What would life be like without appliances? Our reliance on our dishwashers, laundry machines, etc. makes them an integral part of our homes. They keep the house clean and ensure that the well-oiled machine that is your home life continues to run smoothly. Fortunately, Energy Star appliances are more sustainable than others and can save you money on your utility bills.
What are Energy Star appliances?
Energy Star products use less energy than other home appliances. Because they are more energy efficient, they help to protect the environment by reducing harmful emissions. These products adhere to strict guidelines set forth by the U.S. Environmental Protection Agency (EPA) and U.S. Department of Energy. Over the lifespan of these home appliances, you can save significantly on energy costs.
You’ll find the Energy Star badge on common home appliances such as refrigerators and dishwashers, but over the years, the program has expanded to other systems throughout the home including HVAC systems, water heaters, TV sets, and more.
These appliances accomplish improvements in sustainability through various product features. Here are just a few examples of their efficiency gains compared to non-certified appliances, courtesy of the Energy Star Appliances Brochure.
Certified refrigerators are about 15% more energy-efficient
Certified freezers use about 10% less energy
Certified dehumidifiers use 15% less energy (roughly $175 lifetime savings)
Certified air cleaners are 40% more energy-efficient (roughly $25 annual utility bills savings)
Certified dishwashers are 10% more energy-efficient and 20% more water-efficient (average 1,900 gallons of water savings over product lifetime)
On average, certified laundry machines can cut energy costs by one-third and water costs by more than half
To truly make improvements in your energy output, it’s helpful to establish a baseline. By sorting through your utility bills, you’ll gain an understanding of how your household’s energy output is distributed, allowing you to identify areas for improvement. Using these special appliances is just one way to accomplish more sustainable living at home. By combining these products with other eco-friendly practices, you’ll see your energy expenses decrease while feeling a sense of pride that you’re doing your part to protect the environment.
To maximize your appliances, it’s important to keep them clean.
You’ve got several options to choose from when buying your next home. With existing homes, it’s in sellers’ best interest to spruce up their properties, so they’ll usually complete some kind of upgrades, curb appeal projects, and remodeling before hitting the market. A new construction home, however, has no previous owner; it comes brand new. Learning about the new construction buying process will help you understand how it differs from other types of housing, such as existing single-family homes, townhouses, condominiums, etc.
What is a new construction home?
New construction homes are kick-started from two primary sources: the homeowners themselves and developers. When a homeowner is having a home custom built, they work with contractors to build it to their desired specifications on a lot they’ve purchased. This tailored approach comes at a price; building a custom home generally costs more than purchasing a new build from a developer.
When going the developer route, buyers have options to choose from, namely tract homes and spec homes.
Tract homes make up new neighborhoods on land bought by the builder. They bear a strong resemblance to each other but may offer customizable floor plan and design options to tailor the home to the buyer’s liking.
Spec homes are finished, move-in-ready new builds. Though they offer little to no customization, they may be the right option for you if you’re looking to move right away.
There are four component parts of building a new construction home: land, labor, materials, and regulation. Builders combine those costs to determine what price they need to sell the home to make a profit, accounting for local real estate market trends. However, if the market is driving up those costs, builders are less likely to continue building. As a buyer, keeping tabs on the housing market will help you understand the landscape of available new construction homes.
Market conditions can drive up prices/halt production
Buying a New Construction Home
The financial preparations you’d take for purchasing an existing home apply to buying a new construction home. You’ll get pre-approved for a mortgage early on and form a saving strategy for how to make a down payment.
There’s less room for negotiation in new construction home transactions, so you and your agent should thoroughly discuss what kind of offer you’re able to make. Your agent is your greatest asset during this part of the process; lean on them to understand how to make an offer. You’ll also want to know whether a home warranty comes with the purchase of the new construction home and its cost structure.
Even though these homes are brand new, it’s still worth it to get a home inspection to discover any outstanding repairs that need to be made and begin a dialogue with the builder about fixing them before you move in.
Going into the buying process, it helps to know which new construction homes you’re able to afford. This allows you and your agent to work together to find the best candidate properties.
