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

MONEY home prices

Brooklyn Is Now the Least Affordable Housing Market in the Country

Brooklyn brownstones
Jay Lazarin—Getty Images

Big surprise.

GENTRIFICATION, noun.

The process of renewal and rebuilding accompanying the influx of middle-class or affluent people into deteriorating areas that often displaces poorer residents

- Merriam-Webster

Poor hipsters. In the process of turning Brooklyn into a hive of artisanal mustache boutiques and fixie-bike shops, they may have priced themselves out of the neighborhood. According to a recent study by RealtyTrac, which analyzed the affordability of 475 counties through October 2014, Kings County—also known as Brooklyn—was the least affordable in the nation.

The study gauges affordability by measuring the percentage of the locality’s median monthly household income that is required to make monthly payments on a median-priced home in the area.

When RealtyTrac ran the nation-wide numbers in October, payments on a median-priced home required 26% of the average household income. In Brooklyn, by contrast, where the median home costs $615,000 and the median household brings in only $46,960, home payments take up about 98% of a regular family’s wages. That’s less affordable than Manhattan — and even than San Francisco, where half of all homes sell for $1 million or more.

In fact, the typical homebuyer has been priced out of the borough’s real estate for longer than you might have thought. RealtyTrac’s report also measures affordability between January 2000 and October 2014. Over that 14-year period, home payments on a median-priced house still would have cost the typical family 95% of their income. Earlier this year, RealtyTrac found Brooklyn was also one of the most expensive places for young people looking to rent.

Why has BKLN gotten so expensive? The answer is probably a mixture of stagnant wages, investor interest, and an influx of more affluent residents. “Incomes have not grown nearly as fast as home prices” in the regions where affordability declined, said Daren Blomquist, vice president at RealtyTrac, in an interview with Bloomberg. “That disconnected home-price growth has been driven by investors and other cash buyers who aren’t as constrained by income.”

MONEY home prices

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

Feast your eyes on some of the priciest homes on the planet.

The owners of the world’s most luxurious houses can be a mysterious bunch. We all know who owns Buckingham Palace, but does anyone recognize the name Tim Blixseth? Or know the Indian billionaire who built a 27-story apartment building just for himself? We’re guessing not.

Well, the mystery ends here. Using information provided by CompareCamp.com, we’ve got a rundown of the world’s 10 most expensive houses—modern castles, really—and the people lucky enough, and rich enough, to own them.

 

  • 7 Upper Phillimore Gardens

    Location: London
    Value: $128 million
    Details: This 10-bedroom prep school turned mansion has an underground swimming pool, a sauna, gym, cinema, and even a panic room. That’s all in addition to an interior covered in marble, gold, and priceless artworks.
    Owner: Olena Pinchuk—daughter of Leonid Kuchma, Ukraine’s second president. She is known for being the founder of the ANTIAIDS Foundation and a friend of Elton John.

  • Kensington Palace Gardens

    Location: London
    Value: $140 million
    Details: Located on London’s Billionaires Row, the already tricked-out pad will soon add an underground extension with a tennis court, health center, and auto museum.
    Owner: Roman Abramovich—a Russian billionaire and owner of the private investment firm Millhouse LLC. He’s probably best known in the West as the owner of the English Premier League’s Chelsea Football Club.

  • Seven The Pinnacle

    Yellowstone Club near Big Sky, Montana.
    Erik Petersen—AP Photo/Bozeman Daily Chronicle

    Location: Big Sky, Montana
    Value: $155 million
    Details: The largest property in the Yellowstone Club, a private ski and golf community for the mega-rich, the house has heated floors, multiple pools, a gym, a wine cellar, and even its own ski lift.
    Owners: Edra and Tim Blixseth—Real estate developer and timber baron Tim Blixseth cofounded the Yellowstone Club, but the club’s bankruptcy, a divorce, and other troubles have seriously reduced his wealth in recent years.

  • Hearst Castle

    Indoor Pool at Hearst Castle, designed in style of Roman baths.
    Doug Steakley—Getty Images/Lonely Planet Images

    Location: San Simeon, California
    Value: $191 million
    Details: The 27-bedroom castle, used in the movie The Godfather, has hosted John and Jackie Kennedy, Clark Gable, Winston Churchill, and other famous figures.
    Owners: William Randolph Hearst’s trustees—The castle, built by the country’s first newspaper magnate, is now a heritage and tourist site and part of the California Park System.

