Home prices rose 10.5% in April, says CoreLogic, but the days of double-digit gains are nearing an end. Seven states saw home prices surpass boom-era peaks.
Home prices in April rose 10.5% over last year, the lowest rate of appreciation in 14 months, according to CoreLogic. The research firm predicts home prices will continue to increase at a slower pace: 6.3% over the next year.
April was the 26th month of year-over-year increases in national home prices.
CoreLogic CEO Anand Nallathambi attributed the persistent price appreciation to an insufficient supply of homes on the market. “The purchase market continues to suffer from a dearth of inventory,” said Nallathambi.
Despite the still-double-digit growth, April’s price gain represented the lowest year-over-year increase in home values since February 2013.
“The weakness in home sales that began a few months ago is clearly signaling a slowdown in price appreciation,” said Sam Khater, deputy chief economist for CoreLogic.
While home appreciation may be slowing, seven states have seen housing values reach new heights. Prices in Colorado, Louisiana, Nebraska, North Dakota, South Dakota, Oklahoma, Texas, and Wyoming have surpassed their housing boom highs.
Homeowners elsewhere in the U.S. haven’t been so lucky. Prices in Nevada increased 14.8% in April, the second-largest year-over-year increase of any state, but remain off 38% from their March 2006 peak. That’s the biggest drop of any state in that time period.
Of the top 10 most-populated regions, metro areas in California, Texas, and Georgia saw the largest year-over-year home appreciation. Prices in the area comprising Riverside, Calif. area led the pack, increasing almost 20% from April 2013 to April 2014.
The Denver, Dallas and Houston metropolitan areas experienced their highest prices since their boom-era peak.
Anthony Rael, market trends committee chairman for the Denver Metro Association of Realtors, says Denver has become a seller’s paradise.
“If it’s priced right in a good neighborhood and in good shape, sellers are getting top dollar,” said Rael. “In many cases, within the first week [on the market].”
With just $468, the owners of a farmhouse transformed their dingy, dated kitchen in this Budget Redo from This Old House.
They say the kitchen is what sells a home. Not so for Brandi Milligan and her fiancé, Jeff Singer, who loved their early-1900s farmhouse, in New Brunswick, Canada, but loathed the kitchen that came with it. While the space had great bones and a stunning original tin ceiling, it also had dingy wallpaper, dark cabinets, and a red-and-blue-checkered floor.
First to go was the wallpaper, replaced by creamy white paint. Next, Brandi removed the blue upper-cabinet doors to create open shelves, and Jeff helped move isolated corner cabinet units to the other side of the room. Brandi added crown molding to the tops of the cabinets, then refaced the lower doors with white beadboard wallpaper and trim attached with wood glue. A spray-paint treatment gave the counters the look of granite for minimal cost. Brown epoxy paint on the floor provides a neutral look short-term until the couple can afford a new floor. For the focal point, Jeff built a handsome island using stock pine; Brandi distressed it with a hammer and a chain before staining it. The finishing touch? They built a mason-jar light inspired by projects they saw online. The centerpiece is by far Brandi’s favorite part: “It helped turn a plain kitchen into something really special,” she says.
Strip wallpaper and prepare walls: $48
Add crown molding to cabinets: $20
The average home sold in April spent 86 days on the market. But in these 12 cities, homes flew off the market a lot faster.
25 days: There’s just not enough homes on the market to meet demand in the Mile High City. Listings shrunk 13% in April over the same month last year. That, naturally, pushed prices up 20% to a median $340,000.
28 days: California buyers overall have to move quickly to buy, though competition is creeping up. In April there were 47% more homes on the market–probably why prices were up just 3% over last year to a median $499,950.
30 days: The home market in the center of the tech universe held fairly steady in April, with home prices up a solid 5% from last year. Median: $709,500. For the month, the average home sold at 106% of the list price, indicating bidding wars are still going strong, according to the Santa Clara County Association of Realtors.
