To sort out what you can expect in real estate this year, MONEY zeroed in on four markets: upscale neighborhoods, new investor favorites, booming growth cities, and once-busy areas that have quieted down. Whether your local real estate market is heating up or cooling off, here’s what you need to know about buying, selling or renovating your home.
BOOMING GROWTH CITIES
Areas with strong job growth and swelling populations should post big gains this year, says CoreLogic chief economist David Stiff. This may sound like common sense, but it hasn’t always been the case: In 2013 the largest price increases were in places that attracted investor buyers, who were drawn by good deals, not good jobs.
For sellers living near major employment hubs or in mushrooming technology hotspots, 2014 is shaping up to be a good year. Buyers, though, will face higher prices and fewer available homes, due in part to competition from relocating workers. In job-creation juggernaut Fort Worth, for instance, there’s now just a three-month supply of homes on the market (in January the U.S. average was nearly five months).
How you’ll know: Check local stats at bls.gov/eag. Look for upward trends in the number of new jobs and a falling unemployment rate that’s lower than the national average (6.6% in January). To see if your town is headed the way of Fort Worth, compare your area’s “median age of inventory” numbers on Realtor.com’s Trends page with the U.S. average (115 days in January). A lower number is a sign of a tight market.
Be a creative shopper. Sign up for immediate new-listing alerts from your multiple-listing service, realtor, and sites like Zillow, which includes for-sale-by-owner houses that may not show up elsewhere. Zillow also has Make Me Move listings: homes that aren’t currently for sale, but where owners have posted a price they’d consider.
Can you afford a premium of 10% to 15% over an existing house? You may also be able to dodge competition by shopping for a new home. A caveat: Most builders are postponing construction until they have a buyer, so you won’t be able to move in for at least four to six months, says Stephen Melman of the National Association of Home Builders.
Be mindful of rates. The average interest rate on a 30-year fixed loan is predicted to climb from the current 4.4% to 5.3% by the 2015 spring buying season, according to Freddie Mac. For a $250,000 loan, that means that a borrower who waits would pay $136 more per month and an additional $49,090 in interest over the life of the loan. Will you need a big loan? Better to act soon before rates tick up.
Go beyond a pre-approval. Stand out by collecting all your paperwork and going through underwriting before you shop. “That’s almost as good as cash,” says Betty Taisch of the San Francisco Association of Realtors. After you make an offer, ask your lender to call the listing agent to confirm you’re ready to go.
Don’t give up if you lose a bidding war. Deals can fall apart, so check in with the listing agent weekly until the sale closes. “It is a great way to sneak in with little competition,” says Taisch.
Don’t get greedy. Better to price low and receive multiple bids than aim too high and have to cut. Use the past three months of sales data to find a good number.
Multiple bids? To increase chances of a smooth sale, you or your listing agent should call each buyer’s lender to verify that he has been vetted and can move quickly. With inventory tight, you may also want to negotiate to stay in the home for a month or two until you’ve found a new place.
Price a remodel. Like your neighborhood but ready for an upgrade? Look into renovating before you consider a move. Get bids from at least three contractors to assess the cost of improving your current home. Then compare that figure with the price of relocating. Selling a $350,000 home, for instance, you’d pay $21,000 (or 6%) to your agent — and that’s before closing and moving costs. For that, you could redo a master bath or upgrade a kitchen.