The Sunny Outlook for Housing in Upscale Neighborhoods

To sort out what you can expect in real estate this year, Money zeroed in on four markets: upscale neighborhoods, new investor favorites, booming growth cities, and once-busy areas that have quieted down. Whether your local real estate market is heating up or cooling off, here's what you need to know about buying, selling or renovating your home.

UPSCALE NEIGHBORHOODS

Do you live in one of the tonier areas of your city? Here's good news: It should be easier to sell this year.

With jumbo rates now closer to those of conventional loans, and buyers more confident, sales volume for expensive houses is on the upswing. In January the number of U.S. homes selling for $500,000 to $750,000 picked up 15% vs. a year earlier, compared with a 6% drop for $100,000 to $250,000 homes, according to the National Association of Realtors.

The time it takes to sell is also falling in many areas. In Denver, for one, $500,000 homes were on the market 12% fewer days in January of this year than in the same period in 2013.

Prices for high-end homes rose less than those on the low end last year, but that's likely to change soon, says CoreLogic economist Sam Khater. A jump in sales is typically followed by price increases, he says.

How you'll know: To find out if your home is in the top tier, check Zillow's Local Info page for your town. There you'll find the median home values for the low, middle, and top price tiers in your market. Then, gauge the strength of your specific tier by asking your agent for the inventory and days-on-market stats for homes in your range.

BUYERS

Time it right. Want a more expensive home? Buy now before prices climb. However, if you live in a pricey house but are looking to downsize to something less expensive, it may be worth waiting for your current home to appreciate.

Watch: What's your dream home?

Look at jumbos. Will you need a large mortgage (typically more than $417,000)? The premium over what you'd pay for a smaller loan, which grew as wide as two full percentage points during the bust, has shrunk to next to nothing. Today rates on jumbos average 4.43%, vs. 4.42% for smaller loans, thanks in part to growing competition among banks. Big banks often offer the best rates and options on these types of loans, says Keith Gumbinger of mortgage publisher HSH.com.

Don't dismiss ARMs. A five-year adjustable rate for a jumbo averages 2.93%. While rising rates are a very real risk, ARMs at least deserve a look if you're taking a big loan, says Gumbinger.

Related: How much house can you afford?

On a $650,000 loan, you'd save $47,775 on interest during the first five years (vs. a 30-year fixed), and gain an extra $14,745 of equity. If you're planning to sell soon after rates reset or are confident you can handle a spike in your payment at the end of the adjustable period, you may decide the gamble is worth it.

Buy for the future. Nearly 25% of owners regret the size of the home they picked, according to a Trulia study. With prices expected to climb, high-end homes are likely to be more affordable than they will be in the future, so think about how much space you'll need in the coming years and buy appropriately.

Don't go it alone. A recent study found that buyers of homes priced at more than $300,000 are more likely to try to negotiate the deal themselves than buyers of more moderately priced properties, says co-author Bennie Waller, professor of finance and real estate at Longwood University. It doesn't end well: The DIYers end up paying an average of 9% more than those who use their own agent.

SELLERS

Price carefully. With sales of higher-end properties picking up, homes are increasingly "stigmatized if they stay on the market too long," says Judson Henderson, a broker in Princeton, N.J.

Overprice, and your place could be the one with the black mark. If you're unsure, pay the $500 or so for an appraisal. Also, if your home is older than 20 years, get an inspection to make sure your structure is sound, and your HVAC, plumbing, and electrical systems function smoothly. Fix whatever's on the fritz. "You don't want people feeling like the house is a project," says Henderson.

Make your listing tech-friendly. Most shoppers, and particularly those in the market for upscale houses, will be looking at your home on phones and tablets, says Amy Bohutinsky, chief marketing officer at Zillow. Photos on these gadgets need a higher resolution than what's required by a desktop. Check your listing on a mobile device to make sure it looks great. Some buyers may look at photos of your home on Google, so you should do the same (type your address into the map search, then click on the Street View tab). If the photo is outdated or taken in winter, note that in your listing.

Highlight the right features. According to a study by the National Association of Home Builders, buyers who expect to pay at least $500,000 today put warming drawers, wine fridges, and outdoor kitchens high on their wish lists. If your home has these or other unique selling points, mention them in your listing.

OWNERS

Renovate sooner, not later. Don't let dated features drag down the value of your home. Owners thinking about remodeling have good reason to act now. Quality contractors, already busier than they have been in recent years, are likely to get even tougher to snag. Then there's the issue of rising rates, which would push up the cost of new home-equity loans and most lines of credit.

More Real Estate Guide 2014:

Upscale neighborhoods

New investor favorites

Once-hot housing markets, now not

Booming growth cities