33 days: Bidding frenzy slowed a bit, with homes taking 18% longer to sell than last year, even as the market got tighter. Prices jumped 7% to a median $879,000. In all of California, in fact, single-family home sales were down 7% over last year, according to the California Association of Realtors. Association president Kevin Brown attributed that to investors slowing their buying.
33 days: The Seattle-Bellevue-Everett area saw listings jump 19% and prices stay flat at $380,000. Tyler McKenzie, president-elect of the Seattle-King County Association of Realtors, says 75% of his listings have seen multiple offers since January 2012. In the last five weeks, 90%.
39 days: Buying is heating up in the wintry north, pushing prices up 7% to $310,000 in the last year.
41 days: Prices are still bouncing back strong from the housing bust. In April, the median price jumped 42% to $269,250, partly because low-end foreclosures have virtually disappeared from the market.
43 days: Another robust California market, this area saw prices rise 20% to $334,900. The majority of homes–69%–sold in under 30 days, according to the Sacramento Association of Realtors. Short sales are down from 23% of the market last year to 9% in April. The market needs more homes in the $250,000 to $500,000 range, says Paula Swayne, president of the Sacramento Association of Realtors. She cited a recent home in the Land Park neighborhood, listed for $525,000, that sold a week later for $561,000. “It’s a tough market for buyers right now,” Swayne says.
43 days: Like its larger counterpart to the south (No. 1-ranked Denver), this university town continues to have a shortage of homes for sale. Listings are down 5% from last year while prices rose 5% to $405,339.
47 days: April prices in the Boston area, which includes Worcester and Lawrence, rose 4% in April to a median $359,900. Too few homes on the market contributed to a 12.4% decline in sales, says the Greater Boston Association of Realtors, while pent-up buyer demand continues to send prices higher. At the current pace, the batch of for-sale listings would sell in 3.6 months, nearly half the six months considered a balance between buyers and sellers.
48 days: Another city that needs more sellers. Listings fell 8% over last year, while prices rose 18% to $295,000. It’s a sellers’ market, with only a 2.3-months supply of homes.
49 days: Price hikes are starting to slow in Dallas. In April, they were up 8% to $233,900. Sellers in Dallas County received 95% of their asking prices, according to the MetroTex Association of Realtors.
Putting your property up for rent can be tricky. Here’s how to sidestep six of the most common blunders.
Ever considered becoming a landlord? There are plenty of reasons you might. For some, it’s the temptation to scoop up a cheap property before the last of the deals vanish. Or maybe you’re like the 39% of homebuyers who told real estate firm Redfin that they’re interested in renting out their old place. Then there’s the lure of steadily escalating rents. The cost of renting the typical single-family home or apartment rose 4.5% in the past year, and spiked by more than 10% in the hottest areas, according to Trulia.
Becoming a landlord can be a profitable move, but learning the ropes requires some effort; it’s easy to take a misstep and end up in the red. “It’s not a passive investment, like putting your money in a mutual fund,” says Robert Cain, founder of landlord resource site Rental Property Reporter. Below, six slip-ups frequently made by newbie landlords, and strategies that will help you avoid making the same mistakes.
No. 1: Underestimating costs
You’ll most likely account for your insurance, taxes, and if you have one, mortgage. But you might miss expenses such as water, garbage, gardening, and regular repair and upkeep tasks. Even riskier, you may fail to put aside a large enough pot for unexpected expenses and big-ticket items. “Mom-and-pop investors tend to skimp on reserve and emergency funds,” says John Yoegel, author of Perfect Phrases for Landlords and Property Managers.
For a realistic estimate, plan for annual costs (not including your mortgage) to run at least 35% to 45% of your yearly rental income, says Leonard Baron, who runs the real estate investor website ProfessorBaron.com. When calculating future income, it’s a good rule of thumb to include only 10 or 11 months of payments per year. After all, whenever a tenant moves out, you’ll still be stuck with expenses.
