Market Updates • Matthew Gardner • October 24, 2023

U.S. Housing Market 2023: Updated Analysis

by Gary Peterson

Windermere Chief Economist Matthew Gardner gives an updated analysis of the U.S. housing market in 2023, using data released by The National Association of REALTORS® on listing activity, home sales, price growth, and more.

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.

U.S. Housing Market 2023

Hello there, I’m Windermere Real Estate’s Chief Economist Matthew Gardner and welcome to this month’s episode of Monday with Matthew. The National Association of REALTORS® released their data on the U.S. housing market in August, and it contained a few things which I found interesting and wanted to share with you.

U.S. Housing Market 2023: Home Prices, Demographics, and More

Listing Activity

A triple line graph showing the inventory of homes for sale in the U.S. from 2000 to 2023, U.S. single-family homes for sale from 2013 to 2023, and U.S. condo/co-op homes for sale from 2013 to 2023. All three graphs show a downward trend from the mid-2010s to 2023.

As you can clearly see here, the number of homes for sale remains at close to historic lows. When adjusted for seasonality, there were just 1.03 million single-family and condominium homes for sale in the month of August, and that’s down 8.3% from a year ago and the second lowest level in 2023. When adjusted for seasonal variations, there were just over 911,000 single-family homes for sale in the month, that’s 15% lower than a year ago and 36% below August of 2019. And the condominium market is not faring any better with just over 123,000 units available for purchase, listing activity was down year-over-year by just over 9%.

Homes for Sale August 2023

A bar graph showing homes for sale in August from 2000 to 2023. Supply topped out in 2006 and 2007 at around nearly 4 million, before declining steadily to 2023, where supply is just over 1 million.

And to give you a little different perspective, this chart shows you the total number of units for sale in the month of August going back more than 20 years and I think it gives a pretty good indication as to how tight the U.S. housing market really is.

Now, we’ve talked before about the reasons why supply is so limited, and the blame is almost totally attributable to mortgage rates with sellers remarkably reluctant to move because that would mean losing the historically low mortgage rate that they currently benefit from. And as the old saying goes, “you can’t buy what’s not for sale,” and this is certainly true in the housing market today.

U.S. Housing Market 2023: Sales Activity

A triple line graph showing existing U.S. home sales from 2000 to 2023, U.S. single-family home sales from 2013 to 2023, and U.S. condo/co-op home sales from 2013 to 2023. All three graphs show a spike between 2020 and 2022 before declining sharply in 2023.

With such limited choice in the marketplace, it’s unsurprising to see home sales having plummeted following the pandemic induced surge we saw in 2021. At an annual sales rate of 4.04 million units, that is only 40,000 more than the low seen this January and we are now holding at levels we haven’t seen since 2010. Interestingly, single-family sales did see a little jump at the start of this year, but they have since pulled back—likely a function of rising financing costs, which were getting close to 7% in June.

But the condominium market, while certainly down significantly, appears to be somewhat more resilient. I find this interesting as we have not seen any palpable increase in listing activity for multifamily units.

Home Sale Prices Off All-Time High

A triple line graph showing the median sale price of U.S. Existing Homes from 2000 to 2023, the median sale price of single-family homes from 2013 to 2023, Median sale price of multifamily homes 2013 to 2023. All three show a gradual increase from 2013 to 2022, a peak in 2022, with the 2023 numbers being just below that peak.

When prices started to fall in the summer of 2022, many expected to see them continue to plunge in a manner similar to that seen following 2007 collapse, but that has certainly not been the case. Sale prices have rebounded and remain remarkably resilient—especially given significantly higher financing costs.

Although we did see a small drop in home prices between June and July of this year, U.S. home prices are only 1.6% below their 2022 peak; they’re up 3.9% year over year; and up by 11.1% from the start of 2023.

Single-family home prices paint a similar picture with prices down by 1.8% from peak; but up 3.7% year over year, and up 11.2% from the start of the year. Interestingly, sale prices in the Northeast were actually 3.5% higher in August than their 2022 peak. And condominium prices are just 0.1% below the high seen in June of last year. Prices are now up 6.2% year over year and are 11.6% higher than we saw at the end of 2022.

Now, of course the data shown here is unlikely to reflect the recent surge in mortgage rates so it will be interesting to see what impact that has not just on sales but sale prices when the September and October data is published.