How will rising foreclosures impact the U.S. housing market? To give his answer, Windermere Chief Economist Matthew Gardner sheds light on the latest foreclosure data and shows how prepared home buyers are to manage their mortgage debt today compared to the 2000s.
This video on foreclosures is the latest in our Monday with Matthew series with Windermere Chief Economist Matthew Gardner. Each month, he analyzes the most up-to-date U.S. housing data to keep you well-informed about what’s going on in the real estate market.
Rising U.S. Foreclosures
The market has certainly shifted since mortgage rates started skyrocketing last year and, with prices pulling back across much of the country, some have started to become concerned about the likelihood of foreclosures rising—clearly a timely topic given current circumstances.
Hello there! I’m Windermere Real Estate’s Chief Economist Matthew Gardner and for this month’s episode of Monday with Matthew, I pulled the latest data on foreclosure starts and looked and the quality of mortgages that have been given to buyers in order to give you a clear idea of how foreclosures will impact the overall housing market.
For the purposes of this exercise, I’m going to concentrate on foreclosure starts rather than foreclosure filings because data shows us that a majority of homeowners where a foreclosure filing has been submitted to a court by their lender are able to avoid it by refinancing or selling the home, which makes total sense as over 93% of owners in the U.S. have positive equity.
U.S. Foreclosures: Starts 2007-2022
As you can see here, foreclosure starts rose significantly last year. In fact, they were 181% higher than in 2021. But if we zoom out, it’s important to note that foreclosure starts were 31% lower than 2019 and 88% lower than the 2009 peak.
Am I surprised at the increase in foreclosure starts? Not really. The forbearance program was put in place at the start of the pandemic, and it allowed homeowners to temporarily stop making mortgage payments and not be foreclosed on, but that program ended 18 months ago.
And, although a vast majority of the 4.7 million households who entered the program have left it and sold or refinanced their homes, there were always going to be some who were not able to, and this has led to the overall foreclosure activity rising. Let’s take a closer look.
U.S. Foreclosures in 2022
This is a heat map of foreclosure starts by state. And you can see that California, Florida, and Texas saw the highest numbers in 2022. But remember that these are the states that have the greatest number of homes with mortgages so, statistically, we would expect the total number of homes in foreclosure in those states would be higher than the rest of the country. That said, foreclosure starts were significantly higher in Florida, California, Texas, and New York than they were in 2019, the last “pre-COVID” year and before the forbearance program started.
And when we look more myopically, metro areas including New York/New Jersey, Washington DC, the Delaware Valley, Atlanta, Miami, Baltimore, and Dallas all saw total foreclosure starts rise well above what they were in 2019. This may suggest that there are some markets that could see foreclosure activity rise to a level that could materially impact housing in those locations.
But looking at the country as a whole, there are other factors leading me to believe that we will not see the number of homes entering foreclosure rising above the long-term average, and certainly not sufficient to have a material impact on U.S. housing prices.
Let me show you what’s happening on the mortgage side of things. First: credit quality.
Median FICO Scores for New Mortgages 2003-2022
The median FICO score for new mortgages was 766 in the 4th quarter of 2022. Yes, this is down from the peak seen in early 2021 when it was a whopping 788 but as shown here, it’s far higher than we saw before the housing crisis. Buyers over the past several years had very good credit and, given the tight labor market, we are certainly in a very different place than back before the housing bubble burst.
Mortgage Debt Payments Percentages 2007-2022
Secondly, buyers are using larger down payments than in the mid-2000’s, and with the historically low mortgage rates that we saw during the first two years of the pandemic benefitting new buyers as well as allowing existing homeowners to refinance, the share of disposable income that is used to cover mortgage payments remains very low. This basically means that owners aren’t as burdened by their house payments as they were in 2007-2009. And finally…
Equity Rich Households Q4 2022
With the significant run-up in housing values that we have seen over the past few years, 48% of all homeowners with a mortgage have more than 50% equity. Although this share has pulled back a little as mortgage rates rose and values pulled back, it’s still a massive amount of money and, as I mentioned earlier, many homeowners who are faced with foreclosure will end up selling their homes as they still have positive equity rather than go through the foreclosure process.