  • Ellison Estate

    Location: Woodside, California
    Value: $200 million
    Details: Less a house than a compound, this 23-acre property is home to 10 buildings, a man-man lake, koi pond, tea house, and bath house.
    Owner: Larry Ellison—Co-founder of Oracle and the third-richest man in the world in 2013, according to Forbes.

  • 18-19 Kensington Palace Gardens

    Location: London
    Value: $222 million
    Details: Another property on Billionaires Row, 18-19 sits alongside the home of Prince William and Kate Middleton. This particular residence has 12 bedrooms, Turkish baths, an indoor pool, and parking for 20 cars.
    Owner: Lakshmi Mittal—The head of Arcelor Mittal, the world’s largest steel manufacturer, and, according to Forbes, one of the 100 richest men in India.

  • Four Fairfield Pond

    Location: Sagaponack, New York
    Value: $248.5 million
    Details: This 29-bedroom home sits on 63 acres and has its own power plant. Inside, there are 39 bathrooms, a basketball court, bowling alley, squash courts, tennis courts, three swimming pools, and a 91-foot long dining room.
    Owner: Ira Rennert—Owner the Renco Group, a holding company with investments in auto manufacturing and smelting. He also has holdings in metals and mining.

     

  • Villa Leopolda

    Villefranche-sur-Mer, south-eastern France, the villa of Leopolda, property of the widow of businessman Edmond Safra, Lilly Safra.
    Eric Estrade—AFP/Getty Images

    Location: Cote D’Azure, France
    Value: $750 million
    Details: This 50-acre estate includes “a commercial sized green house, a swimming pool and pool house, an outdoor kitchen, helipad, and a guest house larger than the mansions of most millionaires,” according to Variety. The house was famously used as a set in the 1955 Hitchcock classic To Catch a Thief.
    Owner: Lily Safra—A Brazilian philanthropist and widow of Lebanese banker William Safra. Her husband died when another one of the couple’s homes burned down, apparently due to arson.

  • Antilia

    India, Maharashtra, Mumbai, Kemp's Corner, Antilia aka the Ambani building on Altamont Road.
    Alex Robinson/AWL Images Ltd.—Getty Images

    Location: Mumbai, India
    Value: $1 billion
    Details: The Antilia isn’t even really a home in the traditional sense. This 27-story, 400,000-square-foot building has six underground parking floors, three helicopter pads, and requires a 600-person staff just to maintain it.
    Owner: Mukesh Ambani—India’s richest man, with a net worth of $23.6 billion, according to Forbes. Ambani made his money running Reliance Industries, an energy and materials company.

  • Buckingham Palace

    Buckingham Palace
    FCL Photography—Alamy

    Location: London
    Value: $1.55 billion
    Details: Technically still a house, but certainly not for sale, the Queen’s residence was valued at roughly $1.5 billion by the Nationwide Building Society in 2012. The property holds 775 rooms, including 19 state rooms, 52 bedrooms, 188 staff rooms, 92 offices, and 78 bathrooms.
    Owner: The British Sovereign—Currently Queen Elizabeth II, who has ruled since February 6, 1952.

    See CompareCamp.com’s full graphic, including more images of these home, here

    Read next: 4 Things Millionaires Have in Common, Backed by Research

MONEY buying a home

Why Firemen Are More Likely to Own a Home than Economists

Firefighters
Many public service workers such as firemen own their homes. Michael Dwyer—Alamy

A new study shows which professions are most- and least- likely to be homeowners. The results may surprise you.

What do firemen, police officers, and farmers have in common? They’re all more likely to own homes today than economists, jewelers, and accountants.

These are the results from a newly released study, done by Ancestry.com, looking at the relationship between profession and home ownership today and over time. The website teamed up with the University of Minnesota Population Center to analyze Census data between 1900 and 2012, creating a century-spanning log to show how ownership changed over the decades.

Looking at the most recent 2012 data, the research found that 79% of policemen and detectives own a home, yet only 64% of economists do. Farmers (81%) and firemen (84%) are in the top ten professions most likely to own a house, ranked above jobs like accountants (76%), and far higher than members of the armed forces (33%). Nationwide, the data shows 64% of the population owns their home.

Another surprising finding: the stereotype of the starving artist isn’t necessarily reflected in the data—at least for some industries. It turns out 63% percent of artists and art teachers own homes, as well as 62% of musicians and music teachers, 63% of authors, and 57% of entertainers. It’s not all roses for the artistic class, though. Just 37% of actors and actresses own a house, and that number sinks to 23% for dancers and dance teachers.

Toddy Godfrey, a senior executive at Ancestry.com, points out that there are both high and lower income professions on the most-likely-to own list, suggesting there isn’t a direct relationship between high wages and ownership. Typically lucrative professions like optometry tend to own, but so do lower-paid trade and public service workers.

“You look at some of the jobs on the top of the list, and they’re clientele based, or teachers, or others who are community rooted,” says Godfrey. He speculates that professions most likely to own “have a long-term connection to the community they live in.” That reasoning may also explain why tradesmen tend to buy instead of rent. Godfrey guesses many of these workers are tied to regional manufacturing, and therefore are more likely to set down roots.

Another trend the data suggests is that temporary and highly mobile workers tend to avoid homeownership. That could explain why so few military service members own houses, as they can be redeployed elsewhere and may choose to move once their service ends.

Finally, Godfrey highlights the fact that while ownership took a hit in the bust, the majority of Americans own their home. That’s up from 32% in 1900, though most of the growth happened pre-1960. “Maybe it’s come down a point in the last few years, but it’s held pretty steady at two thirds,” says Godfrey.That trend has been pretty constant.”

Top 10 Professions for Home Ownership in 2012

1. Optometrists: 90%

2. Toolmakers and Die Makers/Setters: 88%

3. Dentists: 87%

4. Power Station Operators: 87%

5. Forgemen and Hammermen: 84%

6. Inspectors: 84%

7. Firemen: 84%

8. Locomotive Engineers: 84%

9. Airplane Pilots and Navigators: 83%

10. Farmers: 81%

Bottom 10 Professions for Home Ownership in 2012

1. Dancers and Dance Teachers: 23%

2. Motion Picture Projectionists: 27%

3. Waiters and Waitresses: 27%

4. Counter and Fountain Workers: 28%

5. Members of the Armed Forces: 33%

6. Service Workers (except private households): 34%

7. Bartenders: 35%

8. Housekeepers and Cleaners: 35%

9. Cashiers: 36%

10. Cooks (except private households): 36%

MONEY Face to Face

Here’s What to Say When a Nosy Friend Asks How Much Your House Cost

what to say when someone asks how much your house cost
mattjeacock—Getty Images

Keep these three responses in your back pocket to get you off the hook.

More than 3 million homes have been sold in the U.S. so far in 2014, according to the National Association of Realtors. And if you’re among those who recently purchased, you’re likely still celebrating and decorating your new digs.

Before you’ll have even hung pictures on the walls, however, you’ll surely have to deal with this awkward question from some prying family member, friend or neighbor: “How much did you pay for this place?”

People pose the question for different reasons. For example, it may be that your friends from the city are thinking of moving to the suburbs, and want to get a sense of what they could get for their money, says clinical psychologist and financial coach Eric Dammann.

Or it may simply be good old-fashioned competition.

“A lot of times nosy questions have to do with low self-esteem and how we measure up,” says Dammann. “From childhood on, we’re always comparing ourselves to other people. In adulthood, one of the ways to compare ourselves is money.” In such cases, sharing numbers may heighten tension and envy between friends.

Assuming the person who’s asking is someone you know—as opposed to a nosy neighbor over the hedgerow—you probably have a sense of what’s motivating the question, and whether you feel comfortable answering. If you don’t feel comfortable, you shouldn’t feel pressured to divulge. Here are three ways you can avoid revealing what you paid, without leaving the person feeling dissed:

USE YOUR SPOUSE FOR BACKUP: “Jim and I decided that we wouldn’t talk about the price.”

One option is to use a non-disclosure pact with your partner as an excuse, says Laurie Puhn, a professional couples mediator and author of Instant Persuasion: How to Change Your Words to Change Your Life. This takes a bit of the pressure off you, laying some of the blame instead on your partner (who is hopefully not present in the moment). Also, your unified front will seem more impenetrable to a pushy pal.

“You don’t want to come off as dishonest,” says Puhn. “So discuss in advance with your husband or wife what you’re going to tell other people, and in the moment, use your partner as an ally.”

KEEP IT LIGHT: “How much did we pay? More than I would have liked!”

A joke can do double duty, diffusing tension and tacitly conveying that you’d prefer not to respond. While this response is more subtle, “most people will pick up on the cue,” says Dammann.

Still, since it’s not direct, you might want to change the subject quickly.

An easy way is to use your joke as a jumping off point for a conversation about the real estate market. For example, “I just read that the price of existing homes year-over-year has been on the rise for 30 consecutive months. Can you believe that? And there’s so much competition in our little town—our realtor was telling us about a house that got four offers after the first open house!”

TELL THE TRUTH: “I’m sorry, I’m not really comfortable talking about the cost.”

If your friend really presses you, you don’t need to be dodgy. Just be honest. This comes off as authentic, since you’re talking about your feelings. And you’re putting the questioner in a bind—by pushing for a response, he or she knows that he will be making you even more uncomfortable since you’ve already said so.

Keep in mind that if your friend really wants to know what you paid, there are other ways of finding out, since real estate transaction information becomes public record. But that doesn’t mean you need to discuss the cost. “Just because you’re asked a question doesn’t mean you have to answer it,” says Puhn.

MONEY Millennials

10 Places Millennials Are Moving For Bigger Paychecks

140918_CAR_MillennialsMove_NewOrleans
With 5.1% unemployment and low-priced homes, New Orleans is a top town for millennials. John Coletti—Getty Images

Over the past five years, Gen Yers have decamped for some surprisingly pricey cities in search of a higher-paying job.

Millennials are on the hunt for high-paying jobs, and they’re moving to some unexpected places to find them, according to a new report out today.

Bruised by the rough post-recession job market, Gen-Yers are moving from lower-cost cities to places with a higher cost of living but more plentiful and lucrative jobs, a RealtyTrac analysis of Census data from 2007 through 2013 found.

“Millennials are attracted to markets with good job prospects and low unemployment, but that tend to have higher rental rates and high home-price appreciation,” says Daren Blomquist, vice president of RealtyTrac. “It’s a tradeoff.”

In the 10 U.S. counties with the biggest increase in millennials, the average unemployment rate is 5.2%, well below the national average of 6.1%. The average household income is $62,496, vs. $51,058 nationally. The median home price is $406,800 (nearly double the U.S. median of $222,900), while a three-bedroom apartment rents for $1,619 a month on average, just over the national average of $1,550.

Riding the robust job market in the D.C. area, two counties in Northern Virginia with unemployment rates below 3.7% top the list. But not all places that the 69-million-strong millennial generation are flocking to are expensive. New Orleans, where the median home price is $140,000, edged out San Francisco, where tech jobs may be plentiful but the median home price is nearly $1 million.

New Orleans, where the unemployment rate is 5.1%, is a transportation center with one of the busiest and largest ports in the world, as well as tons of jobs related to the local oil refineries. Denver, Nashville, and Portland, Ore., all top 10 areas, offer median home prices below $300,000 and a diversity of jobs in technology, health care, and education.

Perhaps the most surprising millennial magnet: Clarksville, Tenn, the fifth largest city in the state behind Nashville, Memphis, Knoxville, and Chattanooga. Forty five miles north of Nashville, it benefits from spillover from that city’s strong job market, but Clarksville also has its own industrial base, plus nearby Ft. Campbell and Austin Peay State University. The unemployment rate: 4.7%.

Here are RealtyTrac’s top 10 destinations for millennials on the move:

Rank County State Metro Area % Increase in Millennial Population, 2007-2013 Milennials % of Total Population, 2013 Median Home Price, April 2014 Average Monthly Apartment Rent (3 beds), 2014
1 Arlington County Va. Washington, DC 82% 39% $505,000 $1,996
2 Alexandria City Va. Washington, DC 81% 34% $465,000 $1,966
3 Orleans Parish La. New Orleans 71% 30% $140,000 $1,190
4 San Francisco County Calif. San Francisco 68% 32% $950,000 $2,657
5 Denver County Colo. Denver 57% 33% $270,000 $1,409
6 Montgomery County Tenn. Clarksville 46% 31% $128,000 $1,016
7 Hudson County N.J. New York 44% 31% $330,000 $1,643
8 New York County N.Y. New York 43% 32% $850,000 $1,852
9 Multnomah County Ore. Portland 41% 28% $270,000 $1,359
10 Davidson County Tenn. Nashville 37% 29% $160,000 $1,131
MONEY home prices

Slowing Price Gains Reveal Little Exuberance for Homes

140826_REA_HousePricesSlow
Dimitri Vervitsiotis—Getty Images

Looking ahead, the rate of home price growth may slow even further, especially if mortgage rates increase.

While housing prices continue to rise, the rate of that growth nationally slowed in June, according to a leading gauge of the real estate market.

The S&P/Case-Shiller Home Price Indices showed that home prices throughout the country increased 6.2% since last year. Meanwhile, separate indexes that track 10 and 20 large U.S. cities showed gains of 8.1% during the same time period.

Though decent, those gains were a far cry from the double-digit growth in home prices late last year. Moreover, all three indexes showed deceleration from the prior month, and every city measured experienced lower year-over-year price growth.

“Home price gains continue to ease as they have since last fall,” said David Blitzer, chairman of the index committee at S&P Dow Jones Indices. “For the first time since February 2008, all cities showed lower annual rates than the previous month. Other housing indicators — starts, existing home sales and builders’ sentiment — are positive. Taken together, these point to a more normal housing sector.”

Blitzer also cautioned that an increase in interest rates, which Federal Reserve chair Janet Yellen hinted at last week, may mean further deceleration if they lead to higher mortgage rates.

“Bargain basement mortgage rates won’t continue forever,” he said. “Recent improvements in the labor markets and comments from Fed chair Janet Yellen and others hint that interest rates could rise as soon as the first quarter of 2015. Rising mortgage rates won’t send housing into a tailspin, but will further dampen price gains.”

To be sure, home prices are still going up across the board. All cities reported higher prices for the third consecutive month, and price growth in markets such as Dallas and Denver has continued unabated.

Nationally, average home prices in June are back to Spring, 2005 levels. But city composites are still roughly 17% down from their peak prices in June/July of 2006.

MONEY Housing Market

POLL: What’s the Best Thing About Where You Live?

There are probably lots of great things about your town. But if you had to pick just one, what would it be?

 

MONEY home prices

These Places Have the Best Housing Bargains in the Country

Scioto River and Columbus, Ohio skyline at dusk.
Columbus, Ohio, skyline at dusk. VisionsofAmerica/Joe Sohm—Getty Images

As the market tries to adjust to a post-recession world, there are plenty of deals to be had. But there are also plenty of markets where housing is more unaffordable than ever.

With housing price growth slowing down nationwide, and a gradually improving economy, many Americans who’ve been waiting to make a decision on a home are wondering if it’s time to buy or sell.

Here’s some data that might help with those decisions: A new study by RealtyTrac determined which housing markets are more and less affordable relative to their historical averages. The real estate data firm computed the numbers by determining what percentage of an area’s median income would be needed to make payments on a median-priced home in over 1,000 counties, and then compared that to the county’s historical price-to-income ratio over the past 14 years.

So which areas are looking like a bargain? RealtyTrac identified 66 counties with a combined population of 16 million (about 5% of the total survey area’s population) where home prices are lower than historical averages and the unemployment rate was 5% or lower—well below the national unemployment rate of about 6.2%.

This, according to RealtyTrac, is the best way to measure affordability because many markets with cheap housing don’t have quality jobs to offer to new residents. Some undiscovered markets are “undiscovered for good reason because their economies are struggling,” says Daren Blomquist, vice president at RealtyTrac. “A good example of that is Detroit. Affordability alone isn’t an indication that a market is a good one to buy in or invest in.”

The study found Columbus, Ohio; Oklahoma City; Tulsa; Akron, Ohio; Omaha; Greenville, S.C.; and Des Moines, Iowa, are among the markets with an advantageous combination of employment and affordable housing.

Courtesy of RealtyTrac

Why is housing in these areas undervalued? Basically, the overall real estate market is still recovering from the recession, and prices have yet to adjust in certain markets as investors are slow to discover lesser-known areas with strong economic growth. This pro-buyer environment might not last much longer, though. Blomquist says there’s been an uptick of institutional investor purchasing in Columbus, which means prices are set to rise in the near future.

There’s good news for prospective sellers as well. Prices in over one-third of the counties surveyed are less affordable than their historical averages, suggesting homes there may be over-valued. These cities include San Francisco; Portland, Oregon; Austin; San Antonio; Houston; and Atlanta.

Courtesy of RealtyTrac

Should sellers jump at the high prices? If you’re a homeowner in one of these markets, a lot of things are going your way. As prices rise, institutional investors are rushing to invest in these markets, inflating values even further. But there’s also a lack of supply because builders are still reluctant to start new construction.

“It’s a sellers market still [in these areas] because you have a combination of strong demand from this new breed of buyers and low supply because builders are very hesitant,” says Blomquist. “If you’re a seller, you’re not competing against too many others and you have a long liner of buyers.”

However, he cautions that for sellers looking to buy another home in the same market, less affordable home prices may be a double-edged sword. “The catch-22 is if you’re trying to buy too — if that’s the case, then it’s not a great market to buy in.”

Your browser, Internet Explorer 8 or below, is out of date. It has known security flaws and may not display all features of this and other websites.

Learn how to update your browser