TIME real estate

New Homes Selling At Fastest Rate Since July 2008

New home sales increased 9.6 percent in January

Sales of new homes in January reached their fastest pace since July 2008, reviving hopes of a sturdy recovery in the housing market after growth slowed at the end of last year.

New home sales increased 9.6 percent in January to a seasonally-adjusted annual rate of 468,000, the Commerce Department reported Wednesday, easing concerns that rising interest rates were slowing house sales. Sales fell 3.8 percent in December and 1.8 percent in November. The annual rate is the highest since July 2008, when it hit 477,000 homes.

Economists are forecasting sales of new and previously occupied homes to rise in 2014, reports the Associated Press, boosting job gains and improving the economy. The median home price in January was up 3.4 percent from a year ago to $260,000, and interest rates on a 300-year mortgage increased to 4.33 percent last week.

Even while sales improved in January, cold winter weather slowed construction starts last month by 16 percent.

[AP]

TIME Oil

The State That’s Beginning to Wish It Never Got Rich

An oil drilling rig at dusk near New Town, North Dakota on June 29, 2012.
An oil drilling rig at dusk near New Town, North Dakota on June 29, 2012. Michael S. Williamson—The Washington Post/Getty Images

Oil has brought great wealth and the nation’s lowest unemployment rate to North Dakota. Soaring homelessness, crime, and housing prices have come along for the ride.

North Dakota has had much to brag about in recent years. It is the state with the fastest-growing population in the nation (up 7.6% from 2010 to 2013) and, by no small coincidence, also the lowest unemployment rate (just 2.6%). North Dakota now ranks 29th in millionaires per capita, up from 47th in 2007, climbing far faster up the ladder than any other state in that department.

The state’s oil boom, which kicked off in earnest about the same time as the Great Recession, and which helped North Dakota grow wealthier as the overall economy has languished, is directly responsible for all of these bragging points. “It’s unexpected, a blessing,” one North Dakota landowner told USA Today back in 2008, when many farmers first began earning as much as $1 million annually from oil companies operating wells on their properties. “It’s like winning the lottery.”

Yet in the same way that many lottery winners say their jackpot was a curse, North Dakota is currently absorbing a string of be-careful-what-you-wish-for lessons.

(MORE: 7 Signs It’s Time to Quit Your Job)

In recent weeks, reports have surfaced revealing the following disturbing factoids:

• The violent crime rate has doubled in Bismarck, the state capital.

• The prison population has risen 178% over the past 20 years, compared to a 13.3% increase in the overall population.

• There was a 200% increase in homelessness in the state last year.

• Bizarrely, the city with the highest average rent for an entry-level apartment isn’t to be found in California or New York but North Dakota—the city of Williston, where oil jobs are plentiful, and where the population has more than doubled since 2010.

Meanwhile, a 2012 report by ProPublica is one of several exploring how the oil industry could spell environmental disaster for northwestern North Dakota, the epicenter of the state’s boom. A well-publicized accident involving a freight train carrying crude oil in North Dakota last December has also called into question the safety of the production and transportation of crude in the state.

The changes to the state traditionally known for being exceptionally cold, exceptionally quiet, and, until recently, exceptionally stable aren’t going unnoticed. The idea that the “blessing” of oil could very well prove to be a curse is gaining traction. In a recent column in the Bismarck Tribune, Clay Jenkinson, a Theodore Roosevelt Center scholar at Dickinson State University, highlighted a handful of local stories in the news that would have been unimaginable in North Dakota a decade ago but that suddenly seem to be expected, stories involving sex trafficking, prostitution rings, drug wars, and grisly murders. He summed up the unwelcome elements of the state’s transformation this way:

It’s like seeing your nephew for the first time in a couple of years. His parents look on him as the same old Ralphie, but you instantly notice that he is 6 inches taller than when you last saw him, he has some chin hair, he wears outsized jeans jammed well down on his hips, his voice cracks when he talks about the Super Bowl, and he catches himself about halfway into the F-word.

(MORE: Snow Removal This Winter Is Costing Your Town a Fortune)

In Midland, Texas, a town where the oil boom has come and gone, and come back again, the major offered some advice to communities in North Dakota and elsewhere that are currently “enjoying” high times thanks to oil riches. “Don’t go overboard,” he said to the Associated Press. “It’s not going to last.”

TIME real estate

Actually, San Francisco’s Inequality Problem Isn’t the Tech Industry’s Fault

Signs in opposition of technology companies are seen in San Francisco, California Dec. 9, 2013.
Signs in opposition of technology companies are seen in San Francisco, California Dec. 9, 2013. Stephen Lam—Reuters

But a lack of construction appears to blame

Widening wealth and income inequality have been a hot political topic for several years now, and nowhere more than tech boomtowns like San Francisco. In recent weeks and months, protesters have taken to picketing parts of the city where Google’s private luxury buses come to pick up their highly paid engineers in order to take them to work at the firm’s nearby campus in Mountain View.

The protests are ostensibly about Google’s use of public bus stops for private purposes, but they are motivated also by the impression that new tech money is raising home prices and forcing long-time residents out of the city they love. “You can say ‘I’m just a company, leave me alone, I’m creating jobs, why do I have to do anything else,’” San Francisco mayor Ed Lee recently told TIME. Well, no company can feel that way … Being a citizen of San Francisco, there’s more obligations.

The data, however, paint a more complicated picture. In a report released Thursday, Jed Kolko, Chief economist for the real estate site Trulia, dug into Census and home price data to see where home values are rising faster in tech hubs than the rest of the country and what is driving those increases.