So, my answer to those of you wondering if we will see foreclosures rise to a level that could impact the overall housing market is “no.”
I don’t see any reason to believe that distressed sales will hurt the market in general, but I will say that there are some local markets where distressed sales could rise to levels that could act as a headwind to price growth in these areas. As always, I’d love to get your thoughts on this topic so please comment below! Until next month, take care and I will see you all soon. Bye now.
To see the latest housing data for your area, visit our quarterly Market Updates page.
About Matthew Gardner
As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.
In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.
Few interior design styles have captivated our imaginations like mid-century modern. Though the mid-century modern movement began to impact design culture many decades ago, we still see its lasting impact today. This vintage style remains popular for homeowners everywhere and shows no signs of slowing down. To aid your home décor efforts, let’s dig a bit deeper into what makes mid-century modern so special.
What is mid-century modern interior design?
The mid-century modern movement came to define graphic design, architecture, product development, and interior design in the 1940s, 1950s, and 1960s. Its emphasis on simplicity was a direct reaction to the more opulent styles that preceded it, heralding a shift in suburban home life. Here are a few of its signature features.
Both mid-century modern architecture and interior design live by the maxim “less is more.” With minimal decoration, the space between objects is emphasized, giving interiors a fresh and clean look. Straight lines are a tenet of this design style, reflected in the signature pieces of the era, such as the Eames chair (pictured below). This minimalist approach to interior design maximizes each object by removing all unnecessary elements.
The minds behind the mid-century modern movement prioritized nature and questioned how interiors could interact with the outside world. Nowadays, it’s common for homeowners incorporating this style to decorate with house plants, but the harmony with nature extends further into home design with such elements as stone materials, exposed wood beams, and floor-to-ceiling windows to maximize natural light.
3. Mid-Century Modern Color Scheme
If you’re a fan of decorating with a neutral color palette, this style is perfect for your home. With a reliance on colors like black, white, cream, and grey, a quintessential feature of this décor style is using bolder colors as accents to pop against a neutral backdrop. Primary colors create added contrast and help to lead the eye throughout a room. Experiment with dark brown or black to create different moods within the mid-century modern color spectrum.
Its ability to remain popular for decades is what separates this style. Its principles are still reflected in the latest home design trends. Perhaps nowhere is this more evident than its philosophy on materials and texture. It combines natural and synthetic materials to bridge the gap between eras, creating interiors that feel simultaneously vintage and modern. Plastic and fiberglass are commonly used manmade materials, while wood, marble, and stone are typical natural elements.
5. More Space, Less Clutter
Just as the space between objects is emphasized, open floorplans are typical in mid-century modern design to create spacious environments. Decorative décor is limited to reduce clutter, and enclosed storage spaces are kept to a minimum. If you’re planning to decorate in this style, it’s an opportunity to pare down your belongings and keep only what’s essential for your lifestyle at home.
Deciding when to sell your home can depend on a variety of factors. Perhaps your local market conditions are favorable to sellers, or you’ve recently changed jobs, or your family is growing and you need to upsize. Whatever the case may be, making the decision to sell your home is the first step in your selling journey.
Deciding to Sell Your Home
Once you know it’s time to sell your home, it’s natural to feel a wave of emotions. A home is an integral part of a homeowner’s life. They provide countless memories and, for many homeowners, are their greatest investment. But once you’ve decided to sell, it’s important to look at your home with an objective eye to appeal to a wide variety of buyers.
Which repairs should I make before selling my home?
To get your house in top selling shape, identify its outstanding repairs. As you fill out your list, separate the projects into categories which are DIY-eligible and which require a professional. This will help you to budget for your overall repair expenses and build a reasonable timeline. Some of the most important repairs to make before listing your home include fixing appliances, making sure your sinks and faucets work properly, repairing any cracks or holes in the walls, fixing all leaks and water damage, and ensuring that all systems in the home are functioning properly. Making repairs before you list your home will bode well for home inspections, negotiations, and can even give your home an advantage over other listings. Your agent may suggest a pre-listing inspection to make your home more competitive in a seller’s market.
Which upgrades should I make before selling my home?