My intuition suggests that—even with mortgage rates where they are today—as long as they don’t move significantly higher, prices at the national level are unlikely to collapse. But I do see sales volumes pulling back further as listing activity remains very constrained.

Price Growth vs Payment Growth

A double line graph showing price growth vs mortgage payment from Jan 2016 to July 2023. In 2023, mortgage payment growth sits at 26.5% while price growth is at 3.9%.

This chart shows a different way to look at the impact that mortgage rates are having on the market. The dark blue line shows year-over-year home price growth, and the light blue line shows the 12-month change in average mortgage payments.

Although we did see that annual growth in mortgage payments fall to just 10% in June of this year—the first time we have seen that since 2021—it has subsequently jumped back up. This means that a buyer of a median priced house in the U.S. is faced with payments that are 26 and a half percent higher than they were 12 months ago. At the same time, home price growth has stalled.

As I’ve mentioned in several past videos, I find it unlikely that inventory levels will increase significantly in 2023, and I also believe that supply will be constrained next year as well as rates remain at elevated levels.

As we know, it is this lack of inventory that has helped to support home prices; however, there is a breaking point. 10-year bond yields are holding at multi-year highs and do not appear to be thinking of pulling back at any time soon—especially given new bond issuances that the country is going bring to market in order to address our burgeoning debt levels.

And it’s because of this that I now expect to see rates remaining higher for longer, and the question then becomes how much tolerance will buyers have if mortgage rates hold where they are today or if they head closer to 8%.

Although I am not expecting this to happen, it is possible. And if it does, then sales will fall further and the underpinning of price stability will certainly be eroded. And there you have it. As always, I’d love to hear your thoughts on this subject so feel free to leave your comments below. Until next month, stay safe out there and I’ll see you 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.

Design • October 9, 2023

5 Ways to Add Privacy to Your Patio or Balcony

by Gary Peterson

A private backyard patio with a hanging chair, comfortable wicker patio furniture, a refinished wooden deck, and lush greenery surrounding the seating area.

Your home’s interior can offer you peace of mind, but there’s nothing like the connection between your patio and the great outdoors. With a little privacy, you can relax and unwind at home like never before. Here are five creative tips to add privacy to your patio or balcony and turn into your own personal retreat.

5 Ways to Add Privacy to Your Patio or Balcony

1. Vertical Gardening

Incorporating nature into your outdoor space will not only help you make it more private, but it will also help bring the space to life with an organic touch. Vertical gardens will liven up your patio while making it more secluded. Choose plants that thrive in your local climate and complement your home décor style.

2. Install a Pergola or Canopy

Looking to make your backyard a bit more exclusive while providing some shade? A pergola or canopy will do the trick. This versatile choice is also fitting for any homeowners who like to entertain and want to extend their parties to the outdoors. To set up, pick a central space on your patio for your pergola that won’t interrupt the flow of foot traffic. These furnishings may be the missing piece for your backyard retreat; they will protect you from the elements year-round while maintaining that open-air feeling you’re looking for.

A private backyard patio where two wooden chairs with light green pillows are set up among flowers in ceramic planters, a lantern with a candle in it, and trees all around, which hide the fence in the background.

Image Source: Getty Images – Image Credit: Kristin Mitchell

3. Privacy Screens

Your patio privacy project will lead you toward some creative decorative opportunities. Privacy screens work like a fence for your home, in that they help to enclose your property from your neighbors. However, unlike a fence, they are easy to move around and come in various styles and materials to match your taste in outdoor décor. Typically made of vinyl, metal, wood (bamboo is a popular choice), and artificial greenery, these products may be just what you’re looking for to frame your private patio area.

4. Planters

You can create a barrier and refresh your backyard or balcony patio aesthetics at the same time with planters filled with tall plants. If you’re willing to wait, trees and vining plants can grow into lush fences over time. If you’re hoping for a quicker solution, consider lifted planters with mature bushes or hang planters with plants that cascade down.

A woman tends to her balcony garden. She is growing plants to make her condominium more private.

