survey.

“Though enticed by high rents and low mortgage rates to begin a home search, first-time buyers face a number of obstacles in today’s competitive market.”

Nela Richardson, Redfin Chief Economist

With mortgage interest rates at historically low levels (currently under 4 percent), if homebuyers can get past the down payment obstacle, now is an excellent time to buy, according to a Zillow report late last year.

“(Rates) are currently hovering near all-time lows,” said Zillow Chief Economist Svenja Gudell. “This helps keep monthly mortgage payments low. Renters can’t take advantage of mortgage financing each month. Additionally, while home values dropped steeply during the most recent recession and remain below their pre-recession peaks in most areas, rents have been on a slow, steady, upward climb for much of the past decade. Finally, income itself—while showing signs of picking up in recent months—isn’t growing sufficiently to keep pace with growth in rents and is growing far more slowly than it was prior to the recession.”

While high rents may be causing people to search for homes, it remains to be seen how many will actually be able to purchase a home, because the down payment remains a huge obstacle. Zillow reported that consumers are spending an average of twice as much of their monthly income on rents compared with the percentage of income they are spending on mortgage payments—which makes it difficult to save for a down payment.

“There are good reasons to rent temporarily—when you move to a new city, for example—but from an affordability perspective, rents are crazy right now,” Gudell said. “If you can possibly come up with a down payment, then it’s a good time to buy a home and start putting your money toward a mortgage.”

I read this article at: http://www.dsnews.com/news/05-27-2016/high-rents-may-force-buyers-into-the-market

Remember to follow our Blog at: https://therealestatebeat.wordpress.com/

Got Questions? – The Caton Team is here to help.  

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Thanks for reading – Sabrina

The Caton Team – Susan & Sabrina – A Family of Realtors

Berkshire Hathaway HomeServices – Drysdale Properties

Sabrina BRE# 01413526 / Susan BRE #01238225 / Team BRE# 70000218/ Office BRE #01499008

 

The Psychology of Buying and Selling a House

The Psychology of Buying and Selling a House

How our emotions influence the homes we choose and the prices we pay

By MATTHEW KASSEL

It’s a fact of life: Homes come with far more emotional weight than any other investment we make.

A home is a refuge from the world, a place to raise a family and, for some people, an investment they hope will bring them a good chunk of money down the road. We fall in love with houses in a way that we never fall in love with a portfolio of stocks and bonds.

All too often, though, we don’t realize that how we feel about homes blinds us when it comes time to buy or sell. We let our emotions blind us to cold facts about the market or the realities of ownership. Or we prioritize one set of emotional needs over others that are just are strong but may not be evident at first. And ignoring them can lead us to make bad financial decisions that can affect us for decades to come.

For instance, people might focus on their desire for a house that’s a certain size or style, but ignore the fact that they want to spend as much time as possible with family. So they might buy a “perfect” house that requires them to make a long daily commute to work and keeps them away from home for two extra hours each day.

The home-selling side of the equation brings its own set of thorny issues. Homeowners often have an overly rosy view of their home and expect it to increase in value far beyond reasonable expectations. And when they put it on the market, they often stubbornly cling to their asking price—even if it means leaving it up for sale far longer than they planned, and risking the possibility of not selling it at all.

Here’s a closer look at some psychological missteps that buyers and sellers often make as they wade into the housing market.

Ignoring the big picture

Home buyers are always on the lookout for features—like a longer driveway or bigger backyard—that will make them happier with their home. But people don’t realize that those changes may not make them happier with their life as a whole.

“When people move to a better housing, they think they will be a lot happier overall,” says Shige Oishi, a co-author of a 2010 study on the subject in Social Indicators Research. “When they actually move, however, their overall happiness does not often change because there are many trade-offs in moving.”

One of the biggest trade-offs is commuting. Many move to live in a bigger house, but that bigger house is often farther away from work—so that means more commuting, which tends to add stress and detract from overall happiness. A 2008 study in the Scandinavian Journal of Economics shows that people who had longer commutes reported “lower subjective well-being” than those with shorter commutes. “If you’re moving to a place far away from your friends, but it has nicer stuff, it’s not a great deal for your happiness,” says Elizabeth Dunn, a psychology professor at the University of British Columbia.

In another study in the Personality and Social Psychology Bulletin, Ms. Dunn and her co-authors explored the matter of expectations vs. reality in another way—by looking at Harvard undergraduates who were randomly assigned to different dormitories. The study showed that first-year students incorrectly predicted what would bring them the most satisfaction from their dorms—physical features like location on campus, the attractiveness of the residence, room size and desirability of the dining hall and facilities.

In the initial survey, the students put no weight on social features, such as relationships with roommates and a sense of community in the residence. But when the researchers checked back in with the students after they’d been living in their dorms, the only thing that appeared to matter for their happiness was the quality of the social factors.