When you sell your home, you’re inevitably competing against other listings in your area. The aesthetics of a house play a significant role in its ability to catch buyer’s attention, which emphasizes the importance of improving your curb appeal as you prepare to hit the market. Landscaping projects, new exterior paint, and upgrading your front entry are just a few ways you can spruce up the outside of your home.
And what about the interior? Consider upgrading to energy-efficient appliances, which are known for their high ROI potential. This is a great time to repaint your home’s interior as well. Consider using a neutral color palette to make it as appealing as possible to a wide-array of buyers. It’s also a good idea to identify rooms in which the flooring should be replaced or repaired. When remodeling your home’s flooring, choose a material that is within budget and has good resale value.
High ROI Remodeling Projects to Increase Home Value
Remodeling Projects to Avoid When Selling Your Home
Working With an Agent
Listing agents are trained professionals who work with homeowners to sell their homes. Your listing agent will be there to answer any questions you may have throughout the selling process and will negotiate with buyer’s agents to get the best price for your home. But their value doesn’t stop there. A listing agent will list the home, coordinate showings and open houses, and market the home. When searching for a real estate agent, find someone with whom you are compatible both emotionally and professionally, and who cares about the goals of you and your household.
What’s my home worth?
Homeowners can get a general idea of how much their home is worth by using online home value estimators, like Windermere’s free Home Worth Calculator. Though these tools can provide some context behind the value of your home, nothing compares to the in-depth analysis of an agent’s Comparative Market Analysis (CMA). Using a CMA, an agent can accurately price your home to get it sold quickly.
This video is the latest in our Monday with Matthew series with Windermere Chief Economist Matthew Gardner. Each month, he analyzes the most up-to-date U.S. housing data to keep you well-informed about what’s going on in the real estate market.
Renting vs. Buying a Home
One of my followers asked me about some of the financial benefits of owning your home as opposed to renting. I find this topic interesting as there really is a “laundry list” of reasons that, from a financial standpoint, owning a home is better than renting.
I’m Matthew Gardner Chief Economist at Windermere Real Estate and welcome to this month’s episode of Monday with Matthew. Let’s get to the topic at hand. Of course, I don’t have time to go through them all today but here are the ones that I think are the most compelling: wealth building and tax benefits.
The Financial Benefits of Homeownership
The first thing to understand is that, over time, a mortgage becomes easier to afford. You see, when you buy a home, the mortgage payments themselves don’t change and, over time, your earnings rise but the mortgage payment doesn’t. Simply put, unlike renters who generally see their rents going up every year, your mortgage payment never will and because you’ll hopefully be making more money as time goes by, the share of your income that you spend on a mortgage payment becomes less & less.
The next advantage to owning your home is that it is a good long-term investment. Of course, some will say that this is not the case because we went through the housing bubble bursting back in 2006 but there have actually been very few times in history when home prices have seen any long-term downward adjustment.
Now I know some will say that investing in stocks would give you a higher long-term return. My response to that would be I’ve never seen anyone living under a stock certificate. Have you?
My next reason for believing that ownership is better than renting is rather simple, and that is because a portion of every mortgage payment you make goes toward reducing the principal amount of the loan. Of course, during a majority of the term of the mortgage most of the payment is going towards interest but, a small portion is paying down the debt itself—in essence making it a forced savings plan, building wealth along the way.
Tax Advantages of Owning a Home
But what about the tax advantages? Owning a home offers unique and substantial ways to save on your taxes every year. Firstly, you can deduct your real estate taxes every year. Now, tax reform has limited the total allowed deduction, but it is still meaningful. You can also deduct the interest you pay on your mortgage. Again, there are some limitations but, depending on where you live you could save a significant amount.
And finally, let’s talk Capital Gains Taxes. When you sell your primary residence and have seen its value grow since you purchased it, up to $250,000 of that profit (if you’re a single person) or $500,000 if you’re married and filing jointly is tax free. Now, this is only true if you meet certain requirements with the biggest one being that you have to have lived in the house for a minimum of two years during the preceding five-year period.
If that’s not enough to convince you that there are very significant advantages to owning a home over renting, I will leave you with one last datapoint that you may find of interest.