Image Source: Getty Images – Image Credit: vm

5. Outdoor Curtains and Art

Finding the right items to hang will help create the backyard oasis you’re dreaming of. For those with a vertical structure in the backyard like a pergola or gazebo, or a balcony that can hold a tension rod, consider adding outdoor curtains for some elegance and privacy. For a more personalize approach, a gallery wall can also help keep the creative juices flowing outdoors while connecting the space to the inside of the house. Search for weather-resistant frames that will hold up as the seasons change and hang them on sturdy strings or repurpose a room divider.

With a dash of décor, some elements of nature, and your own personal design touch, you’ll create the outdoor space you’ve always wanted. No matter how much we love our interior, it’s nice to get outside and breathe some fresh air while still feeling like you’re at home.

Market News • Matthew Gardner • September 26, 2023

How Low Inventory Is Affecting the Housing Market

by Gary Peterson

Windermere Chief Economist Matthew Gardner demonstrates how the U.S. housing market is adapting to low inventory levels. He touches on the new construction industry, supply changes in large metro areas, median home sale prices, and more.

Low Inventory Housing Market

Hello there, I’m Windermere Real Estate’s Chief Economist Matthew Gardner and welcome to this month’s episode of Monday with Matthew. As we are all aware, the housing market has softened considerably with the number of existing homes available to buy close to record lows. Today we are going to talk about supply, and how the market is starting to adapt to low inventory levels.

Housing Market Inventory

A bar graph showing the average number of homes on the market in the U.S. from 2000 to 2023. A line crosses through the bar graph showing months supply. inventory peaked in 2007 at roughly 3.5 million homes for sale. In 2023, inventory rose above 1 million for the first time since 2020.

This chart shows the average number of homes on the market by year. Although year to date we have seen a little bit of an uptick, it’s clear the country remains supply-starved. And with just over three months of inventory—as opposed to the normal four to six—the market is clearly out of balance. But even though inventory levels have risen nationally, as I’ve said many times before, not all markets are equal.

Housing Inventory Changes in Metro Areas

A scatter plot showing the changes in inventory levels of homes for sale in different metropolitan areas throughout the U.S. from Q2 2019 to Q2 2022. Only Austin, Texas had more homes for sale higher in the second quarter of this year than it had in the second quarter of 2019.

This chart shows how supply levels have changed. The data here is representative of the 100 largest metropolitan areas in the country. The horizontal axis shows the change in inventory versus the second quarter of 2022, while the vertical axis shows the difference and the number of homes for sale versus the second quarter of 2019. I think you’ll agree that the difference is stark. Although two-thirds of the metropolitan areas have seen the number of homes for sale improved versus the same period a year ago, just one (Austin, TX) had more homes for sale higher in the second quarter of this year than it had in the second quarter of 2019.

And even more stark was the fact that inventory levels in 53 of the 100 largest metropolitan areas were down by more than 50% compared to the same period three years ago.

Interestingly, on a percentage basis, smaller metro areas saw the greatest decline compared to three years ago. For example, in Hartford, CT, the average number of homes on the market in the second quarter was just over 900, down by 80% from the second quarter of 2019 where there was an average of over 4,400 units for sale. Supply levels were down by 78% in Stamford, CT; 75% in New Haven, CT; and 74% in Allentown, PA.

It is true that supply levels are generally higher when compared to a year ago, with the greatest increase being seen in select markets in Florida, Tennessee, Texas, and Oklahoma; however, other than in Austin, supply levels remain well below their long-term averages. So, how is the market adapting? The answer is rather interesting. Even with all the talk of escalating material, land, and labor costs, it’s the new home industry that has been taking advantage of the lack of housing supply.

New Construction Market Trends

A line graph showing the share of new construction homes compared to single-family homes being resold from 1983 to 2023. The most significant portion of the graph is the steady increase from roughly 5% in 2011 to nearly 35% in 2023. In conclusion, new construction homes have a growing market share.

This chart shows the share of new homes on the market compared to their resale counterparts—here we are just looking at single-family homes. Historically, new construction makes up roughly 10% of active listings at any one time, but as you can see here, that share has been rising not just since the end of the pandemic but for the past several years. Although off the high seen a few months ago, 30% of the single-family homes for sale this July were brand new. I find this particularly interesting because, historically speaking, a premium was paid in order to buy a new home rather than an existing one.

