MONEY home improvement

8 Home Upgrades That Add Real Value

David Papazian—Getty Images

Remember: the whole package is far more valuable than the sum of its parts.

The possibilities are endless when it comes to remodeling and upgrading your house, and deciding where to put your precious dollars can be tough. Many of these remodeling decisions can be made based on whether or not you’re planning to stay in your home long term.

Let’s take a look at the places where a $10,000 investment in your home can go the furthest.

If you are planning to sell your home within the next two years

It’s important to remember that there’s not always a direct relationship between exactly how much you put into a specific renovation project and exactly how much you get out of it.

If you consider home improvements item by item, you’ll likely conclude that undertaking almost any individual home improvement prior to the sale of your home is a losing proposition. However, when you add small improvements together with vision and creativity, you create an overall house improvement and a big return on your investment. The whole package is far more valuable than the sum of its parts!

The top six target projects

1. Kitchen. A $10,000 investment is not going to get you a full kitchen makeover and leave enough extra cash to make many other upgrades. Instead, think about upgrading tired old appliances. Cabinet resurfacing and upgrading the countertops can be very affordable and give a big splash. One word of caution: Make sure you don’t overspend for your neighborhood. Know your market.

2. Master bath. Again, here in the master bath, $10,000 will not go very far, but you can create a wow effect. Consider upgrading the shower to a frameless glass shower enclosure, adding new fixtures, and maybe a new vanity and countertops.

3. Paint. Repaint the interior of your home and keep it neutral with soft earth tones. Then make sure you pick up some fantastic pillows and accessories to add punches of color.

4. New carpet. No homebuyer wants to walk barefoot across your tired, old, stained, dirty, worn-out carpet. When you replace the existing carpet, go with a neutral shade.

5. Curb appeal. This is a low-cost no-brainer. Trim up the hedges, give the grass some TLC, plant some flowers, and give the front door a fresh coat of paint in a wonderful accent color. Create a strong first impression by adding shiny new house numbers and maybe even a new mailbox. Finally, add in some wonderful outdoor lighting, and presto!

6. Push the inside out. If there’s an existing room that looks out to the backyard, push it out! Replace existing windows with French doors and build a small deck. You’ve just increased the “size” of that room — and added value to the house for very little money.

When you’re planning to stay in your house

If selling isn’t in the cards for you and your family, you can still consider all of the tips above. You’ll enjoy living in an upgraded house, especially if you’re staying put. Additionally, think about these projects for long-term payback.

1. Heating and air system upgrades. New heating and air systems will actually reduce your monthly utility bills over time and are a great investment.

2. Going solar. In sunny climates, investing in solar technology can increase the value of your home and reduce your monthly and yearly utility costs.

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MONEY Housing Market

This Is the Best State for First-Time Homebuyers

West Virginia capitol building
Thorney Lieberman—Getty Images West Virginia capitol building

According to, the state where first-time home buyers have seen their lot improve most dramatically is...

When it comes to the nation’s hottest real estate markets, West Virginia usually doesn’t come to mind.

But for first-time home buyers it beats out bigger markets like California and Florida, at least according to banking Web site—and it’s not just because of the majesty of its rolling mountains. The site chose New Hampshire number two and Rhode Island number three.

What makes these states stand out? Over the past decade, they’ve seen biggest growth in the number of first-time home buyers—without facing high foreclosure rates. A decade ago, just 33% of West Virginia home sales were to first-time buyers. In 2013, the latest date for which data are available, the rate had climbed to 57%. Meanwhile foreclosures have remained at 0.01%.

One factor in West Virginia’s favor: Median home prices are a very affordable $115,850. The state also boasts a program that provides up to 100% financing for first-time buyers who meet certain income requirements, GoBankingRates notes.

New Hampshire and Rhode Island saw even bigger jumps in first-time buyers—with the rate nearly doubling in both states—but both also had higher foreclosure rates of 0.05%.