Renting vs. Owning a Home: Household Net Worth
Using Federal Reserve data as a base, I’ve been able to calculate the median net worth of a household in America who owned their homes versus a household that rents.
In 2022, the median household wealth of a homeowner household here in America was approximately $330,000.
The median household wealth for a renter household in this country last year was just $8,000.
As you can see, that’s quite the discrepancy between the two. I think it’s very clear that homeownership for a vast majority of families is how they create most of their wealth.
I hope you found this topic of interest. Of course, if you have any questions or comments please do let me know as I do enjoy hearing from you. Take care and I look forward to talking to you all again next month.
Data combined and calculated by Windermere Economics
About Matthew Gardner
As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.
In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.
When mortgage rates are up, prospective buyers can often feel like they’re at a disadvantage as they go about securing a home loan. Fortunately, there are ways to lower your interest rate to make your monthly mortgage payments more affordable.
What are mortgage buydowns?
A mortgage rate buydown is a form of financing that allows you to secure a lower interest rate on your mortgage by paying more money upfront in the form of discount points, also known as mortgage points, at closing. Each discount point is equal to one percent of your total loan amount. Especially attractive in times of high mortgage rates, buydowns are offered by sellers, builders, or lenders depending on the transaction. There are two main types of mortgage interest rate buydowns: permanent and temporary.
Permanent Mortgage Buydowns
With a permanent interest rate buydown, typically the borrower, seller, or builder will contribute to the cost of buying down the rate permanently. In this situation, the borrower qualifies at the bought-down rate for the life of the loan.
Temporary Mortgage Buydowns
A temporary interest rate buydown provides cash flow for the borrower during the temporary period, but they still qualify at the higher note rate. Typically, the seller or builder will contribute to the cost of buying the rate down temporarily.
How do temporary mortgage buydowns work?
Temporary mortgage interest rate buydowns have their own unique structure. Below are three common types:
1-0 Buydown Mortgage: The borrower gets a 1% discounted interest rate for the first year.
2-1 Buydown Mortgage: The borrower gets a discounted interest rate for the first two years of the loan. The first year, the interest rate is 2% lower, decreasing to 1% lower the second year.
3-2-1 Buydown Mortgage: The borrower gets a 3% discounted rate the first year, dropping to 2% in the second year and 1% in the third year.
Although they share certain characteristics with adjustable-rate mortgages (ARMs), temporary mortgage buydowns are slightly different. ARMs initially have a fixed interest rate period. Once the adjustable-rate period kicks in, both the interest rate and monthly payments are subject to change. With buydowns, the buyer’s interest rate doesn’t change; either the seller or lender covers part of the interest payments as outlined by the buydown’s structure.
Though buying down your mortgage interest rate permanently can make the payments more affordable, if you are contributing to this cost, make sure you can withstand the heavier financial load before proceeding. It also depends on how long you plan to live in the home. For example, if you plan to move shortly after buying, the short-term savings on your mortgage may not yet break even on your upfront costs by the time you’re ready to purchase again.
Pros of Mortgage Buydowns
Savings on monthly mortgage payments
A lower rate means you could qualify for a higher loan
Discount points = prepaid mortgage interest, which is often tax-deductible
Cons of Mortgage Buydowns
Higher upfront costs of buying a home
If payments increase, higher risk of foreclosure
Less cash available for remodeling, home improvements, etc.
Here’s an example of the savings you could see with a 3-2-1 temporary mortgage buydown. Let’s say you qualify for a 30-year mortgage with a $400,000 loan amount at an interest rate of 7%. With a 3-2-1 buydown, you’d pay a 4% interest rate the first year, 5% the second year, and 6% the third year. From year four on, you’d pay 7%.