Median Sale Prices: New and Existing Homes

A double line graph showing median sale prices for new and existing homes from 1990 to 2022. The new homes line is consistently above the existing homes line. Both lines started around $100,000 in 1990 and in 2023, reached $455,800 for new homes and $392,800 for existing homes.

As you can see here, the spread in median sale prices, which was pretty stable from 1990 until the bursting of the housing bubble, grew significantly starting in 2011 and in 2022. The premium averaged 16%. But when we look a bit closer at the numbers, they gives us a somewhat different picture.

A double line graph showing median sale prices for new and existing homes from January 2012 to January 2023. The new homes line is consistently above the existing homes line. In 2023, the spread has dropped to just 6%. In June of this year the difference was only $1,000.

You can see here the spread has dropped to just 6%. And in June of this year, the difference was a mere $1,000.

With the share of new homes for sale holding at a four-decade high, the share of sales themselves is at a level we haven’t seen since 2005. But even though we know that there is demand for housing, shouldn’t sales be constrained by mortgage rates? Well, what is happening is that builders are attracting buyers through incentives, and here we’re talking about mortgage rate buydowns which are becoming increasingly prevalent across the country.

In fact, a recent survey from John Burns Consulting suggested that 30% of home builders reported using interest buydowns more in the second quarter of this year than they had previously. And this is attracting buyers to visit new development communities.

An example of these buydowns is the 2/1 program that DR Horton—the largest home builder in the country—is offering at some communities. This program gives buyers a mortgage rate that starts at 3% for the first year, rises to 4% in year two, and then goes to 5% for the balance of the 30-year term. That’s pretty compelling, given where mortgage rates are today.

The bottom line is that as far as I can see, the new home industry will continue to take an outsized share of the market for the balance of 2023 and likely through most of 2024. That said, once the market starts to normalize, I expect them to pull back from these incentive programs, making them more likely to start raising asking prices, and we will return to the traditional spread between the prices of new and resale homes.

Although it’s pleasing to see more homes being built, I still believe that the country will still be running a housing deficit when it comes to meeting demographic demand and this will continue to hurt first-time buyers who continue to be priced out of the market.

As always, I’d love to hear your thoughts on this subject so feel free to leave your comments below. Until next month, stay safe out there and I’ll see you soon. Bye now.

To see the latest real estate market data for your area, visit our Market Update page.

About Matthew Gardner

Living • September 12, 2023

6 Home Cleaning Tips to Eliminate Household Odors

by Gary Peterson

A father and his young daughter work together in the kitchen, using home cleaning tips to eliminate common household odors. The young daughter sprays a solution on the stovetop and the father scrubs with a sponge.

A home that smells fresh feels fresh. But as all homeowners know, even after spending hours cleaning your home top to bottom, musty and unclean smells somehow find a way to hang around. We’ll take a look at some of the most common household odors and offer home cleaning tips to eliminate them room by room. Plug your nose, throw on a pair of rubber gloves, and let’s dive in!

1. Get Rid of Kitchen Odors

In many ways, the kitchen is the heart and soul of a home, but all that cooking and baking comes with a consequence: bad odors. From rotting food to stale air, the kitchen can easily whip up bad smells to combat. Start by emptying your refrigerator and use warm, soapy water to wipe down the shelves. Dispose of expired food products and clean up leaking food containers. Deep clean your dishwasher next, scrubbing those tough-to-reach spots in the back and clearing out the food traps. Next time you take out your garbage and compost, give the trash cans a quick wash with soapy water. Natural cleaning solutions can also help to supercharge your cleaning efforts. Baking soda can easily cut through grease, while lemon and salt can make a powerful mixture to eliminate odors. For more, read the following blog post:

2. Bathroom Cleaning Tips

The toilet and the shower are the main culprits in the bathroom for unwanted odors. Proactively cleaning and regularly maintaining your toilet can prevent bad smells and potential water damage from material buildup. Don’t let that toilet scrubber collect dust; regularly clean the rings in your toilet bowl and use toilet spray to maintain freshness. Your shower is a magnet for mold growth, especially around the ring of your bathtub and along the bottom of your shower curtain. Use a one-part white vinegar to four-parts water mixture in a spray bottle to clean your shower curtain, or simply throw it in the wash for a solo cycle next time you do laundry.

