MONEY home sales

12 Cities Where Homes Are Flying Off the Market

The average home sold in April spent 86 days on the market. But in these 12 cities, homes flew off the market a lot faster.

  • 1.

    Denver, CO

    140527_REA_MoveFast_Denver_1
    Homes in Denver sell, on average, in just 25 days. Scott Dressler-Martin—Visit Denver

    25 days: There’s just not enough homes on the market to meet demand in the Mile High City. Listings shrunk 13% in April over the same month last year. That, naturally, pushed prices up 20% to a median $340,000.

     

  • 2.

    Oakland, CA

    28 days: California buyers overall have to move quickly to buy, though competition is creeping up. In April there were 47% more homes on the market–probably why prices were up just 3% over last year to a median $499,950.

     

  • 3.

    San Jose, CA

    30 days: The home market in the center of the tech universe held fairly steady in April, with home prices up a solid 5% from last year. Median: $709,500. For the month, the average home sold at 106% of the list price, indicating bidding wars are still going strong, according to the Santa Clara County Association of Realtors.

     

  • 4.

    San Francisco, CA

    140527_REA_MoveFast_SanFrancisco_1
    Scott Chernis Photography—San Francisco Travel Association

    33 days: Bidding frenzy slowed a bit, with homes taking 18% longer to sell than last year, even as the market got tighter. Prices jumped 7% to a median $879,000. In all of California, in fact, single-family home sales were down 7% over last year, according to the California Association of Realtors. Association president Kevin Brown attributed that to investors slowing their buying.

     

  • 5.

    Seattle, WA

    33 days: The Seattle-Bellevue-Everett area saw listings jump 19% and prices stay flat at $380,000. Tyler McKenzie, president-elect of the Seattle-King County Association of Realtors, says 75% of his listings have seen multiple offers since January 2012. In the last five weeks, 90%.

     

  • 6.

    Anchorage, AK

    140527_REA_MoveFast_Anchorage_1
    Michael DeYoung/Design Pics—Getty Images/First Light

    39 days: Buying is heating up in the wintry north, pushing prices up 7% to $310,000 in the last year.

     

  • 7.

    Stockton, CA

    41 days: Prices are still bouncing back strong from the housing bust. In April, the median price jumped 42% to $269,250, partly because low-end foreclosures have virtually disappeared from the market.

     

  • 8.

    Sacramento, CA

    43 days: Another robust California market, this area saw prices rise 20% to $334,900. The majority of homes–69%–sold in under 30 days, according to the Sacramento Association of Realtors. Short sales are down from 23% of the market last year to 9% in April. The market needs more homes in the $250,000 to $500,000 range, says Paula Swayne, president of the Sacramento Association of Realtors. She cited a recent home in the Land Park neighborhood, listed for $525,000, that sold a week later for $561,000. “It’s a tough market for buyers right now,” Swayne says.

     

  • 9.

    Boulder, CO

    43 days: Like its larger counterpart to the south (No. 1-ranked Denver), this university town continues to have a shortage of homes for sale. Listings are down 5% from last year while prices rose 5% to $405,339.

     

  • 10.

    Boston, MA

    140527_REA_MoveFast_Boston_2
    The Beacon Hill neighborhood of Boston. Greater Boston CVB

    47 days: April prices in the Boston area, which includes Worcester and Lawrence, rose 4% in April to a median $359,900. Too few homes on the market contributed to a 12.4% decline in sales, says the Greater Boston Association of Realtors, while pent-up buyer demand continues to send prices higher. At the current pace, the batch of for-sale listings would sell in 3.6 months, nearly half the six months considered a balance between buyers and sellers.

     

  • 11.

    Austin, TX

    48 days: Another city that needs more sellers. Listings fell 8% over last year, while prices rose 18% to $295,000. It’s a sellers’ market, with only a 2.3-months supply of homes.

     

  • 12.

    Dallas, TX

    49 days: Price hikes are starting to slow in Dallas. In April, they were up 8% to $233,900. Sellers in Dallas County received 95% of their asking prices, according to the MetroTex Association of Realtors.