Purchase Price
Down Payment
Loan Amount
Interest Rate
APR
Loan Term
$500,000
$100,000
$400,000
7%
7.125%
30 years
3-2-1 Temporary Mortgage Interest Rate Buydown
Year 1
Year 2
Year 3
Years 4-30
Interest Rate
4%
5%
6%
7%
Number of Payments
12
12
12
336
Monthly P&I Payment
$1,909.66
$2,147.29
$2,398.20
$2,661.21
Total PITI Payment
$1,909.66
$2,147.29
$2,398.20
$2,661.21
Monthly Reduction
$751.55
$513.92
$263.01
–
Calculations provided by Penrith Home Loans
Temporary buydown cost as % of purchase price 3.67%
With this structure, you’d save $9,018.60 the first year, $6,167.04 the second, and $3,156.12 the third, for a total three-year savings of $18,341.76.
The following analysis of select counties of the Western Washington real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.
Regional Economic Overview
Although the job market in Western Washington continues to grow, the pace has started to slow. The region added over 91,000 new jobs during the past year, but the 12-month growth rate is now below 100,000, a level we have not seen since the start of the post-COVID job recovery. That said, all but three counties have recovered completely from their pandemic job losses and total regional employment is up more than 52,000 jobs. The regional unemployment rate in November was 3.8%, which was marginally above the 3.7% level of a year ago. Many business owners across the country are pondering whether we are likely to enter a recession this year. As a result, it’s very possible that they will start to slow their expansion in anticipation of an economic contraction.
Western Washington Home Sales
❱ In the final quarter of 2022, 12,711 homes sold, representing a drop of 42% from the same period in 2021. Sales were 34.7% lower than in the third quarter of 2022.
❱ Listing activity rose in every market year over year but fell more than 26% compared to the third quarter, which is expected given the time of year.
❱ Home sales fell across the board relative to the fourth quarter of 2021 and the third quarter of 2022.
❱ Pending sales (demand) outpaced listings (supply) by a factor of 1:2. This was down from 1:6 in the third quarter. That ratio has been trending lower for the past year, which suggests that buyers are being more cautious and may be waiting for mortgage rates to drop.
Western Washington Home Prices
❱ Sale prices fell an average of 2% compared to the same period the year prior and were 6.1% lower than in the third quarter of 2022. The average sale price was $702,653.
❱ The median listing price in the fourth quarter of 2022 was 5% lower than in the third quarter. Only Skagit County experienced higher asking prices. Clearly, sellers are starting to be more realistic about the shift in the market.
❱ Even though the region saw aggregate prices fall, prices rose in six counties year over year.
❱ Much will be said about the drop in prices, but I am not overly concerned. Like most of the country, the Western Washington market went through a period of artificially low borrowing costs, which caused home values to soar. But now prices are trending back to more normalized levels, which I believe is a good thing.
Mortgage Rates
Rates rose dramatically in 2022, but I believe that they have now peaked. Mortgage rates are primarily based on the prices and yields of bonds, and while bonds take cues from several places, they are always impacted by inflation and the economy at large. If inflation continues to fall, as I expect it will, rates will continue to drop.
My current forecast is that mortgage rates will trend lower as we move through the year. While this may be good news for home buyers, rates will still be higher than they have become accustomed to. Even as the cost of borrowing falls, home prices in expensive markets such as Western Washington will probably fall a bit more to compensate for rates that will likely hold above 6% until early summer.
Western Washington Days on Market
❱ It took an average of 41 days for homes to sell in the fourth quarter of 2022. This was 17 more days than in the same quarter of 2021, and 16 days more than in the third quarter of 2022.
❱ King County was again the tightest market in Western Washington, with homes taking an average of 31 days to find a buyer.
❱ All counties contained in this report saw the average time on market rise from the same period a year ago.
❱ Year over year, the greatest increase in market time was Snohomish County, where it took an average of 23 more days to find a buyer. Compared to the third quarter of 2022, San Juan County saw average market time rise the most (from 34 to 74 days).
Conclusions
This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.
The regional economy is still growing, but it is showing signs of slowing. Although this is not an immediate concern, if employees start to worry about job security, they may decide to wait before making the decision to buy or sell a home. As we move through the spring I believe the market will be fairly soft, but I would caution buyers who think conditions are completely shifting in their direction. Due to the large number of homeowners who have a mortgage at 3% or lower, I simply don’t believe the market will become oversupplied with inventory, which will keep home values from dropping too significantly.