No. 2: Breaking the law
Tenant and landlord laws vary from state to state and even city to city. For example, in some areas, you can require a month-to-month tenant to move out within 15 days, while in others you must give him 60 days’ notice. Yet when real estate site Zillow quizzed landlords on basic rental laws, the average respondent missed at least half the questions. One easy way to avoid getting into legal hot water: Never buy generic lease or other tenant forms, which don’t account for local laws, from a general real estate site or a big-box store, says Cain. To get the skinny on what’s permitted in your town, talk to your local or state landlord or apartment owners association. These groups usually cost at least $50 to join.
You know that federal law prohibits you from denying a rental to someone based on race, religion, or gender. Keep in mind that it also means that you can’t advertise a place as perfect for female roommates or specify no kids. You may, however, include a cap on the total number of occupants or ban pets.
No. 3: Skimping on vetting prospective tenants
When you’re looking for a good renter, it’s not enough to trust your instincts, or even to go on a referral from a friend. “Landlords get in trouble when they are in a hurry to find tenants and when they feel sorry for someone,” says Cain.
Never rent your property without checking the prospective tenant’s credit, confirming the source and amount of income, and checking in with the current and previous landlords, he says. Look for income to run at least 2½ times annual rent. Sites such as E-Renter.com and MySmartMove.com provide credit and background details for around $25.
No. 4: Ignoring renters insurance policies
Landlord policies cover the structure of the home, your appliances, and liability in case of injuries or property damage. Not on this list? The tenant’s stuff. You may think that’s not your problem, but Michael Corbett of Trulia warns that renting to one of the 65% of tenants who lack a policy can cause problems if something goes wrong. “Tenants lash out when they realize they aren’t being compensated,” he says.
In places where it’s legal, such as California, he recommends requiring that renters purchase a policy (go to your local landlord association to check the law in your state). This may shrink your pool of potential tenants, but is likely to increase the odds that you end up with someone responsible. If that’s not an option, be sure to explain to your tenant that you are not covering his things, and suggest he buy his own insurance.
No. 5: Failing to check out the property regularly
Don’t count on your renter to tell you about problems. “A tenant will complain about an inconvenience, such as plumbing issues, but not necessarily something like broken rain gutters that can produce major problems down the road,” says Yoegel. What begins as a dripping pipe or watermark on the ceiling can quickly swell into a multi-thousand-dollar repair if left unaddressed. “Water damage is a big one,” says Corbett. “It can be outrageously expensive to fix.”
While you must respect your tenant’s privacy and cannot legally enter the residence without advance notice, you should find a way to take a regular look at the property. One solution: Add a clause to the lease specifying that you or your property manager will inspect the home at least every six months. It’s also a good idea to drive by the place once a week or so to look for exterior trouble spots. Finally, swing by anytime work is being done; you can verify that the job goes as you see fit and take a quick glance around for other potential issues.
No. 6: Going DIY at tax time
The tax treatment of rental properties is nothing like that of your home, and keeping it all straight is nearly impossible for novice landlords. The rules of depreciation are a prime example. The IRS requires that you take a deduction for wear and tear on the property each year. However, “the rules say depreciation is ‘allowed’ or ‘allowable,’ so people assume it’s optional,” says Cindy Hockenberry of the National Association of Tax Professionals. If you don’t claim the deduction for depreciation, you’ll miss a yearly tax break. Then, when you sell, the IRS requires you to retroactively depreciate the home, and that’s likely to leave you with a larger-than- expected tax bill. Not tricky enough? Starting this year the government “complicated” the regulations about what types of repairs you can deduct annually, says Hockenberry.
The bottom line? Get a professional’s help—at least for the first year or two until you fully understand the rules. And don’t forget to keep receipts for everything: You can deduct all the costs involved in managing your property, including the mileage for all those drop-bys.
The Ben Rose house — a.k.a. Cameron's crib from the 1986 film — has been a hard sell over the years
The famous glass house of Ferris Bueller’s Day Off fame just sold for $1.06 million. While the ’80s comedy classic is beloved by movie fans, prospective homeowners haven’t quite felt the same way about the building itself.
The unusual Highland Park, Ill., property’s adjustable walls, two separate units and popularity as a pop culture landmark had real estate agents going “…Anyone? Anyone?” for years — its $1.06m price tag is well below the original $2.3 million asking price from 2009. Perhaps the house’s notable architectural history — it was designed by A. James Speyer in 1953 in the style of Ludwidg Mies van der Rohe — made up for the lack of a fiery-red Ferrari in the end.
17% of homeowners, and 30% of lower-priced homes, are underwater. That's keeping first-time home buyers from finding their dream home.
Home sales picked up a bit in April after a slow, ugly winter, but compared to last year they’re pretty sluggish. They’re trending down 7%, according to the latest from the National Association of Realtors. What’s more, first-time home buyers are still missing from the market: Their share of purchases stayed flat from last year at 29%. Historically, four out of 10 buyers are first-timers, NAR reports.
What gives? It’s not just that aspiring buyers are having a hard time getting mortgages. In most of the country’s largest cities, there simply aren’t enough homes on the market to satisfy demand. One big culprit: The homes where owners still owe more than the house is worth–and so they can’t sell.
Even though prices have rebounded nicely in the last two years, 17% of all homeowners with a mortgage are underwater, according to data firm RealtyTrac. In fact, 241 counties representing a third of the country’s population have at least 20% of homes that are “seriously underwater”–mortgage debt is more than 25% higher than the home’s value. In 136 counties, it’s more than 25%, and the worst counties top 33%.
A homeowner who can’t pay off the mortgage without bringing cash to the closing table simply isn’t going to sell. Not only do they need to be able to settle with the bank, they also need to cover their own closing costs and sales expenses. Between a 5%-6% agent commission and closing costs, the owner has to be at least 10% above water, and that’s before they even consider putting money down on their next property.
This cycle hits first-time buyers the hardest, says Zillow chief economist Stan Humphries, because underwater homes tend to be the most affordable. About 30% of homeowners in the lowest price tier of homes were underwater in the first quarter, compared to 11% of homes in the highest third.
“It’s hard to overstate just how much of a drag on the housing market negative equity really is,” Humphries says. To make matters worse, the shortage of for-sale homes created by the underwater owners drives up prices, “which in turn makes those homes that are available that much less affordable.”
The low end of the market is where listings are fewest, according to Zillow research.
Sharon, Massachusetts, was ranked no. 1 on Money’s Best Places to Live. This New England town is surrounded by a wealth of good jobs in Boston, Providence, and the Route 128 tech corridor, which shielded Sharon from the worst of the recession. From a cup of joe to a tank of gas, here’s what things cost in Sharon, Mass.
A half-hour train ride from Boston or Providence, the town Sharon, in Massachusetts, has the natural beauty of a more remote place.+ READ ARTICLE
When it comes to real estate, there’s something for everyone in this charming town, ranked by Money as the Best Place to Live. We took a sneak peek at three homes–entry-level, mid-range, and high-end lake-front—to see how far your dollar goes here.
Q: I may need to relocate for my job. I got a deal on it in 2012. Should I keep it and rent it out while prices are rising—or should I sell and use the profits to make a nice down payment on a new home? — Shane Keys, Atlanta
A: A solid rental property investment generates enough in rent to cover expenses plus a 10% return, says Brandon Turner, an experienced investor and senior editor at real estate investing website BiggerPockets. You told us that you’re paying $1,100 in mortgage, taxes and insurance. Add to that a property manager (average cost: 12% of gross rents), repairs, and a reserve in case of vacancies. It’s unlikely that the $1,500 maximum in monthly rent you’d likely bring in for your three-bedroom home (check comparables at sites like Hotpads and Rentometer) would produce anything close to a 10% return.
You also told us that you have $45,000 in equity. Selling and plowing that into your next home would eliminate the need for expensive private mortgage insurance—now costing you $137 a month because you had to go with a low-money-down FHA loan—and it would of course reduce your mortgage payment. Plus, you’ll be able to protect the profit from capital gains taxes (up to $500,000 for married couples in home equity is tax-free), a perk you eventually lose if you convert your home into an investment property.
Turner’s conclusion: Sell.