MONEY Ask the Expert

What That Kitchen Remodel Will Really Cost You

140605_AskExpert_illo
Robert A. Di Ieso, Jr.

Q: The bids for our kitchen renovation looked low—until we realized they left out cabinets, appliances and such, which apparently we buy separately. Is there a way to ballpark those costs, so we can judge whether the project fits our budget?

A: Are you sitting down? The bids you received probably account for only a quarter to a third of your project costs, according to kitchen designer John Petrie, who owns Mother Hubbard’s Custom Cabinetry in Harrisburg, Pa., and is president of the National Kitchen and Bath Association, a trade group.

Many general contractors separate out cabinets, countertops, appliances, plumbing, light fixtures, tiles, and paint from their bids because the costs for these decorative items vary exponentially depending on what you choose. A kitchen faucet, for example, can range from $20 to $3,000. Backsplash tiles might run from $7 to $90 per square foot. So unless the contractor is providing design services—as a kitchen remodeling company would—he may prefer to let you select and order your own decorative items, even though he’ll still install them, and help with delivery if necessary.

The NKBA provides guidance on what percentage of the total budget certain elements eat up in a typical kitchen project:

Cabinets: 30%

Appliances: 14%

Countertops: 10%

Lighting: 5%

Plumbing fixtures: 4%

Paint: 2% to 3%

Tiles: 1% to 2%

The rest, about one-third of your cost in this scenario, is largely the stuff your contractor likely included in his price—from demolition and disposal of the old kitchen to new floors, walls, and windows to the labor for installing everything.

“These are only ballpark figures,” says Petrie. “But they work remarkably well at different budget levels.” For example, he would expect the cabinets to cost about $15,000 on a $50,000 kitchen project, $30,000 on a $100,000 project, and $45,000 on a $150,000 project.

Your contractors’ proposals should detail exactly what’s included in their prices (scrap any that don’t), but they probably don’t highlight what is not. So use the above percentages as a starting point to help piece your initial budget numbers together. And don’t be afraid to ask contractors about any details that aren’t clear, such as whether the item listed as “tile backsplash” includes the tiles or just the labor. (It’s very likely the later.)

Make a note right on the bids with the responses so you can keep track of which contractor said what. Also when you finalize the deal ask the pro you hire to initial next to any promises he made for things that aren’t explicitly stated in the bid, to help avoid any disagreements once it is too late to turn back.

MONEY home prices

Case-Shiller Index Shows Home Price Growth Slowing

Home prices increased at their slowest pace since February 2013, according to the latest report on the S&P/Case-Shiller Home Price Index.

The index, which compiles a 10- and 20-city composite of home prices, showed the 10-city composite posted price gains of 9.4% year-over-year, while the 20-city group showed gains of 9.3%. Both results were significantly lower than the 10.9% and 10.8% year-over-year increases the respective composites showed last month, and much less than the 9.9% gains analysts expected from the 20-city index.

All 20 cities posted some month-to-month price gains before seasonal adjustment, but 14 of 20 saw prices decline once seasonal factors were taken into account.

This is the second bit of bad news for home-sellers this month. On Monday, the National Association of Realtors reported that pending home sales dropped 1.1% in June, and were down 7.3% since June of 2013. Lawrence Yun, the NAR’s chief economist, blamed tight credit, low inventory, and flat wages for the decline. However, Yun predicted sales would increase slightly in the second half of the year, partially because price appreciation has slowed.

“Housing has been turning in mixed economic numbers in the last few months,” said David M. Blitzer, chairman of the Index Committee at S&P Dow Jones Indices. “Prices and sales of existing homes have shown improvement while construction and sales of new homes continue to lag. At the same time, the broader economy and especially employment are showing larger improvements and substantial gains.”

Of the 20 cities measured by the Case-Shiller index, Charlotte was the only area to see its annual growth rate improve. Las Vegas experienced some slowdown in price appreciation, but remained the city with the fastest price growth (16.9% YOY), followed by San Francisco (15.4% YOY). Washington had the lowest year-over-year growth at 5.8%.

MONEY buying a home

What a Zillow/Trulia Merger Might Mean For Consumers

House with SOLD sign
Martin Barraud—Getty Images

UPDATED—4:21 P.M.