Ultimately, however, the market will benefit buyers more than sellers, at least for the time being. As such, I have moved the needle as close to the balance line as we have seen in a very long time.
About Matthew Gardner
As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.
In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.
This video is the latest in our Monday with Matthew series with Windermere Chief Economist Matthew Gardner. Each month, he analyzes the most up-to-date U.S. housing data to keep you well-informed about what’s going on in the real estate market.
Hello there, I’m Windermere’s Real Estate’s Chief Economist Matthew Gardner and welcome to the first episode of “Monday with Matthew” for 2023. As has become tradition, this first episode of the year will be dedicated to my real estate forecast for the U.S. housing market, so let’s get straight to it.
2023 Real Estate Forecast
Existing Home Sales & Forecast
Image Source: Matthew Gardner
U.S. home sales trended lower through all of 2022 and, although I believe that sales will still have held above five million, this certainly won’t be the case in 2023. Affordability and higher financing costs will continue to act as headwinds when it comes to sales, but I think that the bigger issue will be that listing activity will not rise significantly as we move through the year.
As I have been saying for several months now, I don’t see why many households who don’t have to move will move and lose the historically low interest rate that they currently benefit from. That said, sales will still occur this year but at just 4.8 million, sales will be lower than we have seen since 2014.
Annual Change in Median Sale Prices
Image Source: Matthew Gardner
Much has been said about the future of home prices, with some forecasters even suggesting that housing prices will collapse in a similar fashion to that seen following the bursting of the housing bubble back in 2008. Now, although price growth through the pandemic period was clearly excessive, fundamentally speaking, the two periods cannot be considered to be similar at all.
It’s my opinion that sale prices in 2023 will be very modestly lower than last year and I certainly don’t expect to see a collapse in home values.
But not all markets are created equal. The pandemic created what has become known as “Zoom-Towns.” These were cheap markets that affluent buyers flocked to because of their newly found ability to work from home and this led sale prices there to soar. It’s these locations that will likely see prices fall more significantly. Ultimately, expect to see prices fall through the first half of this year before starting to recover in the second half.
New Home Starts & Forecast (Single Family)
Image Source: Matthew Gardner
Looking now at the new construction market, housing starts fell last year as construction costs remained high and mortgage rates rose which lowered demand. And I’m afraid that I do not see 2023 as being one where builders will deliver more inventory, with starts pulling back to a level the country hasn’t seen since 2016. That said, I am expecting a recovery in 2024 when new home starts will break back above the 1,000,000 level.
New Home Sales Forecast
Image Source: Matthew Gardner
New home sales in 2023 will fall further coming in below 600,000 but there is some light at the end of the tunnel with sales picking up fairly significantly again in 2024. We all understand that the country has a significant undersupply of ownership housing, but the costs associated with building new homes is still making it remarkably hard for builders even though they understand that demand will be significant for at least the next decade and a half given current demographics.
But the problem they will continue to face is that demand will primarily come from entry level buyers and, simply put, the cost to build a home precludes many developers from being able to meet this demand.
Average 30-Year Mortgage Rate & Forecast
Image Source: Matthew Gardner
And finally, my forecast for mortgage rates in 2023. Although this might not look good at all, as they say, “the devil is in the details.” Rates skyrocketed last year as the Fed stopped buying treasuries and mortgage-backed securities and, although they are off the highs we saw toward the end of last year, they are still significantly higher today than the market has become used to seeing.
As you can see here, I’m anticipating the average 30-year conventional rate to average 6.1% in 2023, but my forecast is actually a bit better than this shows.
Average 30-Year Mortgage Rate Forecast 2023
Image Source: Matthew Gardner
You see, my quarterly forecast suggests that rates have actually already peaked, and that they will trend lower as we move through this year and break below 6% by the fourth quarter. I would add that if anything my forecast may be a little pessimistic, and rates may end 2023 a little lower than I am showing here.
But that will depend on the Fed, and how long they will continue raising rates, and how long it will take before they start to lower them if the US enters a recession this year, which many forecasters including myself believe will be the case.
So, there you have it, my 2023 U.S. housing forecast. I will leave you with this one last thought. 2023 will be a transition year when the housing market will come off the “high” we saw during the pandemic and borrowing costs were artificially low.