Many Millennials and Gen Xers—demographics now in prime home-buying age—have been struggling to make their first purchase after seeing careers interrupted and savings decimated by the 2008-2009 recession. That dynamic has contributed to a lower homeownership rates than any time since the early 1990s, a recent Harvard study found.

West Virginia isn’t the state with the highest overall first-time homebuyer rate. That honor goes not to a state at all but to Washington, D.C., where 68% of buyers were first-timers, according to the Federal Housing Finance Agency data that GoBankingRates used.

Why not choose Washington as the best market for first time buyers? The FHFA study found that first-time home buyer rates typically fell when real estate prices rose. Washington’s real estate prices have been on a tear and median home prices now stand at more than half a million dollars. In other words, while the city may be full of aspiring first-time homebuyers, their task is getting harder, not easier.

MONEY Housing Market

Watch: This $40,000 Film Was Made Solely to Sell a House

film director and movie camera on cherry picker
Phil Hunt—Getty Images

Realtor video has bigger budget than some hit indie films.

Have you seen “9133 Oriole Way” yet? It’s a new independent film that was made in L.A. While only 4 minutes and 39 seconds long, it was put together with an impressive budget of more than $40,000, which surpasses how much it cost to make legendary full-length feature films like “Paranormal Activity” and “The Blair Witch Project.”

What really makes “9133 Oriole Way” stand out, however, is the reason it was created—not to entertain the masses, but to sell a home.

The address of the home in question is, of course 9133 Oriole Way, in West Hollywood, and the “lifestyle film” showing off the property was paid for by Williams & Williams, the real estate agency that specializes in “the most high-end properties from the Hollywood Hills to Malibu,” and works with “the cities [sic] biggest A-level actors, athletes, entertainment professionals and Fortune 100 executives.” (Apparently, they don’t work with a copy editor.)

“Regular marketing doesn’t work anymore. We’re appealing to a more sophisticated and savvy group of buyers,” Rayni Williams, of William & Williams, said to the Los Angeles Times, in explanation for why the agency made the film. “We’re taking it to a whole other level.”

According to the LA Times, Williams & Williams spent months finding a director, cast, and crew to make the promotional video. The result is something far beyond a lame slideshow or some kind of video version of the standard still photos showing off a home on a realtor website. While the entire video is set to music (“My House” by Flo Rida) and there is no dialogue, there is something of a plot, in which a handsome hotshot tears out of the home in a Corvette, leaving behind a gorgeous woman who decides to invite over four more gorgeous women to enjoy the property to its fullest. They’re seen lounging by the pool in skimpy bikinis and clinking glasses in the wine cellar in between slow crawling shots showing off the home’s massage room, fitness center, views of downtown, and other selling features.

Why would Williams & Williams fork over $40,000 to show the property off in such extravagant fashion? Well, the agency stands to take in over $1 million if and when it sells the 12,530-square-foot home, which is located in the hills near homes owned by Leonardo DiCaprio and Keanu Reeves and is listed at a cool $33 million. Watch on, and let the realtors know if you’re inspired enough to put in a bid.

MONEY renting

9 Apartment Hunting Traps to Avoid

Tom McGhee—Getty Images

It's moving season!

Looking for a new apartment to rent? Spring and summer are moving season for many renters. It’s also a time filled with excitement and hope — the hope that the next place will be better than the last. I’ve been there.

Fortunately, a lot of the problems that plague renters can be avoided just by choosing that apartment a little more carefully. Here are nine apartment hunting mistakes to avoid while you’re looking.

1. Assuming That Moving Will Solve Your Problem

As a renter, it’s easy to get used to moving; new year, new apartment. Unfortunately, that new lease often means a new set of problems. Moving is stressful and carries a long list of expenses. Before you decide to move to where the grass is greener, consider whether you’re really that unhappy where you are. Every living space has its pros and cons. Decide whether you can live with your apartment’s drawbacks before moving on to a new set of problems.