It’s official. Zillow and Trulia, the two largest sites in the home listings game, are merging. Together they account for about 48% (not including local websites) of listings web traffic.

The deal, worth $3.5 billion in Zillow stock, has already been good for investors. Both companies’ stock is through the roof as Wall Street rewards Zillow for effectively eliminating its major competitor. Zillow’s press release states that both brands will be maintained, but Trulia CEO Pete Flint will begin reporting to Zillow’s chief executive, Spencer Rascoff. For all intents and purposes, Zillow-Trulia is now the only game in town, with a combined traffic that’s more than 3.5 times that of its nearest competitor, Realtor.com, according to comScore.

What does Zillow’s new, even-more-dominant market position mean for the consumer? Probably not a whole lot—at least initially.

The major concern consumers have long held with both Zillow and Trulia is the accuracy of the services’ listing information. The notorious(ly questionable) ‘Zestimate’ aside, the big two have been dinged for having out-of-date listings information. Because neither company has access to the large sample of multiple listing service (MLS) data that members of the National Association of Realtors are privy to, each relies on a hodgepodge of MLS listings, third-party services, and individual brokerages for their listing information.

The results can be hit or miss. It’s not uncommon to find a home on either site that’s already off the market. Realtor.com, run by the National Association of Realtors (NAR), has made its large MLS network—the site has access to virtually all of the country’s listing services—and more accurate listing information the cornerstone of recent marketing efforts.

A Zillow/Trulia merger isn’t likely to make their listing information any more reliable, and Zillow doesn’t mention increased accuracy as one of the “expected benefits” of the deal. Sissy Lappin, a Texas Realtor and founder of ListingDoor.com, thinks the Zillow/Trulia merger is a pure-and-simple market share grab, not a quest for more or better data. “They’re buying out the competition,” Lappin says.

That shouldn’t come as much of a surprise, both because each company has likely already made deals with all of the data providers willing to do business, and because the data only needs to be accurate enough to attract customers, not necessarily to sell them a particular home. Zillow makes most of its money by providing real estate agents with early leads, and even its own CEO has gone so far as to endorse the notion that “a lead on a stale listing is still a good lead.”

At the end of the day, consumers might find themselves the losers in the merger. 24/7 Wall Street points out that less competition for agents’ business could lead Zillow to charge them higher advertising fees, and those agents may pass on the costs to the buyers they represent. That said, how much agents actually pay for ad space on Trulia/Zillow is a hotly debated topic, and it’s still unclear whether agents—who, after all, provide Zillow with listings—or the company itself has the upper hand in the relationship.

Ultimately, the big question is whether the merger will bring long-simmering tensions between brokerage firms and Trulia/Zullow to a boil. Brokers like the advertising and leads online listings sites provide, but they also don’t like that agents can circumvent real estate franchises and go to the customer directly. There’s always the potential that Zillow becomes so large it can muscle out the middle man, and if enough of the industry fears this is coming true, they could pull their listings entirely.

Zillow denies they have any aspirations beyond creating a mutually beneficial partnership. “We’ve never wanted to become a real estate brokerage,” stated one company spokesman. The question is whether brokers believe that partnership is more beneficial than threatening. If they don’t, and decide to pull their listings—the so called “nuclear option”—it would have a huge impact on the market, for both consumers and everyone involved in the real estate business.

CORRECTION: A previous version of this post stated that Trulia and Zillow shared 90% of online listings traffic. According to Zillow, that number is 48%.

MONEY Housing Market

WATCH: What Zillow Buying Trulia Means for Real Estate

Zillow is set to acquire Trulia for $3.5 billion, but some people in the industry are nervous about the deal.

MONEY buying a home

Dear Zillow, Please Don’t Kill Trulia’s Best Feature

Courtesy of Trulia Trulia's heat maps are a huge competitive advantage.

Zillow is said to be interested in buying its competitor, Trulia.com. If so, let's hope they don't ruin what makes Trulia so great.

UPDATED—July 28, 4:25 P.M.

In case you haven’t heard, rumors are swirling that real estate giant Zillow.com plans to purchase real estate slightly-less-giant Trulia.com. Both companies’ stock have shot up on the news, and if the deal succeeds in going through, the new company (Trillow? Zulia?) will have almost 50% of the online listings market.