3. Carpet Cleaning

Your carpet and flooring may not immediately come to mind as candidates for emitting household odors, but they are. It is generally recommended to clean all household rugs and carpets every six to twelve months. If you do not have a carpet cleaner at home, they are widely available for rent at local hardware and/or carpet cleaning stores. If you have hardwood floors, purchase a hardwood cleaning solution to mix with water. Consider picking up some knee pads, too!

A young woman using home cleaning tips to eliminate common household odors. She scrubs her hardwood living room floor while listening to music.

Image Source: Getty Images – Image Credit: Publishing Group

4. Eliminate Pet Odors

You can’t live without your furry friends, but sharing a home with them means you have to deal with some extra smells. Most importantly, clean up pet accidents right away to prevent lingering odors and potential damage. Regularly cleaning all pet toys eliminates germs and leaves them smelling fresh. The same goes for pet bedding and blankets: regularly run these items through the wash to absorb pet odors. And next time you’re at the store, consider picking up a pet-specific cleaning solution to really zap that pet must from the air.

5. Improve Home Air Quality

All odors travel to our noses by air. Improving air quality improves the health of your household while helping to eliminate odors. Consider investing in an air purifier with HEPA filters to remove dust, pollen, mold, and bacteria from the air in your home. Crack a window when cooking to let air cycle naturally and prevent it from getting stale.

6. Bedroom Cleaning Tips

In the bedroom, bad odors usually stem from fabrics and dirty clothes. Consider storing dirty laundry in the laundry room to banish all smelly clothing and add in a fabric freshener cleanse to your seasonal cleaning methods. After all, the bedroom is where you’re breathing air for hours at a time each night, so it’s worth it to purify your surroundings as much as possible. Also consider adding candles or essential oils to really sweeten the air in the bedroom.

Selling • August 29, 2023

How to Research Home Prices Before Selling Your Home

by Gary Peterson

A middle-aged white man is researching home prices at his dinner table as he prepares to sell his house.

Thinking about selling your home? You’ve likely got a thousand questions swimming around in your head, but there’s one that tends to stick out in homeowners’ minds above the others: What’s my home worth? Your real estate agent will be your greatest resource in answering this question once you’ve decided you’re ready to sell your home, but knowing how to research home prices on your own beforehand will help to inform those conversations. Here are some of the ways you can make good use of your time before you put your home on the market.

What’s your home worth?

Automated Valuation Models (AVMs) are a great first step in understanding home value but aren’t nearly as comprehensive as your agent’s market analysis. They compare your home against other comparable listings in your area to estimate your home’s selling price. Windermere’s Home Worth Calculator evaluates your property and the surrounding market to give you an idea of what your home is worth. Try it here:

How to Research Home Prices

Though AVMs help you research home prices, to say they’re 100% accurate is one of the most common myths of the selling process. To fully understand what your home is worth, you need a real estate agent’s expertise. They’ll conduct a comprehensive Comparative Market Analysis (CMA) to accurately and competitively price your home. An agent’s CMA compares your home to similar listings in your area, sifting through tons of data on the Multiple Listing Service (MLS), a huge network where agents can share information regarding available listings. Here, your agent can maximize the visibility of your listing and easily connect with buyer’s agents to start a conversation about buying your home.

A Black woman real estate agent is showing research on home prices to her client who is looking to sell their home.

Image Source: Getty Images – Image Credit: kate_sept2004

Local Real Estate Market Conditions

Your local real estate market conditions should be a point of emphasis in your pre-selling research. Generally speaking, there are three types of markets you could be faced with as a seller: a seller’s market, a buyer’s market, and a balanced market. Each market will have different implications for how you and your agent approach negotiations, how you interpret buyers’ offers, and your philosophy regarding the terms of common real estate contingencies tied to different offers. And maybe of greatest relevance to you, knowing more about your local market conditions will help you understand a bit more about what price your home could sell for. To see the latest housing data on home prices, home sales, and more in your area, visit our Market Updates page:

Finding the Right Agent

Besides all the number-crunching, some of the most helpful research you can do on your own is finding the right real estate agent. Getting referrals from family members or friends is a great starting point, but it’s still worth it to make sure the agent is right for you. Yes, their business acumen should be a priority, but remember that you’ll be together through all the ups and downs of the selling process, so it’s just as important that you connect on a personal level as well. If you’re looking for an agent with a specific specialty, identify professionals that have the certifications and designations to match.