2. Falling in Love Too Soon

These days, apartment hunting usually begins online, where you can browse through photos of apartments for rent in your area. There’s nothing wrong with doing a little previewing before you go out to view these places in person; just keep in mind that in many cases, photos tell very little. Not only will landlords do their best to make their rental units look attractive, but photos also lack a lot of detail. A rental unit that looks super cute and cozy in a photo, might turn out to be much shabbier in real life. The problem is, if the photos put stars in your eyes, you might already be in love.

3. Failing to See the Big Picture

Before you set out to look for a new apartment, think about what’s really important to you. Are you looking for a short commute to work? Proximity to certain amenities such as shopping, parks, or public transportation? It’s important to understand the big picture in terms of what you want out of your apartment, to size up each apartment as a whole. Otherwise, you’re likely to zero-in on smaller, less important details, like the size of the unit, the decor, or fantastically cheap rent.

4. Allowing Yourself to Be Wooed by Fancy Fixtures

Fancy fixtures like hardwood floors and granite countertops are great, but when you have a budget to stick to, it’s best not to be too fixated on what are essentially details. For one thing, these amenities are purely aesthetic, and will quickly lose their luster if the apartment fails to meet your needs in other key ways. Plus, in many cases, apartments in less desirable locations get the best cosmetic upgrades to entice renters. If you wouldn’t live in this apartment if it didn’t have fancy fixtures, you probably shouldn’t move in just because it does.

5. Going Out of Your League

Before you start looking for an apartment, you have to decide how much rent you are capable of paying. Most financial experts recommend that you spend no more than 30% of your take-home (after-tax) income on housing. Depending on your other financial obligations — and your personal financial goals — you may want to spend even less. But no matter what price point you decide on, once you have a number in mind, stick to it. And do not, under any circumstances, look at apartments that exceed your budget. Chances are they will be nicer. As a result, they will make the places you can afford look much shabbier in comparison. They might also tempt you to blow your budget.

6. Failing to Read the Rental Agreement

I once signed a rental agreement that stated that I was responsible for repainting the apartment before moving out. I was a student and had never painted anything in my life. Of course, I lost most of my damage deposit on that one. Rental agreements lay out, in legal terms, what you as a renter are responsible for. Read every word carefully and make sure you’re up for it. If you aren’t, move on.

7. Overlooking Existing Damage

Most rental agreements include a damage deposit. This is money that the landlord holds in order to pay for any damage the tenant may cause during the term of the lease. This can get tricky if you don’t document any damages that were already there when you moved in. On the day you get possession of your apartment, walk through it with your landlord and document existing damage to ensure you are not charged for them when your lease is up.

8. Not Considering Roommates Carefully

I’ve been lucky to have really good roommates, but living with other people is still hard. When you share your personal space with someone, you get to know each other on a pretty intimate level. Things can get ugly. So try to choose your roommates carefully. There are different philosophies on this. Some people think it’s best to choose a roommate who isn’t a friend. Others say it’s best to room with a bestie. Either way, make sure you get some references to ensure that your roommate has a solid history of paying their rent.

9. Not Vetting Your Landlord

Some landlords care about their properties and their tenants. They’ll take your calls and fix leaking toilets and send an exterminator in to deal with your ant problem. Other landlords treat their tenants like cash machines; money is withdrawn, never to be seen again. If you have problems with your apartment, a bad landlord can make your life hell. I once tip-toed across a bridge of soggy cardboard boxes for weeks until my landlord got around the fixing a leaking hot water tank that flooded my apartment. So, be sure to run a check on your landlord before you sign a rental agreement. Do a Google search, ask if you can contact previous tenants, and check with the Better Business Bureau to see if any complaints have been filed against the landlord or property management company. If you discover serious issues, find another place to rent. Dealing with an uncooperative landlord just isn’t worth it.

