What do you do when your family outgrows your house, or when the quirks you once found charming about the place just aren't livable anymore? A few years ago, the answers were easy.

With house values climbing an average of 50 percent from 2001 to 2005 and lenders handing out big checks to nearly anyone who asked, you could quickly unload a too-small house and use the profits to help pay for a larger one. Or you could borrow against that growing equity to fund a big home-improvement project, with the full expectation of making your investment back someday when you sold. Flash forward a few years, and the rules of real estate have changed. In this marketplace, with home equity shrinking and banks reluctant to lend, is it smarter to move or improve?

According to a recent report on HouseLogic.com, there can be an advantage to trading up now: If your house has curb appeal and a good kitchen—and you price it right—offers will come. You may not turn a big profit, but once you sell, you become a buyer in this buyer's market. That means you'll find what you’re looking for and pay less for it than a few years ago.

To analyze your trade-up options, ask your local Realtor what you could realistically get for your home and what you'd have to pay for the next place. Then contact a lender to see if, based on those figures and your financial situation, you’re likely to qualify for the new mortgage.

If you're improving, know the economic slump has actually made renovating the home you already own a bit easier. The construction-industry slowdown has lowered the cost of some building materials: Plywood is down 46 percent, for example, framing lumber is down 42 percent, and drywall is down 25 percent, according to Bernard Markstein, senior economist for the National Association of Home Builders. Many contractors are also charging less for labor, to compete for the smaller pool of available jobs. What's more, you won't have to wait months for a contractor to show up—chances are he'll be able to start in a matter of days.

Of course, you'll still need to come up with cash to pay for the project.

Figure somewhere between $100 and $200 per square foot for new construction or a major remodel, depending on the scope of the project and labor costs in your area. A two-story addition with a family room, bedroom, and bathroom costs an average of $156,309, according to Remodeling Magazine's 2009-10 Cost vs. Value Report.

Now more than ever, though, you need to make sure that you invest your money wisely. In other words, will your $75,000 kitchen remodel increase your home value by $75,000—or by anything close?

Talk to a Realtor or an appraiser before assuming any kind of return rate on your remodel. As a general rule, no remodeling project returns 100 percent of its investment to the value of your house, but kitchens and baths tend to return at the highest rate -- somewhere around one half to two-thirds of the dollars spent.

Your house isn't just your largest investment, of course, it's also the place where your family lives. Financial considerations aside, the question of whether to move or improve should be decided by the things you cannot change about your current home: the school district, the amount of traffic on your street, the size and layout of your yard, your commute, the ease of access to markets and malls, and your neighborhood quality of life. If you love the spot, improving makes sense. But if a different location would be an improvement in its own right, then trading up could be the way to go.

Source: HouseLogic.com

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Under the Extended Home Buyer Tax Credit, which became effective on November 7, 2009, single buyers with incomes up to $125,000 and married couples with incomes up to $225,000 — are able to receive the maximum tax credits of $8,000 for first time buyers and $6,500 for repeat buyers.

But, if a buyer's income exceeds those limits he/she can still get a credit. The credit decreases for buyers who earn between $125,000 and $145,000 for single buyers and between $225,000 and $245,000 for home buyers filing jointly. The amount of the tax credit decreases as his/her income approaches the maximum limit.

Home buyers earning more than the maximum qualifying income — over $145,000 for singles and over $245,000 for couples are not eligible for the credit.

If you have specific questions or need additional information, please contact a tax professional or the Internal Revenue Service at (800) 829-1040.

If you qualify for a tax credit, you must be under contract before April 30 on the purchase of a home in order to receive your $8,000 (for first-time buyers) or $6,500 (for repeat buyers) benefit. Contact your Realtor immediately if you plan to take advantage of this tax credit. With two months left, the time in which to start looking for that home and to have time in which to make steady, informed, non-pressured decisions is rapidly running out.

Source: National Association of Realtors

The Houston real estate market opened 2010 with a mixed bag of readings, making it difficult to determine a clear direction for the months ahead.

January sales of single-family homes across the greater Houston area slid 12.3 percent compared to January 2009, according to the latest monthly data compiled by the Houston Association of Realtors (HAR).

When broken out by segment, sales of single-family homes priced from $500,000 and above showed dramatic gains in January while sales of homes on the opposite end of the spectrum, those priced from $80,000 and below, fell. Sales of all property types declined 7.4 percent in January on a year-over-year basis.

At $144,500, the January single-family home median price—the figure at which half of the homes sold for more and half sold for less—rose 11.9 percent from one year earlier. That represents the ninth consecutive monthly increase in median price as well as the highest Houston median recorded in a January. The average price of a single-family home appreciated for the fourth straight month, reaching $194,154, up 18.4 percent versus January 2009. That figure also represents the highest for a January in Houston.

Foreclosure property sales reported in the Multiple Listing Service (MLS) fell by 30.1 percent in January compared to one year earlier. The median price of January foreclosure sales rose 4.6 percent to $84,750 on a year-over-year basis.

Sales of all property types in Houston for January totaled 3,049, down 7.4 percent compared to January 2009. Total dollar volume for properties sold during the month was $565 million versus $535 million one year earlier, representing a 5.6 percent increase.

"Several overlapping factors influenced the Houston housing market as the new year began," said Margie Dorrance, HAR chairwoman. "These include both the first-time homebuyer tax credit and the expanded credit for existing homeowners, which may have prompted more listing activity. Strong sales activity in the higher-end single-family home segment also contributed to an overall higher average sales price for the Houston market. We hope to see both sales and pricing continue to reflect a robust real estate market as the April 30 tax credit deadline approaches and we enter the traditionally busy spring homebuying season."

Source: Houston Association of Realtors

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Energy efficiency is becoming an increasingly important factor among buyers in their decision to purchase a home. According to the 2009 NAR Profile of Home Buyers and Sellers, many buyers considered environmental efficiency and commuting costs very important when evaluating their options.

A house with poor energy efficiency tends to result in higher electricity bills. Heating and cooling costs were "very" or "somewhat" important to 88 percent of recent home buyers.

Energy efficient appliances and energy efficient lighting were also "very" or "somewhat" important to a majority of buyers.

A long commute to and from work or in running errands can also affect commuters' wallets. The NAR survey found that commuting costs were "very" or "somewhat" important to 78 percent of home buyers.

Source: National Association of Realtors

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