Kolko used Census data to determine the metro areas with the highest concentrations of tech workers, and looked to see how price increases in those cities compared with the country overall. He found that “recent price gains in tech hubs are in line with national trends.” In fact, of the top 10 metro areas with the highest price increases, the only tech hub was Oakland, while four of the tech hubs identified by Kolko were below average in terms of price increases over the past year.

And while tech hubs are generally more expensive places to live, their being expensive predated the Internet boom. Writes Kolko:

“Today’s tech hubs had expensive housing before dot-commers, Internet bubbles, and all that came with them. Decades ago, many of the metros that would become tech hubs had advantages like major research universities, technically skilled workers, thriving computer manufacturing industries, or a nice climate. Places with advantages like these tend to be more expensive, and they turned out to be fertile soil for the today’s tech industry.”

So what’s the real culprit for sky-high home prices in San Francisco? Kolko points to a lack of construction. He writes, “Since 1990, there have been just 117 new housing units permitted per 1,000 housing units that existed in 1990 in San Francisco. That’s the lowest of the ten tech hubs and among the lowest of all the 100 largest metros even with the recent San Francisco construction boom.”

Compared to other tech-heavy cities like Raleigh or Austin, construction in San Francisco occurs very slowly. writes Kolko, “Geography limits construction in the Bay Area–it’s hard to build on the ocean, the bay or on steep hills–but regulations and development costs hurt too.”

MONEY Insurance

5 Things to Know About Umbrella Insurance

Umbrella insurance covers you for liability risks you may not even have been aware of.

Even if you already have insurance for your home and car, you may not be adequately covered. This policy can help.

1. Without it, you could lose everything

If you cause a car accident and the other driver sues, your auto insurance covers you up to your personal-liability limit, which is likely between $100,000 and $300,000. Same goes for your homeowners insurance if the mailman slips on your steps.

An umbrella liability policy pays for settlements and legal fees above your limit. Without this insurance, your wages and assets are at stake (though in some states, retirement funds, pensions, and your home are excluded).

2. Liability risks are everywhere

“More than 80% of umbrella losses are auto-related,” says Ed Charlebois of Travelers Insurance. Even if you’re the safest driver, your teen probably isn’t.

Redoing your kitchen? Your general contractor may not adequately vet subcontractors for workers’ comp or liability.

Host a lot of parties? If a guest gets into a drunken-driving accident, the victim can come after you. Got a pool, hot tub, or boat? Employ a nanny or a housecleaner? Then you have risk factors.

3. You’re insuring against the worst-case scenario

The median jury award for vehicular accident liability cases is $21,000, found Jury Verdict Research. But the average is $306,000 — so some settlements are much, much higher. That’s why many financial planners say an umbrella policy is a must for those with significant net worth.

“Insurance is there to stop an accident from being a life-changing event financially,” says Redondo Beach, Calif., CFP Scott Leonard.

4. A lot of coverage costs very little

A typical homeowner with two cars can get a $1 million policy for $250 to $400 a year, reports the Insurance Information Institute.

“My rule of thumb is for clients to have coverage equal to one to two times their exposed net worth,” says Franklin, Mich., financial planner Bert Whitehead. (By “exposed,” he means assets vulnerable in your state.) That way you are not just shielding your money, but ensuring that the insurer will mount an aggressive defense.

5. You may need to juggle coverage first

Umbrella insurance usually requires specific liability limits on the policies it’s piggybacking — such as $300,000 per person on auto and $300,000 on home. So you may have to boost your coverage. Plus, some carriers extend an umbrella only over policies they have issued, says Jim Kuryak of Niagara National Insurance.

On the upside, bundling with one insurer can offset the added cost; it can shave as much as 20% off home and auto premiums.

TIME real estate

New Home Sales Fall For Second Straight Month

Mark Zuckerberg during a Facebook press event to introduce 'Home' a Facebook app suite that integrates with Android in Menlo Park
REUTERS—REUTERS

The number of new homes sold in December fell for the second straight month, the Commerce Department announced Monday

The number of new homes sold in December fell for the second straight month, the Commerce Department announced Monday, to a seasonally-adjusted, annual rate of 414,000 homes. Despite the monthly fall, the annual rate was the best since 2008.

Sales of new homes typically decline during the winter months, and the below-average temperatures experienced by most of the country may be playing a role in the sales declines. The average interest rate on 30-year mortgages also rose significantly in the final weeks of 2013, and may have affected prospective buyers’ ability to afford new homes.

Despite the monthly declines, home sales for the entire year increased 16.4% compared to 2012, marking the second straight year that new home sales increased on an annual basis.

MONEY Ask the Expert

How to Sell Your Home Without a Real Estate Agent

Q: How do I sell my home without using a real estate agent? — Bill, Chicago

A: With housing on the rise, more sellers are flying solo, says Eddie Tyner, general manager of ForSaleByOwner.com. The appeal of FSBO: skipping the seller’s agent commission, usually 3%, when houses seem to sell themselves.

It’s not that easy, of course. You probably should put your home on the multiple-listing service, which displays more than 90% of homes for sale; do that via sites like ForSaleByOwner.com or Owners.com.

You must avoid the mistake of turning people off with a steep price; your listing, per square foot, should be within 10% of that of similar homes nearby.

And you may not be up to the job. It requires a serious time commitment and unemotional negotiations.

Plus, you’ll have to overcome a perennial worry: Could an experienced agent have fetched you a better price?

What selling a $300,000 home costs:

You can pocket extra cash by selling your home yourself… if you can get the same price a broker would.
With a broker: $20,000
On your own: $11,000
Notes: In both cases, seller pays buyer’s agent commission; miscellaneous expenses are for photos and open house; without a broker.