What apartment-hunting mistakes have you made? How did you learn your lesson?

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MONEY home maintenance

How Much to Tip for Home Services

For Sale sign illustration
Robert A. Di Ieso, Jr.

Q: I never know if I’m supposed to tip the various people who come to work at my house. Are there any basic rules of thumb I can follow?

A: We turned to Boston, Mass., etiquette consultant Jodi R.R. Smith to help with your question. She gave us a quick history lesson. Or perhaps it’s mythology. The story goes that “tips” is an acronym for “to insure prompt service.” That’s prompt service next time, since you tip after the fact, so it’s especially important to tip people who will be coming back again.

Tipping is never required, Smith says, but when it comes to people who are caring for your house and belongings, there are times when it’s highly advisable—and other times when workers could take offense at the offer. Here are Smith’s guidelines:

  • Don’t tip skilled craftsmen or technical specialists, such as plumbers, electricians, painters, alarm service technicians, handymen, piano tuners, or appliance repair people. “That’s like trying to tip a doctor or a teacher,” Smith says. “They are well-paid professionals, and a tip could offend them.” If you want to reward a professional who regularly provides exemplary service, give a holiday gift, such as a bottle of wine or a tin of gourmet cookies.
  • Do tip lawn-mowing crews, snowplow drivers, oil-truck drivers, and sprinkler servicers—but only if you’re dealing with employees, not the business owner, and only if you see the same guys come around every time. Don’t tip at the time of service, however. Tip once a year as close to the holidays as you can. “During the course of the year, offer a cold drink, a cup of coffee, a bathroom,” Smith says.
  • Mail carriers and UPS/Fedex drivers are not supposed to take cash, according to agency and company policies. But that doesn’t mean they won’t, and they are allowed to take small gifts.
  • When tipping more than one worker, try to have small bills so you can split the tip evenly among them. If you get caught with a large bill, hand it to one of them while everyone is present or announce that you’re giving a tip, and what amount, when everyone is within earshot.
  • How much to tip depends largely on where you live. “It’s all demographics,” Smith says. “If you live in a simple five-story walkup, giving the doorman $50 around the holidays might be appropriate,” says Smith. “In a high-rise with multi-million-dollar apartments, the norm might be $5,000.” And there’s a full spectrum in between. In general, Smith recommends giving $5 to $10 to each worker for a quick job, and $20 to $25 for bigger projects.
  • Food delivery people, however, are a special case. “I always over-tip them,” says Smith. “Give them $5 per pizza they deliver, and they’ll start coming to you first, even if you’re supposed to be last on their route.”
  • Movers are also a special case. If they load the truck one day and then deliver everything on a different day, make sure to tip them at the end of both days. “The guys who load the truck may be different guys who unload it, and they are handling all of your earthly possessions, so you want to keep them happy.”

MONEY home improvement

2 Ways to Make Going Solar More Affordable

Mischa Keijser—Getty Images

A new system can cost more than ten thousand dollars, but leasing a system or taking out a loan can lower your initial cash outlay.

The price of electricity has consistently increased for the last several years, and it’s projected to continue rising in the future. This summer, the U.S. Energy Information Administration expects consumers will spend 5.9% more on electricity than they did in the summer of 2014.

If you don’t like the sound of that, maybe it’s time to consider an alternative. Residential solar energy has grown a lot recently, and in addition to the environmental motivations for choosing that resource, using solar energy to power your home could be a big money saver. At least, that’s how proponents of the industry pitch it.

Whether or not you can power your home with solar energy depends on a lot of things, like the ability to connect solar units to the power grid (not so easy in many states), the type of property you own and, obviously, its ability to receive sunlight. The ultimate money-saver would be to buy a solar energy system and be able to produce enough energy to power your home — once you’ve absorbed the cost of the system, it’s a practically free utility (though you still have to pay a few bucks a month for the electricity delivery).