That’s good for shareholders. What about for consumers? When two businesses decide to tie the knot, you never know what aspects of your favorite company will make it through to the other side. And in the case of Trulia, it would be a tragedy if a ZillowTrulia mashup killed its best feature: Trulia’s amazing visualization of local data.

Sure, Zillow has local data too. And it’s not bad. There’s the average and median sales price, stats on specific neighborhoods (demographics, education, home prices over time), and even a nice little map showing the quality of schools in your chosen area. But Trulia takes all this to another level. Here’s a Zillow data visualization on schools:

ZillowExample

Trulia has pretty much the same thing. But it also has these.

Heat maps of crime rates:

TruliaExample

Commute times:

TruliaCommute

Local listing price heat maps:

TriliaPrice

There’s even a national home price heat map:

TruliaNational

And that’s not even all of the data maps Trulia offers (I just assumed you might be tired of scrolling). The site also has similar visualizations for hazards (like flood zones), demographics, and amenities.

It’s hard to overstate how useful all of this is. When you’re looking for a house in a large area, getting the big picture is absolutely essential in making the right decision. How far am I from work if I live here? How much cheaper are home prices if I move a few blocks that way? Which areas are safe enough to live in, and what kind of stuff is there do in this neighborhood? These are all questions every buyer asks, and Trulia makes it very, very, easy to get the answers. Its amazing maps have long been cited as a competitive advantage.

So Zillow, if you do end up buying Trulia, you’re getting a pretty amazing product. Just please don’t screw it up.

CORRECTION: A previous version of this article stated that together Zillow and Trulia received 90% of online listings web traffic. According to Zillow, that number is actually 48% (not including local sites).

MONEY mortgages

The Best Loan You’ve Never Heard Of—And How You Can Get One

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charles taylor—iStock

Does a home loan with no down payment and decent rates sound too good to be true? It isn't.

No money down, better rates than an FHA loan, and the ability to finance closing costs. It may sound too good to be true, but in fact it’s a U.S. Department of Agriculture guaranteed rural development loan, and now is your best chance to get one.

Before we get into the details, a bit of background. The USDA provides extremely attractive loans to people in certain rural locations, as an enticement to settle down and develop new areas of the country. The Department of Agriculture uses population data from the US Census and other factors to determine which areas of the country count as “rural,” and then allows buyers in these areas (who meet a few other requirements) to get a USDA-backed loan from an approved lender.

If you’re a candidate for one of these loans, there’s no time like the present to apply. Here’s what you need to know.

What Makes USDA Loans Special?

Ag Department-backed financing is so attractive because it requires no money down but still has rates competitive with other government mortgage products. FHA loans, the most common type of government loan, require a 3.5% down payment at minimum, and saddle low-credit buyers with costly mortgage insurance premiums. USDA mortgages only require a small annual fee (a fraction of the FHA’s rates) and an upfront premium of 2% of the loan amount. However, that premium can be rolled into the mortgage, giving buyers the option of getting financed with a 0% down payment.

What’s The Catch?

The catch is the Department of Agriculture limits who can get one of these loans. If you make more than 115% of your area’s median income or already have “adequate housing,” you’re not eligible for USDA financing. You’re also required to purchase housing that is “modest in size, design, and cost” and meets various building codes.

Then there’s the matter of credit. Technically, the USDA doesn’t have a strict credit minimum, but most lenders are reluctant to sign off on anyone with a score south of 620. That’s more than 100 points higher than credit limits for FHA loans, which require a minimum FICO score of 500 for buyers willing to put down 10% up front. The good news is buyers can offset poor credit by showing mitigating factors like a healthy bank balance or a monthly rent bill higher than the home’s future mortgage payments. You can read the details of buyer and property requirements on the USDA’s website.

Most important, you must live in a specific area defined by the USDA as rural. The department provides a map showing which regions are eligible here.

Why Is Now The Best Time To Get One?

Remember how the USDA decides which areas are eligible for these loans based on census data? Well, the Department of Agriculture hasn’t actually updated its map since 2000, and a lot has happened in the last 14 years. Many areas that were previously considered rural, and therefore eligible for USDA financing, have become regular suburbs. According to a 2011 study by Housing Assistance Council, 97% of the country’s land mass, an area that includes 109 million people, is eligible for a USDA loan. That means about one in three people lived in regions that were USDA eligible when the report was published.