     

MONEY Investing

Thinking About Becoming a Landlord? Avoid These 6 Rookie Mistakes

For Rent sign
Zachary Zavislak

Putting your property up for rent can be tricky. Here’s how to sidestep six of the most common blunders.

Ever considered becoming a landlord? There are plenty of reasons you might. For some, it’s the temptation to scoop up a cheap property before the last of the deals vanish. Or maybe you’re like the 39% of homebuyers who told real estate firm Redfin that they’re interested in renting out their old place. Then there’s the lure of steadily escalating rents. The cost of renting the typical single-family home or apartment rose 4.5% in the past year, and spiked by more than 10% in the hottest areas, according to Trulia.

Becoming a landlord can be a profitable move, but learning the ropes requires some effort; it’s easy to take a misstep and end up in the red. “It’s not a passive investment, like putting your money in a mutual fund,” says Robert Cain, founder of landlord resource site Rental Property Reporter. Below, six slip-ups frequently made by newbie landlords, and strategies that will help you avoid making the same mistakes.

No. 1: Underestimating costs

You’ll most likely account for your insurance, taxes, and if you have one, mortgage. But you might miss expenses such as water, garbage, gardening, and regular repair and upkeep tasks. Even riskier, you may fail to put aside a large enough pot for unexpected expenses and big-ticket items. “Mom-and-pop investors tend to skimp on reserve and emergency funds,” says John Yoegel, author of Perfect Phrases for Landlords and Property Managers.

For a realistic estimate, plan for annual costs (not including your mortgage) to run at least 35% to ­ 45% of your yearly rental income, says Leonard Baron, who runs the real estate investor website ­ProfessorBaron.com. When calculating future income, it’s a good rule of thumb to include only 10 or 11 months of payments per year. After all, whenever a tenant moves out, you’ll still be stuck with expenses.

Parsing Rising Rents

No. 2: Breaking the law

Tenant and landlord laws vary from state to state and even city to city. For example, in some areas, you can require a month-to-month tenant to move out within 15 days, while in others you must give him 60 days’ notice. Yet when real estate site Zillow quizzed landlords on basic rental laws, the average respondent missed at least half the questions. One easy way to avoid getting into legal hot water: Never buy generic lease or other tenant forms, which don’t account for local laws, from a general real estate site or a big-box store, says Cain. To get the skinny on what’s permitted in your town, talk to your local or state landlord or apartment owners association. These groups usually cost at least $50 to join.

You know that federal law prohibits you from denying a rental to someone based on race, religion, or gender. Keep in mind that it also means that you can’t advertise a place as perfect for female roommates or specify no kids. You may, however, include a cap on the total number of occupants or ban pets.

No. 3: Skimping on vetting prospective tenants

When you’re looking for a good renter, it’s not enough to trust your instincts, or even to go on a referral from a friend. “Landlords get in trouble when they are in a hurry to find tenants and when they feel sorry for someone,” says Cain.

Never rent your property without checking the prospective tenant’s credit, confirming the source and amount of income, and checking in with the current and previous landlords, he says. Look for income to run at least 2½ times annual rent. Sites such as E-Renter.com and MySmartMove.com provide credit and background details for around $25.

No. 4: Ignoring renters insurance policies

Landlord policies cover the structure of the home, your appliances, and liability in case of injuries or property damage. Not on this list? The tenant’s stuff. You may think that’s not your problem, but Michael Corbett of Trulia warns that renting to one of the 65% of tenants who lack a policy can cause problems if something goes wrong. “Tenants lash out when they realize they aren’t being compensated,” he says.

In places where it’s legal, such as California, he recommends requiring that renters purchase a policy (go to your local landlord association to check the law in your state). This may shrink your pool of potential tenants, but is likely to increase the odds that you end up with someone responsible. If that’s not an option, be sure to explain to your tenant that you are not covering his things, and suggest he buy his own insurance.

No. 5: Failing to check out the property regularly

Don’t count on your renter to tell you about problems. “A tenant will complain about an inconvenience, such as plumbing issues, but not necessarily something like broken rain gutters that can produce major problems down the road,” says Yoegel. What begins as a dripping pipe or watermark on the ceiling can quickly swell into a multi-­thousand-dollar repair if left unaddressed. “Water damage is a big one,” says Corbett. “It can be outrageously expensive to fix.”