“It’s basically like switching from renting utilities to buying a utility plant,” said Alex Valdez, CEO of EcoMark Solar in Colorado. If you can’t afford to buy a system (they can cost tens of thousands of dollars, though prices vary widely by how much energy you need), you have a few options.

You Can Rent a System

When solar energy first emerged in the residential market, homeowners weren’t eager to invest thousands of dollars in an energy system they weren’t familiar with. As a result, the market started off mostly with power purchase agreements (PPAs), in which an investment bank would install a system on a home and charge the homeowners for usage, on an escalating scale as time goes on.

“If you pay 10 cents per kilowatt hour, next year it might be 11 cents per kilowatt hour; that reduces the client’s savings,” said Jonathan Caizley, chief technology officer for Sunistics in California. At the end of the agreement term, usually 15 or 20 years, the homeowner doesn’t own the system, but they can buy it.

PPAs aren’t available everywhere, but a solar lease is similar in that the consumers don’t own the systems. Terms are usually shorter than with PPAs and come with fixed payments, Caizley said. Homeowners generally still save money, compared to what they’d pay a traditional utility company, because the system owner can receive tax credits for the system, and those savings are passed on to the consumer.

This option makes sense if you have the opportunity to try out alternative energy but don’t want to pay a high out-of-pocket cost. Still, you have to have good credit to get a PPA or solar lease. Caizley said applicants must often have a credit score in the 700s, on a 300 to 850 credit score scale.

You Can Buy a System

Even if you don’t have the cash, you can buy a solar energy system for your house (assuming your house meets the criteria). Loans are becoming much more popular.

“Solar loans for a first time [in 2015] are going to be more popular than PPAs and solar leases,” Caizley said. He’s seen interest increase as consumers become more informed about solar energy as a residential resource. “They see the value of consuming the tax credit on their own. Oftentimes what it comes down to is do they want to save money on their electricity bill right off the bat or do they want to invest in the system and have a project with a high return on investment.”

For those looking for the higher return on investment, financing the system could be a great option (if you don’t have the cash, that is).

Right now, the most common option is to finance with the company that sells you and installs the system, though some big banks are moving into the solar financing space, Valdez said.

“The specific companies that are focused on solar financing have more of an idea of how to underwrite it,” Valdez said. That financing typically includes the whole thing — the system, city permits and installation. That’s not to say a home equity loan or a personal loan wouldn’t work, as well.

Valdez said consumers generally need a credit score of 660 or higher (on a 300 to 850 credit score scale) to qualify for solar financing. A few years ago, “you couldn’t touch anyone below 700,” he said.

As for cost, Valdez said the best offer they have is a 2.9% interest rate on a 12-year term, with the first 18 months interest-free. The shorter the loan term, the better the savings, though he said solar loans are usually 12- or 20-year terms. Caizley said their best rate is around 3.5%, but he’s seen solar loans with 6% or 7% rates. There are many factors in the pricing, not least of which is the consumer’s credit standing.

Making such a significant financial (and physical) commitment takes several months. First, you have to figure out if you can even get solar energy to power your home, then you have to get the system set up, which can take as little as a few months to as long as a year. If you’re considering an investment like this, you’ll need to know if you have a shot a qualifying for financing. To see where you stand, you can get two of your credit scores for free on

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MONEY home improvement

8 Mistakes Sabotaging Your Home’s Curb Appeal

Finn O'Hara—Getty Images

The worst mistake is doing nothing at all.

When your home is on the market, first impressions are everything: An unkempt yard or peeling paint will scare some buyers away completely, while a neat, pretty exterior will bring in more potential buyers.

Escape the pitfalls of an unsightly exterior by avoiding these eight common mistakes that can sabotage curb appeal.

1. Doing nothing

“One of the biggest mistakes I see is sellers not doing anything in terms of curb appeal,” says Matthew Coates, a real estate agent with West USA Realty Revelation in Chandler, AZ.