“It’s so easy to get caught up in comparing the physical features of the places you’re looking at,” says Ms. Dunn, “but you should really stop to consider how the places you’re considering will shape your social relationships.”

Overlooking big expenses

People who are buying homes tend to compartmentalize their expenses and not add up the total cost of everything needed to fix up and furnish the house, says Alex Tabarrok, a professor of economics at George Mason University. That can lead them to make poor choices about how much to pay for a home. For instance, they may overspend on a down payment for the house itself and leave themselves without enough money to buy the sort of decorations or furniture that they want. “When you’re getting a house, think about furnishing it at the same time,” says Mr. Tabarrok.

Weighing buying vs. renting

The biggest budgeting concern is, of course, whether you should buy a house at all. Research shows there are psychological benefits to taking the plunge—but also to opting out.

Buying a house can give people a psychological boost by making them feel like they’ve “arrived” and are part of the American ideal. Homeowners also may feel as though they have more control over their lives since they’re not dependent on the whims of a fickle landlord.

But while those factors may lead people into buying a house, there are other negative elements that homeowners don’t discover until after they’ve taken the plunge.

Research, for instance, has shown that home ownership can cause undue stress. The amount of work necessary to maintain a home—such as decorating, or mowing the lawn every weekend—may be too much for some people. Others may be overwhelmed by the financial aspect of ownership, such as being tied to a big monthly mortgage, or keeping up with repairs and other unforeseen costs.

Expecting a big return

When it comes to selling a home, most people aren’t in for a huge payday. Yet many are overly optimistic in their home-price expectations, according to Robert J. Shiller.

Dr. Shiller, a professor of economics at Yale University, co-wrote a paper, updated in 2014, that looked at the ways recent home buyers around the country think about the future values of their properties.

Using questionnaire surveys, Mr. Shiller and his co-authors found, among other things, that home buyers have extremely high long-term price expectations. That can lead people to buy homes that aren’t a good fit in terms of location or social scene just because they seem like good investments. Or they may stake their plans—such as retirement—on a certain return and find themselves scrambling when they come up short. On a larger scale, this over-optimism can lead to speculative booms that warp the market.

While it isn’t entirely clear why homeowners are usually so cheerful about the future, the researchers postulate it may result from the “money illusion”—a failure to take inflation into account.

“Imagine that your grandmother dies, and you’re managing her estate,” Mr. Shiller says. “Her house is worth $30,000 now, and you look at what she paid—$5,000. You think, ‘Wow, that’s a lot.’ Now why does it seem so big? Because you’re not reflecting that all prices went up sixfold” and you’re basically not making a profit after taking inflation into account.

Not wanting to come up short

People have many reasons for selling their homes, and for setting the prices they do. But research has found that the most powerful emotional drive at work in a sale is loss aversion—not wanting to sell a home for less than what you paid for it.

In a study in The Quarterly Journal of Economics, researchers found that homeowners latch on to the price they paid for their home with the hope that they can get more when they put it on the market. But that isn’t the soundest idea, says Christopher Mayer, a co-author of the study and a professor of real estate and economics at Columbia Business School, especially if your house has depreciated in value. It’s a fallacy to assume that you’ll be able to recoup losses you’ve already incurred. The current market price has nothing to do with how much a person actually paid for it.

There is a nuance here, though. People who stubbornly stick to an asking price above market value risk not selling their house at all. But sometimes they are rewarded.

Mr. Mayer and a co-author analyzed housing data from downtown Boston in the 1990s, culled from a boom-bust cycle. Condominium owners who put their houses up for sale above the market rate—though still below what they paid for them—sold their homes for more than expected, even as their properties lingered on the market for longer than usual.

Interesting article – what are your thoughts?

I read this article at: http://www.wsj.com/articles/the-psychology-of-buying-and-selling-a-house-1465783741

Remember to follow our Blog at: https://therealestatebeat.wordpress.com/

Got Questions? – The Caton Team is here to help.  

Email Sabrina & Susan at: Info@TheCatonTeam.com

Call us at: 650-568-5522

Want Real Estate Info on the Go? Download our FREE Real Estate App:  http://thecatonteam.com/mobileapp

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Connect with us professionally at LinkedInhttps://www.linkedin.com/in/sabrinawendtcaton

Please enjoy my personal journey through homeownership at:

http://ajourneythroughhomeownership.wordpress.com

Thanks for reading – Sabrina

The Caton Team – Susan & Sabrina – A Family of Realtors

Berkshire Hathaway HomeServices – Drysdale Properties

Sabrina BRE# 01413526 / Susan BRE #01238225 / Team BRE# 70000218/ Office BRE #01499008