I don’t see any reason for buyers or sellers to panic though. By the end of 2023, most markets will have corrected themselves and I believe we will see prices and demand start to pick up again toward the end of this year, but at a far more normalized pace.
As always, I look forward to your comments on my forecasts and I’ll see you all again next month. Take care now.
About Matthew Gardner
As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.
In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.
There’s always room for improvement in a household’s quest to go green. From how you use your appliances to the way you consume and dispose of food, every lifestyle choice you make at home presents an opportunity to be more eco-friendly. Adopting more sustainable practices has obvious environmental benefits and helps to improve quality of life, but it can also increase your home value and in some cases may generate extra cash.
7 Tips for Sustainable Living at Home
1. Create a Sustainable Kitchen
The kitchen is responsible for a decent portion of your home’s energy output. Choosing energy-efficient appliances can help to improve your household’s sustainability by using less energy. Reusable materials go a long way in the kitchen as well. Even seemingly small changes like switching from single use to reusable grocery bags and eliminating paper towels can make an impact. Using natural cleaning products will keep your kitchen cleaner longer while improving your home’s air quality, and being mindful about water usage can save on utility bills.
To further improve your home’s sustainability, consider planting an herb garden. This helps to cut down on repeatedly buying spices and seasonings at the grocery store while cultivating a natural ambience in your home. (And they’re fun to cook with, too!) Do indoor plants need sunlight? Of course, so be sure to position your indoor garden in an area where your plants have direct access. Once you’ve picked out a spot, decide which herbs you’d like to grow. Some of the most common herbs are easy to grow and will pair well with whatever’s on the menu—basil, thyme, cilantro, parsley, oregano, etc.
The first step in becoming more energy efficient at home is understanding your energy output. Once you understand your household’s habits, you can identify which cutbacks will help you chart a more sustainable path forward. Energy-efficient lightbulbs can help you save on utility bills. Because they use less energy that standard lightbulbs, they typically last longer as well. Make sure your home is properly insulated and your windows’ caulking and weatherstripping is in good condition. Air leaks and poor insulation waste energy and will cause spikes in your utility bills.
Every household produces some sort of waste, but it’s how that waste is treated that makes all the difference for the environment. Clean your recycling to make it easier to process and do your best to only buy what you plan to eat. Start a compost bin for extra food scraps or consider other agricultural solutions for disposing of it. Consider buying items like shampoo, conditioner, moisturizers, and the like in bulk to cut down on packaging waste. Reusable glass containers or jars will help you portion out meals and provide a useful way to store bulk items like rice and beans.
Yes, making the switch to solar energy comes with significant upfront costs. But an investment in solar is not just an investment in the health of the planet, it can increase your home value as well. The energy savings you’ll generate in the long-term will depend on your household’s level of consumption and the power generated by your solar panels. And if you’re generating more power than you’re consuming, you may be able to sell the surplus energy back to the grid. For more information on solar-based incentives and tax breaks by state, visit DSIRE (Database of State Incentives for Renewables & Efficiency®).
Even for the green thumbs, there’s opportunity to go greener at home. A garden is only as healthy as its soil. Mulching is vital to soil health and helps to reduce weed growth. Animal manure also has the power to enrich garden soil, both as a fertilizer and conditioner. Organic weed killers made with natural ingredients will maintain your garden’s health while keeping unwanted weeds at bay. Apply this same organic mindset to dealing with slugs as well. Certain types of slug bait may possess certain chemicals that do more harm than good, especially if you have farm animals on your property like chickens or goats.
Before you begin your next cycle in the laundry room, consider some methods of reducing energy. Because the heating of water is responsible for a majority of the energy generated by doing laundry, using cold water can help you save on energy costs. Cold water is also gentler on clothing. Clean the dryer vent and filter regularly to keep it unclogged and running efficiently. Consider hang-drying when possible, and in warmer months, air dry your clothes to save a dryer cycle.
For more information on sustainable living, helpful advice on home upgrades, plus tips on DIY home projects and more, visit the Living section of the Windermere blog.
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