Many sellers focus their staging efforts inside the house, but the exterior is at least as important. Spend half a day cleaning up your property to reinforce the impression that your home is well-cared-for.

2. Too much clutter

It’s one thing to have a cluttered yard most of the time, but it shouldn’t be cluttered when your home is on the market. A collection of shoes near the front door, a jumble of lawn furniture, kids’ toys — all of that should be cleared away, with only a few tasteful pieces left out to make the yard look homey and to give buyers ideas for how the space could be used.

3. Tired landscaping

Don’t go overboard and bring in a backhoe to level the lawn, but do make sure the yard is looking its best. Water the grass, trim the hedges, and put in a few perennial flowers to brighten things up.

“Adding vibrancy with fresh flowers would make a world of difference and make the yard inviting and alive,” says Coates. Backyards and gardens teeming with bright flowers are one of the main reasons the real estate market heats up in spring.

If it’s not springtime, you can still add a little color to your yard by planting seasonal flowers, sweeping up dry leaves, and making sure it’s looking its best.

4. Peeling paint

There are many theories about which renovations are worth investing in when a house is on the market. We would contend that touching up the paint on the front of your house is one of them.

New paint won’t disguise a house that’s in need of major repairs, but it will give the house a more cheerful appearance than peeling paint. It may not be practical to repaint the entire exterior, but repainting the trim goes a long way. If you can’t paint all of the trim, focus on the trim around the main door so that the buyer standing on the front porch carries positive first impressions inside.

5. Quirky art

That enormous elephant statue may fit your tastes or express your eccentric sense of humor, but you don’t want buyers to fixate on one thing that makes the house seem bizarre. Because you can’t anticipate everyone’s taste, it might be best to remove all the quirky art from your house and yard. You want to showcase your house as pretty and appealing. A trusted friend’s honest opinion will help you part with your precious treasures — even if just for staging.

6. Unusual landscaping

In some circles, front yard vegetable gardens are all the rage. You’re welcome to put tomato plants into the flower beds in your front yard — but buyers might not love the look. When you’re selling, the front yard is best served by ornamental plants only.

Similarly, the backyard should be an inviting outdoor living space. Consider removing the backyard poultry farm, the goat pen, and any other unusual pet habitats.

7. Shocking colors

Is your house locally known as “the bright purple one” or “the Easter egg house?” Bright colors are cheerful, but again, you don’t want your bold taste to scare off a solid buyer.

Consider using neutral paint colors and lawn furniture when your house is on the market. For inspiration, look around the neighborhood. Your house should complement the ones around it. Save your wildest color fancies for your next home — not the home you’re trying to pass along to its next owner.

8. Outdated fixtures

New exterior light fixtures aren’t very expensive, and they make a big difference. Not only will they give the impression that your home has been updated recently, but they’ll also cast a brighter light for evening drive-bys. Matthew Coates also recommends making sure the hardware on your front door is in working order.

“Nothing will turn off a buyer faster than if it’s a chore just to get in the door,” he says.

None of these solutions are expensive — decluttering, a bit of fresh paint, a few flowers here and there. However, all these steps will help potential buyers inside the house, where your home’s real charm will have a chance to cast a spell.

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MONEY home prices

Real Estate In This NYC Neighborhood Is Worth More Than All of New Hampshire’s

Brownstones on the Upper East Side, New York City.
Patti McConville—Alamy Brownstones on the Upper East Side, New York City

And a bunch of other states' too.

New Yorkers are known for their not-so-subtle indifference to the rest of country. Just think of that famous cartoon, where beyond the Hudson River, a featureless expanse fades into the the Pacific Ocean and a distant sliver marked Japan.

When you view the country through the lens of real estate values, New Yorkers’ view seems crazily close to the mark, at least according to data compiled by Metrocosm, a website run by real estate researcher and New Yorker (of course) Max Galka.