MONEY homeowners insurance

After Sandy’s Flood: Family Still Struggling to Rebuild Finances

A growing family makes moving out of their cramped rental and back home all the more urgent for Michael Motherway and Jennifer Schanker. Photo: christopher sturman

Hurricane Sandy wrecked their home and their finances. A year later, this Staten Island family, like tens of thousands of others in the New York metropolitan area, is still struggling to recover.

On Oct. 29 of last year, as Hurricane Sandy was bearing down on the East Coast, Michael Motherway and Jennifer Schanker debated evacuating. Their nearly 90-year-old 1,200-square-foot house on New York City’s Staten Island was eight blocks from the water, and city officials were warning residents to leave the block or, better yet, to leave the island.

In the end, Motherway, a heating and air conditioning technician, and Schanker, an assistant in the trust department of a Manhattan bank, remained. The evacuation wasn’t mandatory, they reasoned, and the couple had heard similar warnings in anticipation of Hurricane Irene a year earlier, only to suffer no more damage than a few broken tree branches.

Motherway and Schanker, his partner of six years, figured they were far enough away from the beach to withstand this storm relatively unscathed too. The couple had plenty of company: Most of their neighbors decided to stay put as well.

As the day turned into evening, and the winds picked up, Motherway walked to the beach for a firsthand look. He came back around 7:30, reporting that the surf was impressive but that everything else seemed normal. Tired of the drumbeat of TV news, the couple switched channels, hoping to distract their 1-year-old daughter, Adriana. She fell asleep watching a movie about Alvin and the Chipmunks stranded at sea.

Around 8:15 p.m., Schanker heard a neighbor scream. Looking through the window, Schanker saw a woman jump out of a red hatchback that had been driving the wrong way down their one-way street, leaving the car door open as she ran toward the neighbor. Then the woman appeared to panic and reverse course, heading back to the car, just as two waves of seawater rushed down the avenue, one from either side.

Schanker watched, horrified, as water filled the car’s interior through the open door, forcing the driver to once again abandon it. Schanker never learned what happened to the woman but recalls, at that moment, “I knew we were trapped.”

Within minutes the water outside their house was several feet high. Frantically, Motherway and Schanker began moving their belongings to the second floor. By 9 p.m., the water level had reached eight feet. “The sea filled the world outside like a bathtub filled with water,” Schanker says. “We were literally in the ocean. Waves crashed against our house.”

As Schanker held her daughter, now awake and crying, the electricity went out, leaving the three of them huddled together on the second floor, the wind outside howling. Downstairs, they could hear pieces of furniture crashing together, the washer and dryer hitting each other. “We’re going to drown here, aren’t we?” Schanker asked Motherway.

Instead, around midnight, just before the rising water hit the second floor, it leveled off, then began slowly receding. The next morning the couple was able to wade through hip-deep water to safety, Adriana in Schanker’s arms.

Their home, though, was in ruins — one of more than 60,000 damaged in New York City that night. “Everything left on the first floor was destroyed — the couches, the boiler, the electrical panel, washer, refrigerator, tables,” says Motherway. There was structural damage too. The water warped the walls and caved in the flooring; part of the fence was swept out to sea.

Before it finally broke aparton land, Sandy would become the second-costliest hurricane in U.S. history, exacting nearly $70 billion in damages across 24 states. Of that total, $19 billion was in New York City, where the transit system was crippled and more than 1 million people were left without power.

The storm hit Staten Island with particular brutality, causing mass flooding and killing 24 people (286 died in all). Power outages lasted into January. A year later an estimated 27,000 on the island and throughout the New York/New Jersey area are still unable to return to their homes.

Count Motherway, 43, and Schanker, 37, in that group. The couple have spent the past year working with insurers and government agencies trying to come up with the money to rebuild their house. But the roughly $95,000 that insurers have paid out in claims to date is far short of the amount needed to repair the damage and bring the house up to newly stringent post-Sandy building codes — initial estimates put the price tag at $260,000.

They’re also in a serious dispute with their mortgage lender: While their payments had been suspended for the first six months after the storm, the bank is now demanding they resume sending monthly checks, plus make back payments — or else face foreclosure. Meanwhile, federal assistance to cover the cost of their temporary living quarters a few miles away has run out.

The couple acknowledge they’ve made some mistakes in dealing with the aftermath of Sandy that have exacerbated their financial troubles. Feeling overwhelmed, they initially ignored notices from the bank about their mortgage. Eager to begin repairs, they moved too quickly to clear out the damage from the storm, which made it difficult for insurance adjusters to accurately assess their claim. And they’ve borrowed heavily to replace personal belongings that weren’t covered by insurance. All told, their expenses exceed their take-home pay by about $3,000 a month.

Returning to their house remains the couple’s top priority. Currently the family — Adriana is now 2 and Michael John was born in September — is living in an apartment so cramped that Motherway sleeps on a mattress on the living room floor. To get back home, though, the couple will first need to square things with the bank, bridge the gap between what rebuilding will cost and what insurers have been willing to pay, and reverse their budget deficit.

Schanker would rather focus on other goals — she’d love to get married, maybe talk about having another child — but says there is no way the couple can even discuss such major moves while they’re still in post-storm recovery mode.

“We are in limbo,” says Schanker. “We just want to move forward already. I’m tired of being a Hurricane Sandy victim.”

Motherway opens the front door to the house at 820 Nugent Ave., cautioning a visitor to watch his step. Inside the entryway, there is no good place to stand. The floor is gone, the pebbled earth visible through the floor joists. Electrical wiring snakes haphazardly across the room. The only interior wall left separates the main space from the laundry room. The place smells faintly of mildew.