While you must respect your tenant’s privacy and cannot legally enter the residence without advance notice, you should find a way to take a regular look at the property. One solution: Add a clause to the lease specifying that you or your property manager will inspect the home at least every six months. It’s also a good idea to drive by the place once a week or so to look for exterior trouble spots. Finally, swing by anytime work is being done; you can verify that the job goes as you see fit and take a quick glance around for other potential issues.

No. 6: Going DIY at tax time

The tax treatment of rental properties is nothing like that of your home, and keeping it all straight is nearly impossible for novice landlords. The rules of depreciation are a prime example. The IRS requires that you take a deduction for wear and tear on the property each year. However, “the rules say depreciation is ‘allowed’ or ‘allowable,’ so people assume it’s optional,” says Cindy Hockenberry of the National Association of Tax Professionals. If you don’t claim the deduction for depreciation, you’ll miss a yearly tax break. Then, when you sell, the IRS requires you to retroactively depreciate the home, and that’s likely to leave you with a larger-than- expected tax bill. Not tricky enough? Starting this year the government “complicated” the regulations about what types of repairs you can deduct annually, says Hockenberry.

The bottom line? Get a professional’s help—at least for the first year or two until you fully understand the rules. And don’t forget to keep receipts for everything: You can deduct all the costs involved in managing your property, including the mileage for all those drop-bys.

MONEY

Why Underwater Homeowners Are a First-Time Buyer’s Enemy #1

Underwater home
17% of all homeowners with a mortgage owe more than their homes are worth. Dejan Stanisavljevic—Shutterstock

17% of homeowners, and 30% of lower-priced homes, are underwater. That's keeping first-time home buyers from finding their dream home.

Home sales picked up a bit in April after a slow, ugly winter, but compared to last year they’re pretty sluggish. They’re trending down 7%, according to the latest from the National Association of Realtors. What’s more, first-time home buyers are still missing from the market: Their share of purchases stayed flat from last year at 29%. Historically, four out of 10 buyers are first-timers, NAR reports.

What gives? It’s not just that aspiring buyers are having a hard time getting mortgages. In most of the country’s largest cities, there simply aren’t enough homes on the market to satisfy demand. One big culprit: The homes where owners still owe more than the house is worth–and so they can’t sell.

Even though prices have rebounded nicely in the last two years, 17% of all homeowners with a mortgage are underwater, according to data firm RealtyTrac. In fact, 241 counties representing a third of the country’s population have at least 20% of homes that are “seriously underwater”–mortgage debt is more than 25% higher than the home’s value. In 136 counties, it’s more than 25%, and the worst counties top 33%.

Source: RealtyTrac

A homeowner who can’t pay off the mortgage without bringing cash to the closing table simply isn’t going to sell. Not only do they need to be able to settle with the bank, they also need to cover their own closing costs and sales expenses. Between a 5%-6% agent commission and closing costs, the owner has to be at least 10% above water, and that’s before they even consider putting money down on their next property.

This cycle hits first-time buyers the hardest, says Zillow chief economist Stan Humphries, because underwater homes tend to be the most affordable. About 30% of homeowners in the lowest price tier of homes were underwater in the first quarter, compared to 11% of homes in the highest third.

“It’s hard to overstate just how much of a drag on the housing market negative equity really is,” Humphries says. To make matters worse, the shortage of for-sale homes created by the underwater owners drives up prices, “which in turn makes those homes that are available that much less affordable.”

The low end of the market is where listings are fewest, according to Zillow research.

 

MONEY

What It Costs to Live in America’s No. 1 Place to Live

Sharon, Massachusetts, was ranked no. 1 on Money’s Best Places to Live. This New England town is surrounded by a wealth of good jobs in Boston, Providence, and the Route 128 tech corridor, which shielded Sharon from the worst of the recession. From a cup of joe to a tank of gas, here’s what things cost in Sharon, Mass.

MONEY

Play in a $3 Million Sherwood Home

The town of Sherwood, Oregon, was ranked by Money as no. 5 on the Best Places to Live.