According to Galka’s calculations, New York City’s 305 square miles, which amount to less than one one-thousandth of the nation’s land mass, are valued at about $1.5 trillion, 5% of the $33 trillion value of the entire nation’s real estate.

Looked at another way, only three states beside New York State itself—California, Florida, and Texas— have total real estate values higher than Gotham’s.

The Upper East Side, essentially a handful of tony blocks adjacent to Central Park, is itself worth about $96.5 billion, according to Galka, more than several states including New Hampshire, South Dakota, and Wyoming. The Upper West Side, home of the famous Dakota apartment building (where John Lennon lived and Rosemary’s Baby was set), is worth more than all the real estate in either of the actual Dakotas.

Overall, Manhattan real estate is worth about $733 billion, in line with all the properties in Ohio, Michigan, and Georgia.

MONEY home construction

The New Green Building Trend is Bricks of Cannabis. Really.

Rainer Nowotny, managing director of the company Hemp fibre Uckermark eG, presents bricks made of clay and hemp in Prenzlau, Germany, July 24, 2013.
Bernd Settnik—dpa/AP Images Hemp, which can be mixed with lime and water to make "hempcrete" blocks, has been used for decades as a building material in Europe.

Builders are using cannabis "not in joints but between joists."

The jokes about homes “going up in smoke” are inevitable.

But the truth is that one of the reasons the cannabis-based building material called hempcrete is gaining acceptance in home construction is that it’s entirely fireproof. As a recent New York Times story reported, hempcrete has been used as a building material in Europe for decades, and lately it’s been incorporated in more homes and offices in the U.S. A small group of hemp entrepreneurs envisions a time very soon when hempcrete will be totally mainstream.

Hempcrete is made with the wood-like interior part of a Cannabis plant, which resemble the look and feel of balsa chips. They’re combined with lime and water, and the resulting material is a block that provides terrific natural insulation, while still being flexible, breathable, and, as mentioned already, fireproof.

And there’s no need to worry about teenage hooligans ripping out your insulation to smoke it. Hempcrete contains an almost imperceptible amount of THC, the active ingredient in marijuana that gets you high.

MONEY real estate

Home Prices Continue to Rise, But For How Long?

aerial view of subdivision
David Sucsy

Home prices rose 6.3% in May, but higher interest rates loom.

More good news for those of us looking to sell homes.

Home prices climbed 6.3% in May, marking the 39th consecutive month of year-over-year gains, according to a report by CoreLogic. Prices in 10 states, including New York and Texas, plus Washington DC, hit 40-year highs.

But for owners and would-be sellers, the silver cloud has a gray lining. The rate at which prices are rising, which topped 10% in 2013, has begun to slow. Moreover, a key factor driving May’s growth, according to CoreLogic was 30-year mortgage rates, which remained below 4% during throughout the first half of the year. Low mortgage rates tend to push up home prices by making it possible for buyers to borrow more. Conversely, even a small increase in rates can add hundreds of dollars to a monthly mortgage bill.

A potential problem: Last week Freddie Mac reported 30-year mortgage rates had climbed above that threshold to 4.08%. Freddie’s chief economist, Sean Becketti, recently said that much of the recent surge in home prices was the result of buyers trying to act before they climbed even further. That’s likely to happen soon, since the Federal Reserve, which as been holding rates low since the recession has said it plans to begin slowly ratcheting them up as soon as September.

Just how big can the effect be? Real estate analyst HouseCanary recently estimated that if mortgage rates reached 6%, a third of millennials—key first-time home buyers—wouldn’t be able to afford a home at today’s rates.

For the next twelve months, CoreLogic expects a more modest increase in home prices — a gain of 5.1%. But others have sounded less optimistic.

“I’m worried about it,” Glenn Kelman, chief executive of Redfin, a real-estate brokerage recently told the Wall Street Journal. “The rates have been so low for so long that trying to persuade anyone that 4% or 4.5% is still a bargain may not be easy to do.”



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