Business Magazine Coverage Hits Home

During the long bear market, Americans gave up hope on stocks and hitched their financial wagons to surging home prices instead. We've been hearing rumblings about a real estate bubble for some time, but with mortgage rates creeping up and the Fed about to start tightening, the threat to the booming housing market looks more real than ever.

Still, dreams die hard. As evidenced by business magazine coverage of late, the American love affair with homes is going strong.

Money Magazine explores in-depth how to get the most out of your home investment in the June issue.

Writer Marion Asnes leads the cover stories with "What is Your House Worth?" Millions of people have become richer than they ever imagined with the answer to that question. "Homeowners are thrilling to the news that their net worth has taken a great leap forward for the simple reason that they purchased the roof over their heads," Asnes says. "Their mushrooming value is a balm to the wounds — both monetary and psychic — we sustained when the tech-stock bubble burst four years ago."

Asnes looks at the factors behind the housing boom. Quite simply, as mortgage rates dropped — from 8.7 percent in 2000 to 5.9 percent today — the same payment bought a bigger loan, helping to drive median home prices up sharply — from $139,400 in 2000 to $171,600 today. Low rates seduced homeowners not only to trade up to bigger and better new homes, but also to tap their equity to renovate and expand old ones. "Any household extravagance, from a restaurant-style stove to a heated pool, can be justified as an investment," Asnes writes.

But what will happen when interest rates start climbing? According to the article, the hottest markets — California , Florida and metropolitan New York — face the greatest risk. The danger to homeowners is they may end up owing more than they own, because, like all paper profits, home value is only truly realized when cashed in.

The next article in the Money cover-story series asks, "What's Next for Home Prices?" Writer Adrienne Carter contends that even with sky-high real estate values and rates on the rise, the outlook calls for more gains this year. The one-year growth forecast for home prices is still 6.4 percent. "A better job market will help offset the drag from higher interest rates," Carter argues.

Americans are awash in home equity — some are being smart about tapping it and some are not, cautions Cybele Weisser in "Unlock the Value of Your House." Weisser helps potential homebuyers figure out whether to opt for a 30-year fixed, adjustable-rate, interest-only or piggyback mortgage, and delves into the pros and cons of cash-out refinancing, home-equity loans and lines of credit, and reverse mortgages. As outlined by the article, the risks of taking on too much debt include getting squeezed by rising interest rates, losing your safety net and limiting your retirement options.

Once you access your home's equity, Lisa Gibbs explains how best to use it, in "Renovations That Pay." The second most popular mantra in real estate after "location, location, location," Gibbs says, is "kitchens and baths sell houses." She details the hot enhancements to those two important rooms.

SmartMoney takes a look at the home upgrading frenzy in the May cover story, "Build Your Dream House," by Chris Taylor. "More Americans than ever are building their dream home, but not just any house. These days they want extras, from granite countertops and personal spas to media rooms."

When every $1,000 upgrade adds just $6 to the monthly mortgage payment at today's low rates, it's easy to roll in those extras. But there's no guarantee on the investment. Taylor puts together a list of key questions every new-home buyer needs to ask themselves before they start building: How much do they want to spend, who should do the work, when to stick with the basics instead and how involved should they get in the building process.

Taylor also explores which upgrades sell the best, last the longest and make the most financial sense. The article lists the costs, appeal and pitfalls of the major improvements made to new homes, including home offices, outdoor fireplaces, hot tubs, hardwood floors, personal spas, media rooms, stainless steel appliances, granite countertops and cathedral ceilings.

Taylor also cautions that it may make more sense to put the money into something more practical, like better roofing and windows, because inadequate basic materials can lead to big problems down the road.

The article ranks the top homebuilders based on workmanship and materials, price relative to value, and home design. The top three: Pulte Homes, Lennar and Standard Pacific.

Looking to improve your financial picture with your paycheck instead of your address? Kiplinger's has ideas on how to tap your personal equity, upgrade your career and cash in on satisfaction in "Find Your Dream Job," the cover story of its June issue. The magazine features people who do what they love and provides tips on how they landed the job of their dreams. The cover stories debunk career myths that could slow you down, outline how to plan a career-shifting strategy and, finally, tell you what to do about your retirement funds before you jump ship.

Copyright © 2008 Donald W. Reynolds National Center for Business Journalism