Unfortunately, the ride is almost over. The USDA plans to update the eligibility map with 2010 census figures this October. The Housing Assistance Council estimated that the new information will make 7.8 million people ineligible for USDA financing unless they move to areas within the new eligibility zone.

In reality, the change is going to effect significantly fewer people than that, thanks to congressional action that grandfathered in many areas. However, the USDA told Money.com they don’t yet have exact numbers on how many Americans will no longer live in rural areas after the update, so if you’re eligible now and looking for a loan, it’s better to be safe than sorry. At least some at the department anticipate a rush to get financing before the old rules expire. “We’re going to get inundated,” predicts Neal Hayes, Housing Programs Director for the New Jersey USDA state office.

How Do I Get One Before My Area Is Made Ineligible?

The current map expires on September 30th. That means a USDA-approved lender needs to have submitted a complete, fully underwritten application package to the department’s relevant state office by no later than close of business September 30, 2014, or the application will be considered under new, less favorable requirements.

What If I Already Have a USDA Loan? Can I Still Refinance If My Area Loses Eligibility?

Don’t worry. If you’ve already got a USDA mortgage, you’re done worrying about regional eligibility requirements. As long as you still meet other requirements, you should be able to refinance.

MONEY buying a home

WATCH: What You Need to Know Before You Buy a Home

One Minute Money: Thinking of buying a home? Money's Kristen Bellstrom shows you what you should do before you make an offer on your dream house.

MONEY real estate

NYC Apartment Building Will Have Separate Door for Lower Rent Tenants. What’s Up With That?

Rich door and poor door
Sarina Finkelstein—Marcus Lindström/Bronxgebiet/Getty Images New Yorkers are calling it the "poor door."

A new luxury high-rise on the Upper West Side of Manhattan will include a separate entrance for tenants in "affordable" housing units.

New York City has approved plans for a new luxury high-rise on the Upper West Side of Manhattan that will include a separate entrance for tenants in “affordable” housing, reports the New York Post. Even the conservative Post manages to see the class angle, calling this a plan for a “poor door.” (The quotation marks are the Post‘s.)

This controversy has been roiling in New York for a while. The Daily Mail unearths a 2013 quotation in a real-estate trade paper from the developer of another project (not the one on the West Side) defending separate entrances. It’s one for the ages:

‘No one ever said that the goal was full integration of these populations,’ said David Von Spreckelsen, senior vice president at Toll Brothers. ‘So now you have politicians talking about that, saying how horrible those back doors are. I think it’s unfair to expect very high-income homeowners who paid a fortune to live in their building to have to be in the same boat as low-income renters, who are very fortunate to live in a new building in a great neighborhood.’

Let’s keep the rich and not-so-rich in separate boats. Nice. You can make arguments for what the developers are doing here—here’s one—but, wow, that’s not it.

If you don’t live in New York and you aren’t familiar with the crazy real estate market here, this story might need a little translation. Your questions answered:

If the developers don’t want to mix different tenants, why include “affordable” units at all?

Because they are getting subsidies—pretty valuable ones—to build them.

There is not enough of any kind of housing in NYC, but housing for people with low-to-middle incomes is especially scarce. The long-term answer to that is to build lots more housing, and there’s a case to be made that building in NYC should just be a lot easier than it is. The fear on the other side is that new construction will mostly go to the luxury end of the market.

One stop-gap has been to encourage developers to encourage builders to include various kinds of affordable units in their projects. There may be tax benefits passed on to buyers of condos in buildings with affordable units, for example. The Upper West Side project, developed by a group called Extell, got zoning rights to build more units, says the blog West Side Rag, and Extell can sell those rights to other nearby developers.

West Side Rag also says the developer argues that, since the affordable units are in a separate part of the building, it legally must have its own entrance. That could have been avoided had the affordable units been mixed throughout the building. But this particular high-rise offers coveted views, including of the Hudson River. Spreading the units around would presumably have meant giving up some prime spots to affordable units, cutting profits for the developer.

What’s “affordable”?