Like Schanker, Motherway is frustrated by the slow pace of recovery. “I want to go in and fix this house,” he says. “I’m handy. With help, I could put down subflooring, insulation, piping. But I don’t want to get killed by the whole insurance thing.”

Motherway and Schanker walk out to the backyard, a gravelly area now overgrown with weeds and strewn with debris deposited by Sandy. During the storm everything in the yard was violently tossed about and the couple’s barbecue grill ended up on the fence, suspended over their neighbor’s property. The battered Weber still rests there. It’s symbolic, says Schanker. “Mike is just not ready to let that grill go.”

In the first days after the storm, with the nation’s attention focused on them and their neighbors, Motherway and Schanker had reason to believe their lives would return to normal faster. Through a co-worker, Schanker quickly found an apartment nearby to live in temporarily. Within two weeks the Federal Emergency Management Agency came through with $2,900 to cover the first few months’ rent; the payments continued through fall of this year.

The couple also moved swiftly to replace their vehicles. Sandy totaled Motherway’s late-’90s Nissan truck, while Schanker’s car, a used BMW 3 Series she had bought just two months before, was nowhere to be found. She searched for days before learning that the floodwaters had carried the car several blocks away, where it jumped a fence and disappeared.

Three days later, as basic services were being restored to the neighborhood, sanitation workers couldn’t figure out what was clogging a major industrial drain. As they dug through the muck, they found Schanker’s car jammed into the drain like a cork. The BMW was battered, coated in sewage. “I loved that car,” she says.

Fortunately, their auto insurer processed their claims quickly. Motherway used the $7,000 he received for a down payment on a new Buick Enclave, financing the remaining $24,000. Meanwhile, Geico paid Schanker enough to recoup most of the $13,000 she’d put down on the runaway Beemer, which she used to buy another used BMW, and upgraded to a 5 Series. She relied on 0% financing offered by her employer to Sandy victims for the other $30,000.

“The car is one of the nicest things I’ve ever owned,” she says, but “if I’d known where we’d be a year later, I wouldn’t have gotten it.”

Sorting out claims for the house proved tougher, in part because the couple had to deal with two insurers: State Farm, their homeowners carrier, for damage caused by wind, and Travelers, their flood-insurance provider, for problems caused by water.

From the beginning, they knew not to expect much from State Farm because most of the destruction was due to water. Still, Motherway and Schanker were able to demonstrate that missing roof shingles and the blown-down fence resulted from the storm’s fierce winds. After meeting a $1,000 deductible, their first State Farm check was a mere $855. Motherway asked the insurer to resend the adjuster and ultimately was awarded nearly $11,000 more.

The flood-insurance process has been more complicated. The couple knew to limit their cleanup work until a claims adjuster could review the damage. They expected to have to wait a long time, given the surge of claims. Clumps of mold started making them nervous, but they were relieved to get a call from Travelers two weeks after the storm saying that an adjuster from a Mobile firm it had contracted with to help handle claims would be coming to visit. Someone by a different name showed up from the Mobile company, but they didn’t think anything of it. The adjuster toured the house, took careful notes, and drew diagrams; Motherway and Schanker documented his work on videotape.

Relieved to be able to start clearing away the soggy debris, the couple got to work almost immediately after the adjuster left. “It was a Sunday,” Motherway recalls. “We were standing there, overwhelmed, and I said, ‘What do we do now?’ Jenn jokingly picked up a sledgehammer.” A church group happened to be walking by and asked if they could help. “They helped us rip up almost half the house.”

Then things got weird. About two weeks later, Motherway got a call from a man claiming he was their adjuster. “I thought I was being scammed,” Motherway says. A call to Travelers led him to the Mobile firm, Southeast Catastrophe Consulting, which told him the first adjuster had not been authorized to visit his home. Southeast’s president, Robert Evans, told MONEY that the adjuster had been fired and all his cases reassigned. A Travelers spokesman confirmed the story.

Back to square one. The new adjuster came but had a difficult time evaluating the full extent of the damage because by that time the house had been cleared and gutted. Their first payment from the flood insurer: $69,000. Motherway pushed to have an engineer analyze the foundation after receiving a code violation notice that it was cracked, netting him a couple of thousand more.

Another check from Travelers for nearly $13,000 arrived in September. The couple’s experience is similar to that of many Sandy families, who have complained about the protracted claims process and settlement checks that come in dribs and drabs.

The $95,000 or so in payouts so far from Motherway’s homeowners and flood policies isn’t enough to cover the actual cost of repairs. To comply with more stringent building codes put in place after Sandy, the couple also need to install support piles to raise the house 10 feet.

Estimates that Motherway has compiled — mostly from acquaintances in the construction business — put the total project price tag at around $260,000. The current market value of the house: $204,000, down from $303,000 before Sandy. Meanwhile, Motherway still owes nearly $275,000.

Despite the high cost, Motherway and Schanker feel that rebuilding is their only viable option. No one would buy the property in its current condition, Schanker points out.

Without the funds to proceed with repairs, though, the couple are unsure of their next move. Initially they could afford to wait as they worked on getting their insurance settlement bumped up. After all, FEMA was covering their rent, and Wells Fargo, their mortgage holder, had granted them a six-month suspension on payments, as the bank did for all customers displaced by Sandy.

When the grace period ended in April and the bank started pressing for payment, Motherway and Schanker panicked and didn’t respond. Neighbors and friends reassured them that the bank would eventually just tack the amount past due onto the back end of the loan.

Bad call. The notices from Wells Fargo demanding that Motherway, the sole title holder, resume payments of $2,148 a month, plus send the amount past due — by then, about $13,000 — became more threatening. The latest communication used the F-word: foreclosure. Motherway’s initial unresponsiveness hasn’t helped his cause.

“We are trying to be flexible. We have offered extensions of the moratorium period,” said Marie Day Hayes, a senior vice president for Wells Fargo, when asked about Motherway’s loan. “If the customer is in that situation, they need to have a conversation with us.”

The couple have since made tentative attempts to resolve the issue. After getting bounced among different bank representatives, Motherway was finally connected to a disaster-relief specialist in September, but says he was told he was not a candidate for loan modification because his house is not habitable.

Instead the bank offered to reduce his payments for three months to $1,600 a month; after that, he’d have to send in the past due amount and resume regular mortgage payments. Motherway sent a check for $1,600 for October, then stopped when he realized he couldn’t sustain the payments.

Even without the mortgage mess, Motherway and Schanker would be in trouble. Since most of their furniture was destroyed in the storm, they bought new pieces for the apartment, putting the purchases on credit cards. Between that and the loans for their new cars, they’re shelling out about $2,500 a month.

After repairing the boiler and electrical panel, they’re also paying utility bills for both the apartment and the house — they need lights in the house so they can work on it and heat so the pipes don’t freeze. Meanwhile, premiums for their homeowners policy have doubled. State Farm has been pulling out of coastal New York because of the higher risk of severe weather and did not renew their policy. Unable to find alternative coverage, Wells Fargo “force placed” them with an expensive specialty carrier.

After reviewing their finances, certified financial planners Mark Sallinger and Michael Terry of MTP Advisors in Maspeth, N.Y., initially believed the challenges the two face are so severe that Motherway might need to declare bankruptcy.

“Even if you take the mortgage out of the equation, you’re barely keeping your heads above water,” Sallinger told them in an early meeting. Bankruptcy, he said, would free the couple of their biggest debts and wouldn’t affect Schanker’s credit standing, since the two aren’t married and the house is in Motherway’s name only.

That suggestion did not go over well. “It feels wrong to walk away and let the whole thing defeat us,” says Schanker. “We’re not ready to give up.”

THE ADVICE

Working with Motherway and Schanker for several weeks more this fall, Sallinger, Terry, and Jeffrey Gould, a private insurance adjuster from Baltimore, re-assessed the couple’s options. The experts came up with a plan to get the family out of the quagmire.

File an amended claim — stat. Multiple go-rounds with adjusters are common with complex insurance claims, says Gould. Flood programs are particular sticklers for details, demanding exhaustive documentation. After a major storm, Gould also notes, adjusters are loaded with claims and may rush, miscoding items in estimating software or missing them altogether. Small oversights can add up quickly.

All these factors came into play with Motherway’s claims, says Gould, who was able to identify dozens of items that either were missing from the original claims or had been underestimated. For instance, there was no listing for the baseboard heating system on the first floor, which was destroyed by flooding, or for a damaged crawlspace. The original adjuster also didn’t note certain upgraded materials, such as higher-quality wood subflooring.

After getting detailed estimates for these items, Gould prepared a new 14-page claim for $112,000, or nearly $30,000 more than they’ve gotten from the flood insurer so far. “These are conservative estimates I’m confident they’ll get,” says Gould. The higher amount would bring the official damage total to more than 50% of the home’s assessed value, qualifying Motherway for up to $30,000 in FEMA grants to help offset the cost of bringing the house up to code.

Get multiple bids for rebuilding. Even if the amended claim is successful, Motherway and Schanker will still not have enough to rebuild, if the estimates they’ve gotten are accurate. Gould urges the couple to get at least two bids from general contractors experienced with flood damage, rather than relying on piecemeal estimates from individual plumbers, electricians, and other workers. The adviser believes repairs to the 750-square-foot first floor, plus the support piles, should run far less than the $260,000 Motherway initially quoted.

The couple can also help close the gap by applying for a low-interest loan from the Small Business Administration, which provides disaster relief to homeowners as well as businesses. The couple already received a $30,000 SBA loan to help replace their appliances and furniture since they did not have contents coverage. Their amended insurance claim would qualify them for up to $40,000 more.

Clean up the mortgage mess. Sallinger says it’s imperative for them to negotiate a new deal with Wells Fargo. Ideally they’d be allowed to make reduced payments of $1,200 a month until they’re back in the house, then tack on the past due amount to the principal. At the least, the couple could accept the bank’s offer to pay $1,600 a month for three months, then try to negotiate an extension until they’ve done enough work on the house to qualify for a loan modification.

Wells Fargo has indicated to MONEY the bank is willing to work with Motherway, but he’ll need to keep the disaster specialist he’s working with apprised of his progress in rebuilding the house and stay current with the reduced payments.

Erase the red ink. To boost their income, Sallinger suggests Schanker could temporarily reduce her 401(k) contributions from 13% to 6% (she’d still qualify for a full company match). Motherway, who helps support two older daughters, could also bump up his exemptions from two to six without triggering a tax bill, says his accountant, John Bernet of Port Jefferson Station, N.Y., who was brought in for consultation. Total extra income: $600 a month.

In addition, Sallinger proposes that Motherway and Schanker use part of the proceeds from their low-interest SBA loan (monthly payment: $125) to erase their high-interest credit card debt (monthly payment: about $1,700). Replacing Schanker’s BMW with a cheaper, used vehicle could drop her car payments by more than half. Along with smaller cuts in discretionary expenses such as meals out, these steps should bring the couple’s expenses in line with their pay.

Get better, cheaper protection. Motherway might be able to lower his homeowners premiums by buying “builder’s risk” insurance, which provides coverage during renovations, from a specialty carrier. He might also get a lower-priced policy through the state-backed insurer of last resort, New York Property Insurance Underwriting Association. Once the repairs to the house are done, Motherway can reapply for traditional insurance.

One extra insurance expense the couple should take on, Terry says: life and disability protection. Around $84 a month will buy a $500,000 term policy for each of them, according to Accuquote. Terry also recommends disability insurance for Motherway, the higher earner; roughly $165 a month buys him $5,000 in monthly income.

More hopeful after hearing the recommendations, Motherway and Schanker say they’ll do whatever it takes. They’re keenly aware their situation could have been a lot worse: Two women drowned the next street over, as did the man who lived on the corner. Nugent Avenue itself remains lifeless; many of their neighbors haven’t been able to go home yet either.

Reflecting back over the past year, the couple are also quick to point out that not all of it has been bad. “So many people have been generous and kind to us,” says Schanker. Still, they’re eager to move on and to finally be able to put Hurricane Sandy behind them. Says Motherway: “You just hope it’s the kind of storm that happens only once every 100 years.”

MONEY Retirement

Use Your Home to Boost Retirement Savings

Do you dream of leaving full-time work behind at 60, or even sooner? In MONEY’s 2014 Retirement Guide, you’ll learn the five essential rules for pulling off early retirement — rules built on tough lessons from recent years and new thinking about investing.

Rule 3: Be grateful, not greedy, about your gains

The housing market’s recent recovery may be one of the things that’s giving you the confidence — and the wherewithal — to retire ahead of schedule. Home prices in 20 major metro areas are up 12% over the past year, the biggest gain since 2006, according to the widely followed S&P/Case-Shiller home price index.

In seven of those markets, values are higher than or nearing their pre-crash peak, says David Blitzer, managing director at S&P Dow Jones Indices. American homeowners have seen their equity rise more than $2 trillion in just the past year, according to the Federal Reserve.

Alas, you can’t count on a housing boom to keep padding your net worth. With rising mortgage rates and tepid economic growth, the pace of price gains is expected to slow. “A year from now home prices will be higher, but half the double-digit gains we’ve seen,” says Blitzer.

You need to set realistic expectations for what your home can do for you, and plan prudently with what you have. That might mean leaving your old digs behind.

What to do

Lose two bedrooms. Moving out of your home of decades can pay off in two ways. By selling into a strong market now and buying a smaller house, you can lock in your good fortune, letting you add to your savings or wipe out any lingering debts.

Related: How much house can you afford?

Plus, if retiring early means learning to live on less, there’s no better way to do that than to cut your housing costs, which typically eat up 40% of retirees’ budgets, according to the Consumer Expenditure Survey.

Get out of town. Only 10% of retirees pick up stakes, though boomers look to be a bit more likely to relocate than previous generations were. In a 2012 AARP survey, two in 10 boomers said they planned to move in retirement.

“Boomers are different,” says Fred Brock, author of Retire on Less Than You Think. “They are willing to move to cheaper parts of the country.” With families more mobile, he adds, you don’t need to be tied to one place to stay near your kids.

Join this minority and move to a town with lower property taxes and lower living costs, as well as cheaper homes, and you can leverage your profits even more. That’s what Sheri and Bill Pyle did when they sold their three-bedroom Cape Cod outside Chicago for $185,000, paid cash for a $128,000 four-bedroom ranch in Tennessee, retired a home equity line and car loan, and added $30,000 to their savings.

And though their income is less than 40% of the $126,000 they used to earn, their cost of living is so low that they are able to get by on their combined Social Security, leaving their $400,000 in retirement savings to grow for now.

Their property taxes plummeted from $7,000 to $500 a year. Milder winters mean their heating bills are a third of what they used to pay. “We could never have done it if we stayed in Chicago,” says Sheri.

Beware the trap of leisure fees. Whether you downsize locally or across the country, it’s crucial that you don’t simply trade maintenance costs for steep association fees.

“I see a lot of people who move into a new home for retirement, and their cost of living goes up, not down,” says Colorado Springs financial planner Linda Leitz, national chair of the National Association of Personal Financial Advisors.

When Gundy and Karen Gunderson retired in 2007, the Seattle couple bought a home in a gated country-club community in Las Vegas. But they were surprised at how quickly the costs added up. Gundy, 66, a former commercial airline pilot, and Karen, 67, a homemaker, estimate they were spending $1,000 a month on dues for the private golf course, tennis and fitness classes, the club’s restaurant minimum, and maintenance on their pool and lawn.

Related: 10 Best Places to Retire

“We ran the numbers and knew we had to make an adjustment if we wanted our money to last,” says Gundy. So this year they downsized a second time, to a Henderson, Nev., retirement community overlooking two public golf courses. Now all they pay is a $93 monthly association fee.

Invest in staying put. All this said, what if you really don’t want to leave your home? At a minimum, early retirees told us they avoided carrying a mortgage into retirement, as 30% of retirees do.

While you’re still working, invest in improvements that will cut costs later, like replacing old appliances and drafty windows and upgrading your heat and electrical systems. “If you’ve been in your home a long time, there’s a lot you can do to make it less costly,” says Stillwater, Okla., financial planner Louise Schroeder.

MORE: New rules for early retirement

Rule 1: Early retirees: Don’t fear losing your health insurance

Rule 2: Getting ready to retire? Save more, spend less

Rule 4: Get the first decade of retirement right

Rule 5: Retiring? Time to look for a part-time gig

MONEY real estate

Best Places to Retire

Love the culture and excitement of urban life, but loathe the congestion and cost? One of these ‘second cities’ could be your first-choice retirement spot.

If the thought of retiring to a sleepy beach town or country hamlet bores you silly, you’re not alone. Increasingly, retirees are “interested in urban center communities,” says John McIlwain, senior fellow at the Urban Land Institute. “They don’t want to be isolated out in the suburbs.” It’s not surprising that people want to spend their post-work years surrounded by the arts, cutting-edge health care, and diverse neighbors, but the cons of urban living (like cost) can be daunting. So we set out to find places that won’t ding your nest egg with high taxes and nosebleed prices, yet still have great attractions and plenty of your peers. Here are five affordable small cities you may one day want to call home.

  • Raleigh, N.C.

    This state capital’s thriving economy and proximity to top universities have long made it a prime relocation destination. And recently more of those new faces have had a few wrinkles: From 2000 to 2010 the city’s population of 55- to 64-year-olds shot up by 97%, according to the Brookings Institution.

    It’s not hard to see the draw: Raleigh provides a big-city feel with a low cost of living; mild, four-season weather; and, thanks to all those medical schools, world-class health care.

    Where to live

    Midtown/North Hills: Retirees looking for a good deal and a practical location should shop north of downtown, says local real estate agent Kim Crump. There you’ll find spacious townhouses starting at around $200,000.

    Downtown: Those willing to pay about twice that price may consider the new condos and lofts downtown. “It’s stimulating to be around a young and diverse population,” says Jim Belt, now 62, who retired from finance in 2006 and along with his wife, Donna, moved from London to downtown Raleigh.

    The couple say living in the center of things made it easy to get involved. Jim founded a downtown residents group. Donna, 59, started BEST Raleigh, a group that puts art in vacant storefronts.

    What to do

    Food: The city has a diverse restaurant scene, with everything from Afghan cuisine to Southern barbecue.

    Music:
    The 5,000-seat Red Hat Amphitheater hosts the big acts, while the opera and symphony perform at the Duke Energy Center for the Performing Arts.

    Art:
    A range of work is on display in galleries, public spaces, and parks. Or take in the 30 Rodin sculptures at the North Carolina Museum of Art.

    Education: North Carolina State University’s lifelong-learning program offers affordable courses and study trips on topics including garden ecology and classical music.

    Taxes

    Like most of the states in this gallery, North Carolina does not tax Social Security benefits. The state has no inheritance or estate tax.

    Income tax:

    • 5.8% flat (starting 2014)
    • Sales tax: 6.75%
    • Median property tax: $1,800

     

  • Pittsburgh

    Talk about a comeback. At the turn of the 20th century Pittsburgh was an economic and cultural hub, home to Andrew Carnegie and other captains of industry. Then came deindustrialization and job losses in the 1980s. Now the city is polishing its rusty image by converting old mills and factories into office space, galleries, and lofts.

    The once-dwindling population is also bouncing back; the city took the top spot in U-Haul’s 2012 relocation survey, with a 9% jump in transplants. For retirees, Pittsburgh offers a true urban experience, including good public transportation, pro sports, and a host of top universities, all at a bargain price.

    Where to live

    The Northeast and South: Jim and Deborah Bogen moved to Pittsburgh from California in 2000, when Jim, now 78, retired from the philosophy department at Pitzer College.

    During a teaching stint at the University of Pittsburgh, he fell in love with the town, its 90 eclectic neighborhoods, and the green, hilly landscape. For Deborah, the move to a more affordable city had major practical implications. “If we hadn’t come here, I’d still be working,” says Deborah, 63, who retired from her paralegal job at age 50 and now writes poetry and novels.

    Homes in popular neighborhoods like Highland Park (where the Bogens live) or the South Side are now fetching more than $300,000 or so, double what the Bogens paid. Still, many remain a bargain by other big-city standards. Plus, the area is easy to navigate on foot, providing an extra perk: “I lost 20 pounds the first year we lived here,” says Deborah.

    What to do

    Museums: The four Carnegie Museums span art, science, natural history, and a collective 1.3 million square feet. The Andy Warhol Museum is a local favorite (the artist grew up here).
    Performance: Renovated concert halls are home to a thriving symphony, ballet, and opera.
    Sports: Thanks to the Steelers, Penguins, and Pirates (who recently made the playoffs for the first time since 1992!), superfans can stay busy all year.
    Outdoors: There are five large city parks, including the 561-acre Frick Park, where you can try lawn bowling or tennis.

    Taxes

    Distributions from most retirement plans, including qualifying 401(k)s and IRAs, are largely exempt. There is an inheritance tax, but there is no estate tax.

    • Income tax: 3.07% flat
    • Sales tax: 7%
    • Median property tax: $2,450
  • Lexington, Ky.

    Retirees looking to mix city activities with country charm will find a lot to love here. Lexington’s historic downtown is packed with galleries, restaurants, and boutiques. But drive just a few minutes and you’re in the rolling hills of Bluegrass Country.

    The city is also home to one of the country’s oldest and most robust lifelong-learning programs, as well as the top-scoring University of Kentucky Albert B. Chandler Hospital, which has received accolades from the American Heart Association and National Cancer Institute.

    Where to live

    Downtown: Over the past decade, a crop of new condos and loft conversions has transformed the center of Lexington. Indeed, developers got a little overzealous during the boom years, says realtor Casey Weesner, so prices stagnated and condos sat empty in the wake of the housing crash.

    The market has picked up in the past year, he says, but there are still some downtown bargains to be had. Expect to see modern two-bedroom condos priced around $200,000.

    What to do

    Sports: Welcome to basketball heaven. The Wildcats, the University of Kentucky’s powerhouse team, play at Rupp Arena, which also hosts shows and big music acts.
    Education: Locals age 65 and older can sit in on university classes, sans tuition, whenever there are open seats. The school’s Osher Lifelong Learning Institute offers classes for the 50-plus set.
    Arts: The campus also boasts the Singletary Center for the Arts. Downtown, the Kentucky Theatre shows independent and classic films.
    Outdoors: Churchill Downs, home of the Kentucky Derby, is 90 minutes away. Bikers can hop on the 12-mile Legacy Trail, which leads to the equine events at Kentucky Horse Park.

    Taxes

    Up to $41,110 per person in retirement income is exempt. Homeowners 65 or older get a property tax break. Some family members are exempt from the inheritance tax.

    • Income tax: Top rate is 6%
    • Sales tax: 6%
    • Median property tax: $1,620
  • St. Petersburg, Fla.

    Can’t imagine retirement without a beach? In St. Pete you can dip your toes in the Gulf of Mexico or Tampa Bay — plus play a round of golf, eat virtually any type of cuisine, and see famous art, all in a single day.

    While St. Petersburg is undoubtedly a retiree hotspot, the city has also drawn more young families in recent years, says local realtor Judy Horvath. The mix helps keep the city vibrant and stocked with boutiques, galleries, and restaurants.

    Where to live

    Downtown: The market for new apartments and condos was flattened by the bust, but developments are now back on track and in many cases selling out quickly. New two-bedrooms downtown start at around $300,000, says St. Petersburg agent Rachel Sartain.
    Surrounding neighborhoods: If that’s too expensive, going five or 10 minutes outside of downtown brings prices down dramatically; condos in many central areas start in the $200,000 range, says Sartain.

    What to do

    Beaches: Two of the nation’s best (according to TripAdvisor readers) are just a 10-mile drive from downtown, including North Beach, located in the 1,140-acre Fort De Soto Park.
    Art: Try the Dalí Museum for works by the Spanish surrealist, or the Museum of Fine Arts for Monet and O’Keeffe
    .
    Sports:
    Tropicana Field is home to the Tampa Bay Rays. There are also plenty of golf courses, including Mangrove Bay, a par-72 championship course. At $25 a round, these municipal greens may be the city’s best bargain.

    Taxes

    Retirement income is not taxed. Permanent residents get a property tax exemption of up to $50,000.

    • Income tax: None
    • Sales tax: 7%
    • Median property tax: $1,080
  • Boise, Idaho

    © imagebroker / Alamy

    Moving to a mountain town means easy access to skiing, hiking, golf, fly-fishing, and more. Unfortunately, it also usually means jaw-dropping home prices, a dinky airport, limited health care, and tourists galore. Not in Boise.

    Yes, locals here can ski at Bogus Basin 16 miles from downtown, stroll or bike 85 miles of trails, and paddle or fish on the Boise River, which runs through town. But they’ll also find low taxes and affordable homes.

    Plus, Boise has become a nucleus of culture and health care. Saint Alphonsus Regional Medical Center is ranked in the top 5% of hospitals nationwide for clinical performance.

    Where to live

    North and East of downtown: Prices in the city center are steep, so buyers should concentrate on the surrounding neighborhoods, says Boise real estate broker Jason G. Smith. “Traffic isn’t an issue,” he says. “So you don’t need to be right downtown to enjoy it.”

    You’ll find two-bedroom condos or small single-family houses priced at about $300,000 in the North End.
    Southeast and Northwest Boise: On a tighter budget? Head to these neighborhoods (located about 10 minutes from the city center) for homes starting around $200,000.

    What to do

    Outdoors: Walk along the Boise River Greenbelt or explore the trails winding out of Hull’s Gulch or Camel’s Back Park. The city has two open-air Saturday markets, which are a great place to find produce and bump into friends.
    Art: The Boise Art Museum has 3,000 permanent works and presents diverse exhibitions ranging from site-specific installations to collections of ancient artifacts.
    Performance: Grab tickets for the opera, philharmonic, or ballet. Boise State’s Morrison Center hosts national tours of Broadway shows, stand-up comedy, and live music, while the Shakespeare Festival fills a 770-seat outdoor amphitheater.

    And there’s more to come: Construction is under way for a new $70 million, 65,000-square-foot cultural center, slated to open in 2015.

    Taxes

    Retirement benefits are taxed, though some types of pensions qualify for a deduction. There is no inheritance or estate tax.

    • Income tax: Highest is 7.4%
    • Sales tax: 6%
    • Median property tax: $1,230
  • Spokane, Wash.

    © Andre Jenny / Alamy

    Unlike gloomy Seattle, Spokane basks in about 260 days of sunshine a year. Want to get out and soak up that vitamin D? The Spokane area has 76 lakes and five ski resorts, plus plenty of golf courses and wineries.

    The city has urban appeal too, with a downtown that’s become a destination for retirees looking to trade high maintenance homes for condos that are walking distance from restaurants, art galleries, and theaters.

    Spokane residents do pay a hefty 8.7% sales tax, but the state has no income tax.

MONEY

Should I buy beach property?

Should I invest in undeveloped beach property? The lots have dropped in price considerably. — Mike Mannion, Salisbury, Md.

Test the waters first. A beach lot may have a lower cost of entry than an investment in a beach home, says Gary Eldred, author of Investing in Real Estate, but your risk is much greater.

At issue: conditions that limit what you or anyone else can do with the land, such as access to utilities and zoning that restricts the size and location of any structures.

Related: Half of Millennials Will Ask Mom and Dad to Help Them Buy a Home

You’ll need a good agent and appraiser to determine whether that price drop signifies a deal or simply reflects news that has lowered the land’s value.

A neighbor might have an easement on the property, for example, that restricts the area you could build upon, says Sheila Dodson, executive director of the Coastal Association of Realtors.

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