This quaint historic town – known for its top-ranked schools and relatively affordable home prices – offers a plethora of fun for adults and kids alike.

The home featured in this video has a tanning room for those sunless days and a kids’ entertainment level, with a stage and built-in slide. Check it out in Sherwood, Ore., no. 5 on Money’s Best Places to Live.

MONEY

Watch: You Can Live Big or Small in the Best Place

A half-hour train ride from Boston or Providence, the town Sharon, in Massachusetts, has the natural beauty of a more remote place.

When it comes to real estate, there’s something for everyone in this charming town, ranked by Money as the Best Place to Live. We took a sneak peek at three homes–entry-level, mid-range, and high-end lake-front—to see how far your dollar goes here.

MONEY

This is What It Is Like To Live 70+ years in One Town

Ron Roeser, 78, still lives next door to the home where he grew up in Chanhassen, MN, ranked no. 4 on Money’s Best Places to Live. Roeser talks about what it was like to go up in the charming town – and to settle down as an adult just a few feet away from the house where he was born.

MONEY Ask the Expert

Should I Sell My Home or Rent It Out?

Q: I may need to relocate for my job. I got a deal on it in 2012. Should I keep it and rent it out while prices are rising—or should I sell and use the profits to make a nice down payment on a new home? — Shane Keys, Atlanta

A: A solid rental property investment generates enough in rent to cover expenses plus a 10% return, says Brandon Turner, an experienced investor and senior editor at real estate investing website BiggerPockets. You told us that you’re paying $1,100 in mortgage, taxes and insurance. Add to that a property manager (average cost: 12% of gross rents), repairs, and a reserve in case of vacancies. It’s unlikely that the $1,500 maximum in monthly rent you’d likely bring in for your three-bedroom home (check comparables at sites like Hotpads and Rentometer) would produce anything close to a 10% return.

You also told us that you have $45,000 in equity. Selling and plowing that into your next home would eliminate the need for expensive private mortgage insurance—now costing you $137 a month because you had to go with a low-money-down FHA loan—and it would of course reduce your mortgage payment. Plus, you’ll be able to protect the profit from capital gains taxes (up to $500,000 for married couples in home equity is tax-free), a perk you eventually lose if you convert your home into an investment property.

Turner’s conclusion: Sell.

MONEY house hunt

‘I Have $1 Million and I Couldn’t Get a Mortgage:’ A Buyer’s Story

Lynda Pratscher bought this two-bedroom condo for $138,500.

Despite her more-than-$1 million investment portfolio, Lynda Pratscher couldn’t qualify for a loan because she wasn’t earning income.

Lynda Pratscher, retired telecommunications project manager, downsized from her $315,000 four-bedroom home Middleton, WI to a $138,500 two-bedroom condo in Wheaton, IL. This is the story of her House Hunt.

She was ready to sell but wasn’t sure where she wanted to end up.

I’ve been a single parent for 15 years or so, and my oldest son was off to college. A four-bedroom, three-car garage home in Middleton, WI was just way too big for me and my younger son and way too much for me to maintain by myself.

I was hesitant because the market hadn’t completely come back yet. I was lucky because I bought in 2002 and the home was worth about $50,000 more than what I paid for it. I sold it in 2012 and decided to rent for a while until I decided what I wanted to do. We went out to Las Vegas and tried that out. We stayed for a year and then moved to Illinois, where we were originally from, in Aurora, just outside Chicago.

After a while she started looking for condos, but saw they were selling fast.

I liked Aurora, but I wanted to go back to college and take classes. I didn’t want the congestion of a big university town though, and I don’t want to live near Animal House. I started looking at towns near the College of DuPage in Glen Ellyn, IL. They have a fitness center, classes, events. I figured, I could build my social life around that.

In February I started contacting agents and looking on all the websites. I set up custom searches and got email updates from agents about new listings. I found a beautifully landscaped condo complex near a lake and started watching for that. When a condo there came up, I contacted the realtor and it was already under contract.

Related: What mortgage is right for you?

At first, she wanted a mortgage. She didn’t want to use all her free cash for a home purchase.