To qualify for these units, a tenant would need to earn less than 60% of the area’s median income, adjusted for family size, says West Side Rag. For a family of four, that’s about $52,ooo a year. That’s twice the Federal poverty line and above the median U.S. household income, though making ends meet in NYC on that much, with a couple of kids, isn’t easy. That family could rent a two bedroom under this program for about $1,100 a month. So yeah, New York’s version of affordable is different than in other places.

MONEY Citigroup

Here’s Why Citigroup Is Shelling Out $7 Billion

It wasn't just investors who were hurt when banks turned lousy mortgages into toxic bonds

You could be forgiven for not caring — or perhaps not even noticing — that Citigroup agreed yesterday to pony up $7 billion to settle a Justice department inquiry into its mortgage business. More than five years after the financial crisis, the legal process of holding banks accountable can feel about as urgent as a rerun of Law & Order.

But it’s worth spending a few minutes remembering what actually happened — and who got hurt.

The government’s case against Citigroup is about harms to investors who bought pieces of mortgage “pools” that Citi created. But since investors who buy mortgage securities aren’t exactly Joe and Jane Mainstreet, the whole thing can seem almost victimless. The financial press also tends to overlook the human costs and focus on the money: What does the $7 billion hit mean for Citigroup’s share price? (So far, investors seem happy to at least know the bill.) Who gets the money? (Mostly the government, but $2.5 billion will go to consumer relief, like mortgage modifications.) And who is paying? (Shareholders, basically. No individuals from the banks are paying up—at least in this settlement.)

So it’s easy to forget that actual homeowners were hurt, too. Citigroup was one link in a chain that turned home loans into investment products. At one end, there were the original mortgage lenders (including such fine operation as Countrywide). Citigroup would buy mortgages from the originators and then pool the loans together to create securities that other investors could buy. One of the bank’s jobs was to make sure that the mortgages in the pool were up to snuff.

Citigroup hired outside companies to check on this. The companies would look at a sample of the loans and see if any of them didn’t fit guidelines, or if valuations of the homes the mortgages backed looked squishy. The news Citigroup got back wasn’t pretty. One Citigroup trader looked at the reports produced and wrote in an email (one for the ages) that “we should start praying… I would not be surprised if half of these loans went down.” Nevertheless, Citigroup went ahead and created securities out of the loans. These securities went south, touching off the Great Recession.

But things didn’t work out terribly well for the individual borrowers, either. Citigroup and institutions like it helped stoke mortgage originators’ appetite to lend to just about anybody and everybody, in many cases based on unrealistic valuations. The damage from this includes borrowers who ended up overstretched and put on the road to foreclosure, and more broadly any home buyer who bought into a increasingly inflated market.

Let’s not forget that part.

TIME real estate

You’re Not the Only One Who’s Having Trouble Paying Rent

Condo Towers Rise From Boston to Los Angeles in U.S. Rebound
Patrick T. Fallon—Bloomberg/Getty Images The EVO condominium building stands in downtown Los Angeles on June 23, 2014.

Average rents in big cities rose more than 5% in the 12-month period ending in June 2013, while wages rose a measly 1%

Rent prices are going up in cities across the country even as wages stagnate, making it ever harder to afford to live in big cities.

In the 25 largest rental markets in the country, rents rose faster than wages, according to the latest data published by the real estate website Trulia.

Miami, New York, Dallas and Phoenix and 21 other big cities saw average rent increases of 5.5% in June compared with the same month last year. Meanwhile, annual average wages increased nationwide just 1.0% in 2013 compared with 2012, according to the Bureau of Labor Statistics.

The two data sets reflect slightly different time periods, but the trend is clear, said Jed Kolko, chief economist at Trulia: affordability is worsening.

“Wage data is up one percent,” said Kolko. “Rent is rising at a pace much faster than that.”

San Francisco had the highest median rent for 2-bedroom apartments, at $3,550, according to Trulia, while Miami residents paid the highest percentage of their wages on rent for an average 2-bedroom, or 62% of wages. New Yorkers paid 56% of their wages on rent, while on the other and of the spectrum, St. Louis residents forked out just 24%.

Rents are soaring in smaller cities like Denver (10.8% increase) and Atlanta (8.6% increase) as well.

San Francisco saw the highest increase in rents in June compared with last year at 13.8%.

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