Market News • Matthew Gardner • August 22, 2023

U.S. Home Prices and Housing Affordability in 2023

by Gary Peterson

Windermere Chief Economist Matthew Gardner gives an updated look at U.S. home prices and housing affordability in 2023 by examining two key second-quarter reports from ATTOM Data Solutions and the National Association of Home Builders (NAHB).

U.S. Home Prices 2023

Hello there, I’m Windermere Real Estate’s Chief Economist Matthew Gardner and welcome to this month’s episode of Monday with Matthew. Today we are going to look at home prices and housing affordability. To do this I will be looking at the second quarter sales price data from ATTOM Data Solutions and we will also look at the just released National Association of Home Builders Housing Opportunity Index for the second quarter.

Are home prices dropping?

A map of the United States showing the year-over-year change in median sales price from Q2 2022 to 2023. Iowa had the largest positive change at 10.4%, while New York state had the greatest decline at -8.1%.

Starting with the year-over-year change in sale prices at the state level, there aren’t any great surprises. For the past several months I’ve been saying that as the Western U.S. saw the greatest price growth during the pandemic, so it’s not surprising to see most states sale prices in the quarter below the level seen a year ago. But it was pleasing to see that sale prices in 36 states either matched the level seen a year ago or were higher, and in some instances quite significantly so.

U.S. Home Sale Prices 2023 By State

A map of the United States showing the percentage change of home sales prices from their 2022 peak. 33 states are at or above their peak last year, but most of the Western states have yet to recover. Louisiana, Hawaii, and New York are lagging the most.

And when we compare second quarter sale prices to their 2022 peaks, 33 states are at or above the highs seen last year, but most of the Western States have yet to fully recover. In the South, Louisiana is still lagging by a good amount, as is New York State on the East Coast.

But as you are all very aware, all markets are different. I thought it would be interesting to dig a little deeper into the data to see which metro markets have seen significant gains over the past 12 months. It’s going to be interesting specifically because of the fact that mortgage rates have risen so much.

Metro Areas: Home Sale Prices 2023

A map of the United States showing specific metro areas throughout the Eastern U.S. that are above their 2022 peak in terms of home sale prices. Macon, GA is up 13.4%, while Roanoke is up 9.1%.

These are markets where sale prices are far above their 2022 peak sale prices. Now I must add that I only looked at markets where more than 1,000 transactions occurred in the last quarter, which takes out some of the volatility. Notably, even though the state of Virginia’s home prices in the quarter were flat when compared to their 2022 peak, the Roanoke market was up by over 9%. And in Pennsylvania, where state prices were only 1.2% above their 2022 peak, Reading is up by 7.6% and York by 7.4%. And in Georgia, where state sale prices were up a modest 1.6%, homes in Macon have leapt by over 13% and prices are up by 6.9% in Savannah.

A map of the United States showing specific metro areas throughout the country that are below their 2022 peak in terms of home sale prices. California has three metro areas highlighted, the lowest of which is San Francisco at -10.5%. Austin, TX is at -10.9% and Shreveport, LA is at -17.8%.

But, on the other end of the spectrum, there are markets which are underperforming their respective states and, unsurprisingly, California tops the list with three of their metros seeing prices significantly below that of the state as a whole. In other parts of the country, several metro areas which were relatively affordable before the pandemic saw an influx of remote workers and this led prices to skyrocket, and these will take some time to recover. This is particularly true in the Austin and Boise market areas.

I would add that, of the counties across the country where there were more than 1,000 transactions in the second quarter, half have met or exceeded their prior peak and—of the half where sale prices were still lower—the average shortfall is only around 4% and there are just seven counties in the country where sale prices are down by more than 10% from their 2022 peaks.

Now, what I see in the data is that the U.S. housing market, although certainly not fully healed, is headed in the right direction even when faced with mortgage rates that remain remarkably high. So, with sale prices recovering and still faced with stubbornly high financing costs, what does affordability look like?

U.S. Housing Affordability 2023

Well, according to the National Association of Homebuilders (NAHB), of the 241 metros that they track, just 40.5% of sales in the second quarter were affordable to households making the area’s median income—that’s the second lowest share of sales seen since they started generating this dataset a decade ago. