MONEY renting

These Are the Most—And Least—Affordable Places to Rent

Fieldston Historic District, Riverdale, Bronx, New York
Alamy Fieldston Historic District, Riverdale, Bronx, New York

A New York City borough is the least affordable—but it's not the one you're thinking of.

It’s no secret that renting has become more expensive in recent years. Now, new data a from housing data firm RealtyTrac lets us know exactly where in the country renting is most and least affordable.

In order to find out which areas are easiest on the typical renter’s wallet, RealtyTrac crunched the numbers on 461 counties across the U.S. with a population of at least 100,000 and sufficient data available, to determine the percentage of the local median household income that gets eaten up by the “fair market” rent (set by the U.S. Department of Housing and Urban Development) on a three bedroom property.

The Bronx, in New York City, where fair-market rent takes up a whopping 69% of median income, ranks as the least affordable county in the nation—a result of the borough’s extremely low median income and relatively high rents.

San Francisco, Brooklyn (Kings County, New York), and Philadelphia, are also high on the list, each taking up around 48% of the typical household salary in rent payments.

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On the other end of the spectrum, Delaware County, Ohio, was ranked as the most affordable city for renters, with fair-market rents costing just 14% of the median household income. Delaware was closely followed by Williamson County, Tennessee; Hamilton County, Indiana; and Fort Bend County, Texas.

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RealtyTrac also notes that renting is generally more expensive than buying a house. The firm found monthly ownership costs of a median-priced home—including mortgage payments, property taxes, and home and mortgage insurance, assuming a 10% down payment—account, on average, for just 24% of the median income. Fair-market rents, by comparison, averaged 28% of the typical household income. Overall, RealtyTrac found house payments were more affordable than fair-market rents in 76% of the counties it analyzed.

“From a pure affordability standpoint, renters who have saved enough to make a 10% down payment are better off buying in the majority of markets across the country,” said RealtyTrac vice president Daren Blomquist.

That said, Blomquist warned, “Keep in mind that in some markets buying may be more affordable than renting, but that doesn’t mean buying is truly affordable by traditional standards.” He added, “In those markets renters are stuck between a rock and hard place when it comes to deciding whether to buy or continue renting.”

MONEY home prices

The Surprising Thing That Will Boost Your Home’s Value

Starbucks coffee shop, Philadelphia, Pennsylvania.
John Greim—LightRocket via Getty Images

New research finds that a Starbucks opening in the neighborhood helps local property values.

When searching for a new home, buyers usually consider the usual suspects: square footage, number of bedrooms, amount of sunlight.

Vanessa Pappas had another factor in mind as well: coffee shop proximity.

When Pappas and partner C.C. Hirsch recently closed on a three-bedroom property in Windsor Terrace, Brooklyn, it didn’t hurt that her favorite macchiato place was only a half-block away.

“Coffee is important,” says Pappas, 36, global head of audience development for YouTube. “It’s our daily ritual, and we always go to see our friends who work there. It makes us feel like part of the neighborhood.”

It turns out that easy access to quality java has broader implications. Call it the Starbucks Effect: Proximity to a local coffee shop has a very real, and positive, effect on home values, new data shows.

“We looked for certain markers for where homes appreciated faster than others,” says Stan Humphries, chief economist at real estate marketplace Zillow and co-author (with chief executive Spencer Rascoff) of the book The New Rules of Real Estate.

“Coffee houses emerged early on as a big predictor of future home value. Within a quarter mile, close enough to smell the coffee brewing, that ring appreciates faster than rings further out,” Humphries says.

How much faster? Over 17 years tabulated by Zillow, leading up to 2014, homes adjacent to the local Starbucks almost doubled in value, up by 96%. Those further out appreciated by 65% over the same period.

And apparently not all coffee shops are created equal. Zillow researchers compared homes near Starbucks locations to those near Dunkin Donuts.

Dunkin Donuts-adjacent properties also outperformed the wider market, rising 80% over 17 years, but they lagged those in the shadow of Starbucks.

Of course, there is a chicken-or-egg question here: Are coffee shops causing a boost in home values, or are the popular chains merely locating in promising neighborhoods that are already on the upswing?

Humphries’ discovery: Within the first few years of opening, Starbucks locations are actively helping local home values. After that, the outperformance of the broader market tends to diminish.

Whole Foods Effect

The coffee shop is hardly the only symbol of neighborhood gentrification. Researchers have found other amenities can have an even more powerful effect on home values.

Nearby specialty grocers, for instance, can lead to a 17.5% home-price premium, according to Portland, Oregon-based real estate consultancy Johnson Economics. That compares to a more modest 4.5% for coffee shops.

In that sense the Starbucks Effect might be more accurately be termed the Whole Foods Effect, according to the firm’s principal, Jerry Johnson, referring to the natural food supermarket chain.

Also significantly affecting nearby home prices, according to the Johnson Economics study: cinemas, wine shops, and garden stores.

Given Starbucks’ massive resources, it is perhaps not surprising that the Seattle-based chain is adept at picking out promising spots. After all, the company employs entire teams of professionals devoted to pinpointing optimal locations.

“Where we choose to locate our stores is as important as how we design them,” says Michael Malanga, Starbucks’ senior vice president of store development.

For potential homebuyers, it’s like heading into an exam with the answer key. Assuming that significant market research has gone into every store opening, buyers can piggyback on those positive conclusions.

“There are substantial resources spent by Starbucks headquarters to figure this stuff out and find where the best locations are going to be,” says Zillow’s Humphries. “So for homebuyers, you can essentially draft off the work that Starbucks has already done for you.”

As for YouTube’s Pappas, she’s not a fan of Starbucks. She prefers her local Brooklyn spot—Krupa Grocery. But she isn’t surprised that coffee shops turn out to be a reliable predictor of home-price appreciation.

“Especially in New York City, you want to be able to walk to everything,” says Pappas. “Having a coffee shop within eyesight is a big plus.”

MONEY Housing Market

Why More Home Buyers May Be Trading Up to Bigger Digs This Spring

fish jumping into bigger fishtank
Phil Ashley—Getty Images

A tight inventory of houses for sale has been stymying buyers who want to trade up. That could change soon.

Joe and Debbie Valerio, a couple in their 60s, put their Westport, Conn., home of more than 20 years on the market because it was getting too big for them.

When they found a nearby condo they loved, they pounced. That set off a chain reaction allowing Peter and Leah Baiocco, a couple in their 30s, the ability to trade up.

The Baioccos lived a few miles away, contemplating a future move to a bigger home once kids came along. With favorable economic conditions, they jumped at the chance to buy the Valerios’ $2.7 million house last April. After renting it out for nearly a year, the Baioccos’ starter house in Fairfield, Conn. is on the market for $739,000.

This seemingly simple sequence of events is still relatively rare in the U.S. housing recovery. Despite an improving economy and rock-bottom rates, inventory of available homes is inconsistent. Anything more than a trickle of listings sends prices down, causing sellers to pull their homes off the market.

Then prices go up again because competition gets fierce, and sellers re-emerge. As a result, a bustle of trade-up activity is expected for this spring’s selling season, before conditions change again.

“I think a lot of people have made a lot of money in the stock market the last few years. People who want to enjoy a luxury home, now is the time. Everyone has more cash available to them,” says Ken Barber, a real estate agent in Wellesley, Mass.

Other positive signs: new single-family housing starts are at a high since 2008, according to the Commerce Department’s latest report.

Also, fewer homeowners are renting out their homes to delay selling them, down to 35% in 2014 from 39% in 2013, according to Redfin, a real-estate brokerage.

And more consumers have positive equity. Last spring, 19% of homeowners in Redfin markets (such as Atlanta and Philadelphia) had low or negative equity. That was down to 11% in November. Nela Richardson, Redfin’s chief economist, expects it to hit 8% by March 2015.

Even better for buyers, interest rates are near-historic lows below 4%. “The question of staying versus leaving is shifting. For people who were afraid to leave their mortgage because they thought it was the best they’re ever going to get, now there is another good mortgage around the corner,” Richardson says.

Those trading up in 2015 should hit a sweet spot of selling near the top but not buying at the top, says Margaret Wilcox, an agent from agent in Glastonbury, Conn., for William Raveis.

Wilcox says a client couple recently traded up from a $500,000 house to a $1 million home. They did not get quite the price they wanted for the sale of their old home, but they got a discount of nearly $300,000 on their new purchase, Wilcox says.

There are a few red flags for buyers and sellers. Seller confidence is still low, with just 35% of sellers thinking now was a good time to sell, versus 48% the previous year, according to Redfin.

Keith Jurow, a housing market analyst who writes the Capital Preservation Real Estate Report, is something of a doomsayer and thinks talk of a housing recovery “is phony and only an illusion,” he says.

Given the number of mortgages originated between 2004 and 2010, he feels that too many of the people who would like to trade up still have little or no equity in their homes and are not prepared to do a sale below their purchase price.

“Unless you bring more cash to the table, you can’t trade up,” Jurow says.

Also, foreboding makes some people want to act now. They do not want to be the family that missed their chance, adds Bob Walters, chief economist for Quicken Loans. “People won’t delay forever,” he says.

The Valerios and the Baioccos have only happy thoughts about their real estate choices. They love their new homes.

“In our mind, it’s the house we’re going to be in forever,” says Peter Baiocco.

MONEY real estate

Obama Cuts Mortgage Insurance Premiums to Help Low-Income Home Buyers

aerial view of subdivision
David Sucsy

The changes will save borrowers an average of nearly $1,000 a year.

The White House announced on Wednesday plans to reduce government mortgage insurance premiums in an effort to make homeownership more affordable for low-income buyers. President Obama is scheduled to talk about the policy in a speech Thursday in Phoenix, Arizona.

In the announcement, Housing and Urban Development Secretary Julián Castro said the Federal Housing Administration would slash insurance fees by more than a third, from 1.35% of the loan amount down to .85 percent. The FHA had a 30% share of the mortgage insurance market in the third quarter of 2014, according to Bloomberg.

Mortgage insurance, required of FHA borrowers, is meant to protect the lenders in case of default by allowing them to recoup some of their losses.

Over the next three years, the FHA projects the rate drop will allow 2 million borrowers to save an average of $900 a year when they purchase or refinance a home. The agency also estimates these savings will encourage 250,000 first-time buyers to enter the market.

The move marks a trend of recent policy changes meant to help low-income Americans get into the housing market. In December, mortgage providers Fannie Mae and Freddie Mac announced that certain first-time buyers could now qualify for a loan with a down payment of just 3 percent of the home’s value.

Taken together, today’s announcement and lower down payment requirements should make the housing market far friendlier for the economically disadvantaged. However, David Stevens, CEO of the Mortgage Bankers Association, told CNBC that the effect of the new policy may not spur an especially large increase in home buying.

“I think the marginal impact on sales will be small because potential buyers make the decision to purchase based on trigger events, such as a new job, marriage, kids, etc,” Stevens told the network. “Changes in affordability only impact how much home they can buy.”

While Democrats have been supportive of policies that aid low-income and new homebuyers, Republicans are concerned that lower insurance premiums could put the government at risk if borrowers once again default in large numbers. The FHA has previously required billions in taxpayer assistance, and while the agency is no longer losing money, its capital requirements will not meet the legal limit until 2016.

Find more answers to your home-buying questions in Money 101:
What mortgage is right for me?
How to I get the best rate on a mortgage?
What are the steps in a home purchase?

MONEY Housing Market

The Hottest Homes of 2014

You clicked on these 15 homes—from a sleek penthouse to a wacky mushroom house—more than any others.

Which homes piqued the most curiosity in 2014? We went door-to-door, virtually, and scoured realtor.com® data to figure out which homes were the most-clicked over the past year. We limited our list to show only homes that are currently on the market. The resulting list shows us exactly what you want to see when curiosity strikes.

This article was originally published on realtor.com.

  • Connecticut Castle

    Rank: 1
    Address: 450 Brickyard Rd, Woodstock, CT
    Price: $45 million
    Choice quote: Curbed memorably called it a “Ludicrous Nightmare Castle.”

  • Mushroom House

    Rank: 2
    Address: 142 Park Rd, Perinton, NY
    Price: $729,000
    Choice quote: On the market since April 2013, the Mushroom House was described byThe Wall Street Journal as “composed of several 80-ton concrete pods and built partially into the side of a hill.”

  • Palladian Estate

    Rank: 3
    Address: 172 Bliss Canyon Rd, Bradbury, CA
    Price: $68.8 million
    Choice quote: The listing describes this home that’s been on the market for almost three years as a “Palladian Masterpiece” and also states, “Nothing compares.”

  • Brick Manse

    Rank: 4
    Address: 5200 Moore Rd, Suwanee, GA
    Price: $13.995 million
    Choice quote: From the listing: “Underground tunnel connects detached garages with main house.”

  • Texas Chateau

    Rank: 5
    Address: 4939 Manson Ct, Dallas, TX
    Price: $29.995 million
    Choice quote: Candy’s Dirt opines, “Any Dallas socialite would kill to have one of the kid’s rooms in this house.”

  • Sprawling Southern

    Rank: 6
    Address: 7 Montagel Way, Birmingham, AL
    Price: $13.9 million
    Choice quote: According to the listing, it’s quite simply “America’s largest home.”

  • Stately Fixer-Upper

    Rank: 7
    Address: 809 N Jefferson St, Huntington, IN
    Price: $179,900
    Choice quote: The historic Purviance House “will require much renovation as there is currently no HVAC, plumbing, electrical, kitchen or baths.”

  • Manhattan Skybox

    Rank: 8
    Address: 20 W 53rd St, New York City, NY
    Price: $60 million
    Choice quote: This duplex atop the Baccarat Hotel and Residences offers “panoramic 360-degree views of iconic NYC landmarks.”

  • Beverly Hills Villa

    Rank: 9
    Address: 9904 Kip Dr, Beverly Hills, CA
    Price: $39.995 million
    Choice quote: Because the “main house comprises 10 bedrooms [and] 22 baths,” you won’t be squeezed for space.

  • Mountain Views

    Rank: 10
    Address: 8272 E Left Hand Fork Hobble Crk N, Springville, UT
    Price: $35 million
    Choice quote: On the market since July 2012, this mansion has a “2-lane bowling alley [and] indoor shooting range.”

  • Tuscany in the Desert

    Rank: 11
    Address: 10696 E Wingspan Way, Scottsdale, AZ
    Price: $32 million
    Choice quote: The most expensive listing in Arizona “combine[s] opulence and sophistication without overindulgence.”

  • Beach Retreat

    Rank: 12
    Address: 5800 N Bay Rd, Miami Beach, FL
    Price: $40 million
    Choice quote: Formerly owned by Jennifer Lopez, this mansion is “a sophisticated residence with impeccable style.”

  • Southern Belle

    Rank: 13
    Address: 490 W Paces Ferry Rd NW, Atlanta, GA
    Price: $15.9 million
    Choice quote: The listing doesn’t skimp on hyperbole: “Buckhead’s most palatial estate on Atlanta’s most prestigious street.”

  • Sweet in SoCal

    Rank: 14
    Address: 5444 Valerio Trl, San Diego, CA
    Price: $1.595 million
    Choice quote: While it’s not a multimillion-dollar mansion, this SoCal home “features charming curbside appeal, ideal privacy and a functional floor plan.”

  • New Orleans Classic

    Rank: 15
    Address: 1415 3rd St, New Orleans, LA
    Price: $7.999 million
    Choice quote: Built in 1859, the Robinson-Jordan Mansion “is reputed to be the first house with indoor plumbing in the city.”

MONEY home prices

What to Expect From the Housing Market in 2015

aerial view of subdivision
David Sucsy

Consumers think 2015 will be a better year than 2014, especially for selling a home. But the recovery faces an uphill climb.

What does 2015 have in store for the housing market? Nine years after the housing bubble peaked and three years after home prices bottomed, the boom and bust still cast a long shadow. None of the five measures we track in our Housing Barometer is back to normal yet, though three are getting close. The rebound effect drove the recovery after the bust but is now fading. Prices are no longer significantly undervalued and investor demand is falling. Ideally, strong economic and demographic fundamentals like job growth and household formation would take up the slack. But the virtuous cycle of gains in jobs and housing is relatively weak, and that will slow the recovery in 2015. All the same, consumers are optimistic, according to our survey of 2,008 American adults conducted November 6-10, 2014.

Consumers Expect 2015 to Be Better, Especially for Selling a Home

Consumers are as optimistic about the housing market as at any point since the recovery started. Nearly three-quarters — 74% — of respondents agreed that home ownership was part of achieving their personal American Dream, the same level as in our 2013 Q4 survey and slightly above the levels of the three previous years. For young adults, the dream has revived: 78% of 18-34 year-olds answered yes to our American Dream question, up from 73% in 2013 Q4 and a low of 65% in 2011 Q3.

AmericanDream

 

Furthermore, 93% of young renters plan to buy a home someday. That’s unchanged from 2012 Q4 despite rising home prices and worsening affordability.

Which real estate activities do consumers think will improve in 2015? All of them – but especially selling. Fully 36% said 2015 will be much or a little better than 2014 for selling a home. Just 16% said 2015 will be much or a little worse, a difference of 20 percentage points. The rest of the respondents said 2015 would be neither better nor worse, or weren’t sure. More consumers said 2015 will be better than 2014 for buying too. But the margin over those who said 2015 will be worse was not as wide.

BetterorWorse

 

Despite this optimism, barriers remain to homeownership. Saving for a down payment is still the highest hurdle, as it was last year, followed by poor credit and qualifying for a mortgage. Not having a stable job has become considerably less of an obstacle, dropping to 24% this year compared with 36% last year thanks to the recovering job market. But affordability has become a bigger obstacle. Some 32% of respondents cited rising home prices, compared with 22% last year.

BiggestObstacle

 

Housing Recovery in 2015: Rebound Effect to Fade Before Fundamentals Can Take Over

Different engines power each stage of the housing recovery. During the early years—roughly 2012 to 2014 – the rebound effect drove the recovery. Investors and other buyers scooped up undervalued homes and took advantage of foreclosures and short sales, boosting overall sales volumes. Local markets hit hardest in the housing bust posted the largest price rebounds. Now, though, the rebound effect is fading. Price levels and price changes are both approaching normal, foreclosure inventories are dwindling, and investors are pulling back. This is inevitable as the market improves and therefore shifts to slower, more sustainable price increases and a healthier mix of home sales.

So what replaces the rebound effect in the next stage of the housing recovery? The market increasingly depends on fundamentals such as job growth, rising incomes, and more household formation. But here’s the hitch: These fundamental drivers of supply and demand haven’t returned to full strength. They aren’t able to fully take the reins from the rebound effect. Importantly, the share of young adults with jobs is still less than halfway back to normal, many young adults are still living with their parents, and income growth is sluggish. This points to a tricky handoff, and means housing activity in 2015 might disappoint by some measures, though the rental market will remain vigorous.

Here’s what we expect:

  • Price gains slow, but affordability worsens. Price gains slowed in 2014 and we’ll see more of the same in 2015. In October 2014, prices increased4% year-over-year, down from 10.6% in October 2013. The slowdown has been especially sharp in metros that had a severe housing bust followed by a big rebound. Now, prices nationwide are just 3% undervalued relative to fundamentals. That leaves fewer bargains and scant room for prices to rise without becoming overvalued. What’s more, with consumers expecting 2015 to be a better year to sell than 2014, more homes should come onto the market, cooling prices further. Nevertheless, despite slowing price gains,home-buying affordability will worsen in 2015 for two reasons. First, even these smaller price increases will almost surely outpace income growth. In 2013, incomes rose just 1.8% year-over-year in nominal terms, and a negligible 0.3% after adjusting for inflation. Second, the strengthening economy and the Fed’s response should push up mortgage rates.
  • The rental market will keep burning bright. Next year will see strong rental demand and lots of new supply. The demand will come from young people leaving homes belonging to parents or roommates and renting their own places. Until now, they’ve been slow to leave the nest. But the 2014 job gains for 25-34 year-olds should lead to the rise in household formation we’ve been waiting years for. At the same time, the 2014 apartment construction boom will mean more supply in 2015 since multi-unit buildings take about a year to build. Will rent gains slow? Probably – provided that this new supply keeps up with formation of renter households. This surge of renters will probably cause the homeownership rate to fall. To be sure, the ranks of homeowners will probably rise. But an even larger number of young adults will enter the housing market as renters.
  • Single-family starts and new home sales could disappoint. While apartment construction is breaking records, single-family housing starts and new home sales are still not much better than half of normal levels. They’ll improve in 2015, but not as much as we’d like. Our consumer survey suggests more people will try to sell existing homes. That would add to the supply on the market and possibly reduce demand for new homes. Also, the strongest source of housing demand will be young people getting jobs and forming households. But they’ll be moving into rentals and saving for a down payment rather than buying homes right away. Finally, the vacancy rate for single-family homes is still near its recession high, which discourages new construction. The apartment construction boom shows that where there’s demand, builders will build. But buyer demand for single-family homes simply hasn’t recovered enough to support near-normal levels of single-family starts or new home sales.

If these predictions for 2015 sound similar to our predictions for 2014, you’re right. As the rebound effect fades and fundamentals take over, the recovery gets slower and the market starts to look more similar from one year to the next. But there’s good news here. Even though the recovery remains unfinished, the housing market is becoming more stable and more certain for buyers, sellers, and renters.

Markets to Watch in 2015

As the rebound effect fades, our 10 markets to watch have strong fundamentals for housing activity. These include solid job growth, which fuels housing demand, and a low vacancy rate, which spurs construction. We gave a few extra points to markets with a higher share of millennials. These young adults are getting back to work and that will drive household formation and rental demand. We didn’t include markets where prices looked at least 5% overvalued in our latest Bubble Watch report. Here are our markets to watch, in alphabetical order:

  1. Boston, MA
  2. Dallas, TX
  3. Fresno, CA
  4. Middlesex County, MA
  5. Nashville, TN
  6. New York, NY-NJ
  7. Raleigh, NC
  8. Salt Lake City, UT
  9. San Diego, CA
  10. Seattle, WA

MarketstoWatch1

 

These markets are spread across the country: Boston, Middlesex County (just west of Boston), and New York in the Northeast; Dallas, Nashville, and Raleigh in the South (the Census considers Texas part of the South); and Fresno, Salt Lake City, San Diego, and Seattle in the West. No Midwestern metros make the list because they generally have slower job growth and higher vacancy rates than other markets, even though many are quite affordable and prices are rebounding.

In 2015, more markets will settle back into their long-term housing patterns. Fast-growing markets that boomed last decade, collapsed in the bust, and then rebounded are now leveling off. Even the markets that have been slowest to recover and have struggled longest are seeing foreclosure inventories decline and the sales mix moving back toward normal.

At the same time, first-time homeownership, single-family starts, and new home sales won’t come close to fully recovering in 2015. But if 2015 brings strong job growth, big income gains, and the long-awaited jump in household formation, then 2016 could be the year when we see a major turnaround in homeownership and single-family construction.

MONEY Housing Market

Why 2015 Might Be the Year You Finally Sell Your House

141224_REA_sold_1
Martin Barraud/Getty Images

Home price gains are slowing, credit is thawing, and more first-time buyers may be hitting the real estate market in 2015.

Better balance in the housing sector is “in” next year, as far as trends go. That’s likely to put buyers and sellers on a more even footing.

Some prospective sellers sound especially bullish on housing. In a recent Trulia survey, the biggest chunk of consumers, 36%, said they expect next year to be much or a little better than 2014 for selling a home.

To be sure, like politics, all real estate is local. Some sellers have stayed on the sidelines in recent years, investing in improvements amid a dearth of buyers. For others, low inventory and rising home prices meant a bidding-war bonanza.

The landscape next year’s sellers are likely to encounter depends a lot on where they live. But here are a few broad trends to bear in mind.

Bringing Back Buyers

Mortgage credit is becoming more available as lenders scale back requirements. The average FICO score on a conventional purchase loan in October was 754, according to Ellie Mae. That’s a five-point drop from last year’s average. (You can check your credit scores for free on Credit.com to see where you stand.)

Tough credit and underwriting requirements have been a huge hurdle for many would-be buyers. So is liquidity, but there’s also good news on that front: Fannie Mae and Freddie Mac recently rolled out a mortgage option that allows for a 3% down payment. These two government-sponsored behemoths purchase about two-thirds of all new mortgages.

If conventional lenders get on board, the new low-down-payment option could pull more first-time buyers into the marketplace. During a time of tight credit and stagnant wages, this crucial group of buyers has been all but absent from the housing picture.

“If access to credit improves, we could see substantially larger numbers of young buyers in the market,” Jonathan Smoke, chief economist for Realtor.com, noted in his 2015 housing forecast. “However, given a high dependency on financial qualifications, this activity will be skewed to geographic areas with higher affordability, such as the Midwest and South.”

Affordability May Be a Concern

Lower credit and down-payment thresholds are causes for optimism. But rising home values and mortgage rates will impact affordability, especially in costlier housing markets. Realtor.com’s Smoke expects affordability to decline 5-10% next year.

Job and wage growth will play a big role in shaping homebuying activity. Gains in both may offset the price and rate increases likely on the horizon.

Sellers in more affordable housing markets, especially those with improving economies, are likely to see more buyers.

Home Prices & Inventory

Home price growth is slowing after years of big gains. Zillow’s chief economist predicts home values will rise about 3% next year, about half the current clip. More listings are hitting the market each month, too, although inventories are still tight in some places and price ranges.

Housing inventory nationwide jumped nearly 16% in October year over year, according to Zillow.

The combination of cooling prices and more inventory means the balance of power is tilting back toward buyers in some markets.

“Sellers have had their day in the sun for several years in a row now,” Zillow’s economist, Stan Humphries, told U.S. News & World Report. “It’s time to get back to a balanced market and for buyers to have their day.”

More on Mortgages & Homebuying:

MONEY home prices

Buying or Selling a Home in 2015? Here’s What You Need to Know

After a boom, a bust, and a bounce, housing finally gets back to "normal."

Housing should be a drama-free zone in 2015. “After the boom, the bust, and the recovery bounce, we are transitioning to a calmer market driven by fundamentals,” says Jed Kolko, chief economist at Trulia.

Even though the econ­omy is growing and mortgage rates will remain low—the 30-year fixed isn’t likely to pass 5%—bubbly gains in housing are unlikely. Household income has barely budged since the housing market bottomed in late 2011, while home prices are already about 20% higher on average. Plus, with cautious lenders requiring hefty down payments and low debt/income ratios, it’s not as if buyers have the capacity to push prices sharply up.

All that figured in, CoreLogic forecasts a 4.4% rise in the national median home price. “That’s healthy and sustainable,” says chief economist Mark Fleming.

Here’s what to do if you’re thinking about buying or selling in 2015.

Sellers, forget bidding wars. In most markets you still have leverage, but less than you did. In the summer of 2013 about 20% of homes were selling at a premium to original list; this fall, 11% are, the National Association of Realtors reported. The takeaway: “You have to price your house right,” says Redfin chief economist Nela Richardson. ­Review recent comps and list within 5% to allow for counteroffers.

Buyers, save interest. While the 30-year fixed is not expected to hit 5% until later in the year, a winter move will likely nab the lowest rates. Meanwhile, the 15-year mortgage, now at 3.3%, should stay under 4% for most of 2015—and can be a good call if you’re looking to pay off the house before retirement.

Owners, renovate. Especially if you have a low-rate mortgage, “it can be a lot cheaper to remodel to age in place than move,” says Kermit Baker, director of the Remodeling Futures Program at Harvard’s Joint Center for Housing Studies. Rates on home-equity loans and lines of credit are still “in shouting distance of record lows,” says Keith Gum­binger of mortgage data service HSH.com. While loans are pricier than HELOCs—possibly 6.5% vs. 5.5% by year’s end—the fixed-rate HEL can be a safer bet in a rising rate climate.

Read More on Home Buying and Selling in Money 101:

How Much House Can I Afford?
What Renovations Will Pay Off When I Sell?
How Do I Get the Best Rate on a Mortgage?

Read next: The World’s 10 Most Expensive Houses—and Who Owns Them

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