MONEY home prices

America’s ‘Gayborhoods’ Are a Lot More Expensive, a Lot Less Gay

Castro Street in San Francisco is decorated in rainbow flags and balloons for Gay Pride month.
Castro Street in San Francisco. Cammie Toloui—Alamy

What becomes of a trendy gay neighborhood when housing prices soar and straight people move in?

As gay acceptance has risen over the years, gay people have increasingly moved away from historically gay neighborhoods, such as the Castro in San Francisco and Chicago’s Boystown. Simultaneously, more and more straight individuals and couples have felt comfortable enough to move into these neighborhoods. As a result, many gay neighborhoods—call them “gayborhoods”—aren’t nearly as gay as they used to be.

That’s the gist of a new book called There Goes the Gayborhood? by Amin Ghaziani, an associate professor of sociology at the University of British Columbia. His research traces the changing face of gay neighborhoods and explores the implications of these shifts in cities around the U.S.

For instance, from 2000 to 2012, the number of same-sex couple households increased in nearly every neighborhood in Seattle, with one glaring exception: Capitol Hill, described as the “center of the city’s gay and counterculture communities,” according to Wikipedia, experienced a 23% decrease in same-sex households over the same time span, the Seattle Times noted.

“This isn’t unique to Seattle,” Ghaziani explained. As gays have moved far beyond gayborhoods to other parts of cities and into small towns and the suburbs, a “straightening” has taken place in neighborhoods like Capitol Hill.

Much of Ghaziani’s research is based on Chicago’s Boystown, where he lived for nearly a decade, and where the idea for the book was born. “My friends and I began to notice changes in the character and composition of the neighborhood,” he said to the Chicago Tribune “We’d notice more straight couples holding hands and more baby strollers. That became a symbol. Oftentimes a sex store would close and a nail salon would open in its place.”

The shifting demographics must be viewed as a sign of growing acceptance—that of straight people in traditionally gay neighborhoods, and of gay people throughout the land. Still, many of the sources quoted in Ghaziani’s book worry that the blurred lines could mean that much of what makes a gayborhood special will disappear. In an op-ed he wrote recently, Ghaziani quoted Dick Dadey, who was the executive director of Empire State Pride Agenda in the 1990s, explaining, “there is a portion of our community that wants to be separatist, to have a queer culture.” Still, Dadey said, “most of us want to be treated like everyone is,” and, “we want to be the neighbors next door, not the lesbian or gay couple next door.”

Then there are the financial implications of all of these shifts. “It’s impossible to discuss gay neighborhoods without considering economic factors like rent and housing prices,” Ghaziani said in an email to MONEY. He pointed out some data from Trulia in the book showing that several traditionally gay neighborhoods, like West Hollywood and New York’s West Village, are extremely expensive places to live.

Meanwhile, according to 2013 report from Trulia, prices in urban U.S. neighborhoods have been increasing at a faster pace than the suburbs, and prices soared in gay-friendly city neighborhoods in particular:

Neighborhoods where same-sex male couples account for more than 1% of all households (that’s three times the national average) had price increases, on average, of 13.8%. In neighborhoods where same-sex female couples account for more than 1% of all households, prices increased by 16.5% – more than one-and-a-half times the national increase.

These numbers are backed up by other research, such as that highlighted earlier this year by Richard Florida, the celebrated urban theorist and author of The Rise of the Creative Class. In a City Lab post, Florida summed up recent research indicating “a connection between gay neighborhoods and some of the markers of gentrification,” and that “neighborhoods that began the decade with larger concentrations of gay men saw greater income growth, and, especially in the Northeast, greater population growth as well.”

Ghaziani writes, “I don’t think gayborhoods are dying.” But Florida doesn’t sound quite as convinced, writing, “As these areas of the city continue to change, potentially pricing out some of the gay couples who moved in decades ago, gayborhoods could just as easily become a thing of the past.”

MONEY Millennials

The 15 Most Affordable Cities for Millennials

Greeting Card from Augusta, Georgia. ca. 1943
Universal Images Group (Lake County Discovery Museum)—Alamy

Finding an affordable place to live is one of the biggest challenges for millennials. This list should make it easier.

Last week, we told you about the 15 most expensive cities for millennials to live in based on a recent study by RealtyTrac. This week, we bring you the other side of the story: the 15 areas that are the most affordable, and the most attractive, to young people.

To quickly review how this list came to be, RealtyTrac ranked counties with at least 100,000 people by the percentage of median income one needs to spend in order to make a median housing payment or pay an average rent bill on a three-bedroom property. To make sure these cities are actually places young people would want to live, the company only included areas where millennials make up at least 24% of the population, and where the percentage of millennials has increased over the past six years.

So which area wins the most-affordable crown? It depends if you’re renting or buying. As is often the case, renting is significantly more expensive than making payments on purchased property. The best county for buyers—Richmond County, Georgia, which includes the city of Augusta—will cost an owner 10% less of their median income than if they were renting in Bossier Parish, Louisiana, the most affordable area for leasing.

For renters, Bossier Parish, home to Bossier City, will cost about 20% of the area’s median income. Average rent on a three-bedroom is a paltry $943. There aren’t as many familiar names on this list as its less affordable cousin, but some relatively major cities do make an appearance. Dane County, ranked ninth, includes Madison, Wisconsin; a beautiful city that also houses one of the nation’s top universities. Franklin County, home to to Columbus, Ohio, also offers a great city for millennials to live. Minneapolis, Minnesota’s Hennepin County even squeaks in at number 14.

Those willing to purchase a home are going to see a very different ranking. While Baltimore and Philadelphia are some of the least affordable places to rent, they’re actually one of the more affordable cities for buyers. Philadelphia County and Baltimore City rank 5th and 6th respectively, and payments will cost buyers around 14% of their area’s median income. Other highlights are Milwaukee, Minnesota, which comes in 9th, and Columbus’s Franklin County, which makes another, more highly ranked appearance.

Want the whole list? Here it is:

MONEY home improvement

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Go to thisoldhouse.com/win to choose which prizes you’d like to enter to win. You can pick them all, or check only the prizes you want. Enter every day between now and September 2 for more chances to win.

Related:
The $468 Farmhouse Kitchen
The Best Yard Tools for Your Money
4 (Mostly) Cheap and Easy Ways to Green Up Your Grass

MONEY Millennials

The 15 Most Expensive Cities for Millennials

Skateboarder on the Golden Gate Bridge, San Francisco, California
And the "winner" is...the City by the Bay. Jordan Siemens—Getty Images

Finding an affordable place to live is hard, especially when you're just starting out. Here are 15 cities where you'll be pinching pennies.

In June, I moved out of my college dorm room into what I thought was a reasonably priced apartment. I need two roommates to afford the monthly rent, and my room lacks space for anything more than a bed and tiny desk. But I figured those were luxuries my peers in other big cities gave up in their first apartment, too, right?

Wrong.

A new report from RealtyTrac ranks New York, my home town, as the one of the least affordable areas for millennials in the entire country. The study ranked counties with at least 100,000 people by the percentage of median income one needs to spend in order to make a median housing payment or pay an average rent bill on a three-bedroom property. In order to focus on young people, RealtyTrac only included areas where millennials make up at least 24% of the population, and where the percentage of young people has increased over the past six years.

When it comes to least affordable counties to buy a house, four of NYC’s five boroughs take up almost a third of the list, with Manhattan (New York County), Brooklyn (Kings Country), the Bronx (Bronx County), and Queens (Queens Country), each “earning” a spot.

The West Coast isn’t off the hook, either. Beating out Manhattan for the dubious honor of most expensive city for young people is San Francisco. Buying a median-priced three-bedroom house—$950,000 as of this April— in the City by the Bay will cost median income earners more than 78% of their wages.

In terms of renting, the picture changes—but only slightly. Bronx county is the least affordable of the nation’s millennial-heavy areas, not because three-bedroom rent—averaged at about $1,850 a month—is particularly expensive, but because median incomes are relatively low. In 2014, the median Bronx household is estimated to make only $32,891.

For residents of San Francisco, renting is actually relatively more affordable than buying. Leasing an apartment will take about 40% of a median earner’s income, almost half of what the usual housing payment would take away.

OK, we all knew New York and San Francisco were going to be expensive (just maybe not this expensive), but there are some surprising names on the list, too. Our nation’s capital takes up two spots on the most unaffordable homes list, and snowy Denver, Colorado, comes in before Portlandia‘s notoriously expensive namesake.

(No word on whether Denver has restaurants that inform you how many friends your chicken dinner had growing up.)

Renters will also notice that some cities they thought were cheap are a lot less affordable than expected. Baltimore, home of The Wire, is the the second least affordable city, behind the Bronx. Philadelphia comes in third, but the good news is that millennials have been surging into the city recently. From 2007 to 2013, Philly’s young-person population has increased by a fourth. At least you’ll have people your age to complain to about the rent.

What’s also notable are the cities not on this list. Hubs like Boston, San Antonio, Chicago, Houston, and San Jose are nowhere to be found. That doesn’t mean they’re cheap, but their prices might be more manageable than most people realize.

Check out the full list below for even more information.

More: The 5 Cities That Have Recovered Most—and Least—From the Recession

 

MONEY Ask the Expert

The Best Yard Tools for Your Money

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Robert A. Di Ieso, Jr.

Q: We just moved out of the city and are gearing up for our first yard work. How do we decide what type of lawnmower, hedge-trimmer, leaf blower, and other machines to buy? Our options include gas, plug-in and battery-powered.

A: Welcome to suburbia! As you begin to enjoy the many benefits of lawns and foliage, you’ll also likely quickly discover yard work needs to be done weekly during much of the year, taking anywhere from an hour to a whole day depending on the chore at hand and the size of your property.

You might shell out $1,000 to $5,000 on the equipment you’ll need, but assuming you stay with your do-it-yourself plan for perhaps five years or more, that investment will more than pay for itself compared with hiring a pro to tackle the work. (If you’ve never before used mowers, string trimmers, leaf blowers and such, get a friend who owns them to give you a lesson before you buy.)

Gas-powered equipment is the gold standard. You get virtually unlimited run time (as long as you keep your gas can full), with plenty of power. There are downsides though: Gasoline engines need regular service (technically every year), and they’re bulky and loud. They may require a strong arm to start, especially as they age.

Plug-in machines, on the other hand, start with the flip of a switch and need no maintenance, other than sharpening blades perhaps once or twice a decade. They weigh less than a gas tool and cost less too. The price for a handheld machine, such as a leaf blower or hedge-trimmer, comes in at just $50 to $70, compared with $130 to $250 for gas. The problem is that plug-ins lack the power of gas, plus you have to drag long extension cords around to use them. That’s why Chris Bolton, of the giant Michigan equipment retailer Weingartz, doesn’t recommend plug-in tools for anything larger than a postage-stamp-size lot.

Battery-powered machines have long been the also-rans of the outdoor power equipment world. Thanks to new battery technology, though, they’ve leapfrogged plug-ins and now offer a middle ground between burning gas and dragging cords in terms of power, weight, and convenience. The downsides: They are pricey, with a high-quality handheld coming in at $400 to $500 (perhaps twice the price of an equivalent gas machine), and the batteries typically only last 4 to 5 years. Replacements run about $80 apiece.

As long as you’re able-bodied enough to handle their weight and power, go with gas for your mower and snow thrower (if you need one), which are jobs that demand maximum power, says Bolton. If you prefer batteries for other tools, go with the same top-of-the-line name brand for them all. That way you’ll get plenty of power and the batteries will be interchangeable. Buy two so that when you’re using one, the other can be charging. Also spring for the quick-charger upgrade so you never have to wait on a battery and can get back to enjoying your new yard as fast as possible.

MONEY home prices

Backlash Against Foreign Home Buyers Takes Off

Foreigners are paying cash for U.S. real estate. Turns out some of that money is laundered. Fuse—Getty Images

It’s no secret that outsiders are collecting homes in cities around the country. Often the mystery is who they actually are, and where their money comes from.

Updated: August 1, 2014 11:00am

Foreign interest in U.S. real estate continues to grow, according to a report released this month from the National Association of Realtors. International sales rose from $68.2 billion to $92.2 billion over the past year, thanks to favorable exchange rates, affordable home prices, and rising affluence abroad.

In the wake of the housing bust, foreigners helped revive many U.S housing markets by scooping up properties when Americans were running scared. Despite the rise in prices since then, the attraction doesn’t seem to have soured. Experts estimate at least one-third of newly developed apartments in Manhattan go to international buyers. Other metropolitan areas including Los Angeles and Miami are also seeing demand, as well as even second-tier cities in places like Arizona and Texas.

Investors have been flocking from all over the map: China, Russia, The UAE, Switzerland. The industry catering to these faraway landlords—in charge of everything from managing payments to choosing lighting fixtures—has ballooned, since many of the apartments are rented out or sit empty.

Sales of ultra-high-end pads have received much of the media attention. Publications ranging from CBS News to Vanity Fair paid attention when two years ago a family member of Russian fertilizer oligarch Dmitry Rybolovlev purchased the most expensive condo in Manhattan, for $88 million. But you’d be wrong to think it’s only billionaires that want a place on American soil. Buyers regularly hunt for homes and apartments at more mainstream prices (although, to be fair, the median price of a condo in Manhattan runs nearly $1.4 million). The National Association of Realtors reports that more than one-quarter of agents have worked with international clients. Chinese buyers spend $425,000 on average on U.S. homes, with about two-thirds of the deals being all-cash.

The Backlash

No surprise, the out-of-towners have earned a bad rap from many locals, who are losing bidding wars to the cash offers and feeling squeezed by the inflated prices. The outrage had grown strong enough in New York that in February writer Diane Francis, a Canadian who owns a place on Manhattan’s 57th Street, penned an opinion piece in the New York Post proclaiming that foreign real estate buyers in New York are not the enemy. She pointed out that she and her husband pay at least $25,000 a year in property and sales taxes but don’t cost the state’s schools, hospitals, or jails a dime.

Last month New York magazine fueled the rage with its cover story, “New York Real Estate Is the New Swiss Bank Account,” suggesting that wealthy foreigners are using property to hide—and sometimes launder—their rubles and yuan. Another story a few days later from the Nation, both part of a joint project that included the International Consortium of Investigative Journalists and the Organized Crime and Corruption Reporting Project, piled on. A few tidbits from New York magazine:

As New York magazine noted, it’s often anonymous LLCs and bank accounts behind the purchases:

“There is nothing illegal—at least from the destination nation’s perspective—about sending money from an anonymous offshore bank account to purchase property in America. On the contrary, it’s an everyday occurrence.”

Sometimes not even building managers or the best neighborhood snoops know who the mysterious owners are, or where the money came from.

“With a little creative corporate structuring, the ownership of a New York property can be made as untraceable as a numbered bank account…. Those on the New York end of the transaction often don’t know—or don’t care to find out—the exact derivation of foreign money involved in these transactions.”

While not all of the foreign money coming in is laundered, some of it is, and public officials so far haven’t taken up the issue. From the Nation:

“U.S. authorities don’t put up many roadblocks for foreigners who want to launder money through American real estate. Escrow and real estate agents aren’t required to find out the true identities of property buyers—the real people behind the front men or corporate shells.”

Will enough outrage boil up that politicians feel obliged to make buying less attractive for foreigners? The capital-gains tax rules were recently modified in London, dimming future returns for foreign investors (and likely sending more buyers to this side of the Atlantic). Yet Adam Davidson, writing in the New York Times Magazine, points out one upside:

“I initially felt anger and disgust at the idea of absentee billionaires hoarding Manhattan real estate, making the city even more unaffordable while they live like princes in Moscow or Hong Kong or wherever. But then I did the math. Assuming that their money has to go somewhere, it’s not so bad that these billionaires choose to put a chunk of it here. Any city official in Dayton or, for that matter, Philadelphia would do anything to have such problems.”

The trend may slow on its own, particularly at the ultra high end. Developers looking to cash in on the world’s wealthy may oversaturate the market. There is, after all, a fixed number of people worldwide who want—and can afford—to plunk down upwards of $20 million for a pied-a-terre. The New York Daily News recently pointed out that sales in at least one building on Manhattan’s West 57th Street, so-called Billionaires’ Row, have slowed.

Then last week, the conversation about luxury real estate shifted from shady foreign buyers to an issue much closer to home for most of us: the question of whether non-ultra-rich residents of a new luxury development on Manhattan’s Upper West Side will have to enter through a separate door.

 

Correction: A representative of Dmitry Rybolovlev stated in an e-mail to MONEY that the Manhattan apartment was purchased by Rybolovlev’s daughter, not by Rybolovlev, as the article originally indicated.

MONEY home prices

Why You Should Worry When Home Prices Fall in Minneapolis

Minneapolis
Minneapolis serves as a bellwether for national home values. Minneapolis Park and Recreation Board, courtesy of Meet Minneapolis

The Twin Cities signal what will happen next year to national home prices better than any other large city—though even it is far from a perfect bellwether.

Wouldn’t it be nice if there were a local housing market that we could use as the nation’s crystal ball? If one market regularly ran ahead of the national trends, we could pay extra attention to what’s happening there in order to know what the rest of the country should expect. During the housing bubble and bust over the last decade, there were clearly markets—like Las Vegas—that had more extreme swings in prices than others did, but being more extreme isn’t the same as being first.

To see which markets, if any, tend to get ahead of the national trend, we looked at home-price changes between 1980 and 2014 in the 100 largest U.S. metros and the U.S. overall, using the Federal Housing Finance Agency (FHFA) home-price index. Our crystal-ball score, calculated for each metro individually, is the correlation between the year-over-year home price change in that metro with the year-over-year home price change for the U.S. overall one year later. In other words, we’re measuring how closely the ups and downs in a local market’s home prices match the national ups and downs one year later. Remember that correlations range from 1 to -1: the higher the correlation, the stronger the forecast. A negative correlation means that a better year for a metro’s home prices is typically followed by a worse year for the nation’s home prices (and vice versa).

The Crystal Ball Award Goes to the Twin Cities
Among the 100 largest metros, the housing market with the highest crystal-ball score is Minneapolis-St. Paul. Other markets that are relatively good bellwethers include San Diego, Ventura County, and Sacramento in California; West Palm Beach and three other Florida metros; Washington, DC; and St. Louis. In general, these markets had a more severe housing bust last decade and faster historical price growth over the past three decades than other markets. But it’s an eclectic bunch, with St. Louis, Washington, and Minneapolis-St. Paul having had a milder bust than the markets in California and Florida.

# U.S. Metro Crystal-ball score: Correlation of local price change with following year’s national price change
1 Minneapolis-St. Paul, MN-WI 0.79
2 San Diego, CA 0.76
3 West Palm Beach, FL 0.76
4 Cape Coral-Fort Myers, FL 0.73
5 Ventura County, CA 0.73
6 Washington, DC-VA-MD-WV 0.72
7 Sacramento, CA 0.72
8 Palm Bay-Melbourne-Titusville, FL 0.71
9 North Port-Bradenton-Sarasota, FL 0.71
10 St. Louis, MO-IL 0.71

This graph shows what a 0.79 correlation actually looks like. Year-over-year home prices in Minneapolis – St. Paul tend to look like national changes but a little bit ahead:

AheadofCurve

What Happens in Texas, Stays in Texas
On the flip side, the markets that are the worst predictors of next year’s home price movements are clustered in and near the Gulf states. The six metros with the lowest correlations are all in Louisiana, Texas, and Oklahoma. The correlation is actually slightly negative for Baton Rouge.

# U.S. Metro Crystal-ball score: Correlation of local price change with following year’s national price change
1 Baton Rouge, LA -0.02
2 Houston, TX 0.02
3 San Antonio, TX 0.03
4 Austin, TX 0.03
5 Tulsa, OK 0.04
6 Oklahoma City, OK 0.05
7 Salt Lake City, UT 0.06
8 El Paso, TX 0.06
9 Greenville, SC 0.14
10 Buffalo, NY 0.22

Looking further at Texas, Dallas and Fort Worth would rank #11 and #13, respectively, on the lowest-correlation list. And if we extended the analysis to smaller metros, the lowest scores would be the next-door metros of Midlandand Odessa, TX, with correlations of -.24 and -.22, respectively. Several other smaller Texas and Louisiana metros also have negative crystal-ball scores.

What’s with Texas? The state was among the least affected by the bubble and bust of the 2000s; its worst period for home prices was in the mid-1980s, even though national home prices were fairly strong. Texas home prices are influenced by the swings in the energy industry, which means real estate in Texas and Gulf Coast tends to beat to a different drummer more than any other market in the country. Here’s how Houston’s price trend compares with the U.S.:

Can “Crystal Ball” Markets Really Tell the Future?