I had quit my job in February, knowing I could live off my savings. I will be 63 in July but I wanted to wait to take Social Security if I could. I have $1.1 million in investments, plus the money from the house sale in a CD. I went to my credit union, and they wouldn’t give me a mortgage because I didn’t have an actual income. They wouldn’t even look at my investments! To them, I had no income. It just sounds crazy.

Then her perfect condo showed up.

I saw a condo on a realtor’s email list and it had everything I wanted. It was on the first floor. It had a one-car garage. It had laundry inside the unit. My agent called me the next morning at 6 a.m. and said, ‘We have an appointment at noon, are you OK with that?’

I walked in and loved the place right away. It was very well cared for and the bathrooms had just been updated. I knew I wanted to put in a bid. She said, ‘I think this thing is going to go very fast.’

The list price was $139,000 and I bid $135,000 cash. They dropped the price by $500, but my agent told me two other people came to see the place after me. I accepted the counteroffer. I didn’t want to lose it. Later, their lawyer told my lawyer they had a backup bid for substantially more than the asking price. I got a great deal.

It turned out that paying cash saved her some money.

Closing was so easy, and the original estimate on my closing costs was $3,000. I ended up paying only around $2,000. I had no idea how much it was worth to pay cash.

House Hunt is an occasional series about buying a new home. Have an interesting story to tell? Email us at realestate@moneymail.com.

MONEY buying a home

Countdown to Buying Your First Home: Our Checklist

Get ready for one of the biggest financial moves you'll ever make: Buying your first home.

First-time home buyers have it tough. The supply of homes for sale is tight, and lenders are tightfisted.

Student debt, at an all-time high of nearly $30,000 per grad, is getting in the way of saving for a down payment, says David Stevens, president and CEO of the Mortgage Bankers Association. But it’s a great time to get your foot in the door.

“Interest rates remain the envy of even your grandparents,” says Keith Gumbinger, vice president of mortgage publisher HSH.com. First, make your finances sparkle.

THE TURNING-POINT CHECKLIST

12 months in advance

Make sure the time is right. Use Trulia.com’s rent or buy calculator to see if you’d really come out ahead, based on loan rates, taxes, and where rents and prices are headed in your area. Nationwide it’s 38% cheaper buying vs. renting.

Clean up your act. Devote this year to saving money and paying down debt. You’ll need at least 3.5% down for an FHA loan, or 10% to 20% for a conventional mortgage. Lenders also like to see job stability, so settle in for now.

Learn what you like. When a home catches your eye—a listing, say, or a photo—pin it to a board on Pinterest. Or try Swipe, a new app from the site Doorsteps, which lets you browse listing photos and mark them pass or save.

Six months out

Look better to lenders. To boost your credit score, order your free credit reports at annualcreditreport.com and fix any mistakes. Pay bills on time, chip away at credit card balances, avoid new debt, and don’t close any accounts or apply for new credit. The average credit score for approved mortgage applicants is 755.

Figure out what you can buy. Use an online calculator like the one at Zillow.com to estimate how much house you can afford based on your income, savings, and debts. That’ll help you research homes and drill down on costs.

Forecast future bills. With an idea of how big a house you can buy, you can do a more detailed budget. Scan listings for property taxes on homes you like. Get a homeowners insurance quote at Insweb.com. Call local utility companies for the typical bills. And tack on 1% of the home’s value for yearly maintenance.

Related: Baby on the Way? Time to Make a Budget.

Three months out

Pick your loan. Fixed mortgage rates, now 4.4%, may edge up to 5% this year, forecasts HSH.com. If you are confident this is a starter home, you can save with a 7/1 adjustable-rate loan, now 3.5%. The risk: You end up staying longer than seven years and rates rise sharply. Most—92% of mortgage borrowers—opt for fixed-rate loans.

Prove you’re a serious shopper. Based on your income and credit, a bank will give you a mortgage pre-qualification. “It’s the No. 1 thing you want in your back pocket when you go shopping,” says Svenja Gudell, an economist with Zillow.

Even better in a hot market: Pay a few hundred to go through underwriting upfront.

Find a guide. Look for a realtor who has worked in the neighborhood where you hope to live. And in a tight market like today’s, ask candidates what their strategies are for unearthing listings and handling potential bidding wars.

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