Home prices and interest rates are rising but still reasonable, and that’s good for both buyers and sellers. By Janet Bodnar, Editor-at-Large From Kiplinger's Personal Finance, September 2013 Imagine you’re the editor of a personal-finance magazine and you’re planning a cover story about cashing in on the housing rebound. While your staff is working on the story, the Federal Reserve hints that it will begin tapering its purchases of bonds, the stock market plummets, and interest rates spike—threatening the housing rebound. What do you do?See Also: 10 Housing Markets Where Prices Are Rising Most If you’re an investor, you’d do well to follow senior editor Jeff Kosnett's three-day rule: Wait three days after a major financial development before you do anything rash with your money. Sponsored Content If you’re a magazine editor, you follow the same rule. Wait a few days to see where interest rates are likely to settle. Ask your housing editor to do more digging to find out how home buyers and sellers might be affected. Read everything you can get your hands on about the mortgage market. Breathe easier when you conclude that you can go ahead with your cover story. And scrap your original editor’s column for a new one. I was planning to write about whether we at Kiplinger see a new bubble developing in the housing market. There’s much less danger of that now, but we still see opportunities for both buyers and sellers. No less an authority than Ben Bernanke said in his most recent news conference that “rates have tightened some, but other factors have been more positive—increasing house prices, for example.” In terms of monthly payments on an average house, said Bernanke, “the change in mortgage rates we’ve seen so far is not all that dramatic.” Advertisement Interest rates on 30-year mortgages recently topped 4% for the first time in a year. Rates are likely to jump around, but Kiplinger thinks they’ll settle at around 4.25% by year-end. It’s important to keep recent rate hikes in perspective. “A good, normal 30-year fixed rate is 5%,” says Guy Cecala, publisher of Inside Mortgage Finance. “But nobody wants to hear that when they’ve seen 3.5%.” So for now it seems that home prices and interest rates are rising but still reasonable, and that’s good for both buyers and sellers. The biggest drag could be a shortage of inventory. And many lenders are still picky to the point of paranoia when it comes to lending standards and appraisals. Affordability continues to be an issue in parts of California and in the northeast corridor from Washington, D.C., to Boston. And in some areas, bidding wars have broken out. I’d echo Knight Kiplinger’s advice for first-time buyers in hot markets: “Chill out and stick to a target price you can afford. Your day will come.” More about targets. We have always been fans of target-date mutual funds for investors who crave simplicity. These one-stop funds, used primarily for retirement accounts, divvy up your money among stocks, bonds and other assets and adjust the mix to become more conservative as you near your target date. We’ve always taken care to explain that some funds take more risks than others, and it’s important to choose one that you feel comfortable with. But one thing has always bothered me: What if you’re stuck with a fund in your retirement plan that doesn’t have a very good track record? To answer that, senior associate editor Nellie Huang zeros in on the seven biggest issuers of target-date funds and tells you what to do if your plan’s fund is a dud. P.S. Our staff fanned out across the country to visit each of the places on our list of the top ten cities that have it all.