Before anyone starts booking tickets to Minneapolis, San Diego, or West Palm Beach to see what the future holds, here’s the reality check. While some markets are better leading indicators than others, none of them are that great. Our test of “great” is whether any local market’s price change in a given year is a better predictor of next year’s national home price change than this year’s national price change is. That means the number for a local market to beat is the correlation between national home price changes in one year and the next, which is .77. That’s higher than the correlations for 99 of the 100 largest metros — except for Minneapolis-St. Paul, which is just a hair better at .79.

Even though Minneapolis-St. Paul is the best predictor of national price trends for the 1980-2014 period overall, different metros are better predictors of the national trend for narrower time periods. During the recent cycle, from 2000 to 2014, Sacramento, San Diego, and Providence, RI, best predicted national trends; but from 1980 to 2000, three Massachusetts metros — Middlesex County,Worcester, and Boston –showed most clearly what the future had in store. The Twin Cities didn’t do so well in predicting national price trends in the 1980s and 1990s.

The answer, therefore, is that the crystal-ball award isn’t worth much more than the glass it’s made of. In no local market do home price trends consistently and reliably outperform the national price trend in predicting next year’s national price trends. There’s just no shortcut for understanding the U.S. housing market.

See the complete article, with additional charts, here.

Jed Kolko is the chief economist of Trulia.

MONEY Housing Market

The 5 Cities That Have Recovered Most—and Least—From the Recession

Some areas have rebounded nicely since the financial crisis. But many have not.

On Wednesday, the Department of Commerce announced the U.S. economy grew a healthy 4% in the second quarter of 2014. The good news aligns with other positive economic signals, like an increase in hiring, and suggests the nation as a whole might be on the road to recovery.

Unfortunately, this rosy picture hasn’t been shared equally across the United States. Some areas have recovered well, while others have struggled. A new report from personal finance social network WalletHub highlights which municipalities have made the most progress toward normalcy since the downturn, and the areas that still have a way to go. To compile the list, WalletHub analyzed 18 economic metrics for the 180 largest U.S. cities, including the inflow of college-educated workers, the rate of new business growth, unemployment rates, and home price appreciation.

Here are the results.

Most Recovered Cities

Klyde Warren Park, Dallas, Texas.
Home prices in Dallas have shot up since the crisis, bolstering the city’s economy. Trevor Kobrin—Dallas CVB

1. Laredo, Texas

Over the past seven years, this Southern Texas city’s median income has increased 5% while the population has surged 13%. State-wide bankruptcy is down, and new business growth is up.

2. Irving, Texas

Irving, sandwiched between Dallas and Fort Worth, earned high marks for rising median income (up 6% since 2007) and a decreasing ratio of part-time to full-time workers. The area has seen more college-educated workers moving in.

3. Fayetteville, North Carolina

More workers moved from part-time to full-time gigs in this city than any other place. Plus more college-educated workers are coming than going, helping the population spike over 14% since 2007.

4. Denver, Colorado

The Mile High City has seen a 12% jump in median income since the financial crisis. Most impressively, it’s one of the few areas to have seen home prices completely recover (and then some) from the housing crash.

5. Dallas, Texas

Dallas is still dealing with an increased ratio of part-time to full-time workers, but median income is up nearly 4% and home prices have appreciated a shocking 17% since the housing bubble burst.

Least Recovered Cities

Newark, New Jersey
Newark, New Jersey is still struggling to come back from the financial crisis. Flickr

1. San Bernardino, California

This Southern California city ranks as the farthest away from a full recovery. Both income and housing prices have dropped since 2007, with median income down 4%, and home prices down 43%. San Bernardino’s ratio of part-time to full-time jobs has also gone up nearly 14%.

2. Stockton, California

This Northern California inland area isn’t doing so well either. Incomes are down. Home prices have severely depreciated (down more than 43% from seven years ago), and the foreclosure rate is close to 18%.

3. Boise City, Indiana

Residents of Boise City have suffered an 8% drop in their median income since the crisis. Despite there being increasingly more full-time work opportunities, relative to part-time roles, new business growth remains far below its pre-recession level, down roughly 11%.

4. Newark, New Jersey

The median income remains down almost 5% in this urban area, adjacent to New York. Homes have been hit hard too. Housing prices are about 41% lower than they were in 2007.

5. Modesto, California

This town, which neighbors depressed Stockton, also hasn’t been able to break out of its post recession funk, likely because home prices remain down about 35%, and new business growth almost 9%.

MONEY Ask the Expert

What That Kitchen Remodel Will Really Cost You

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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%.

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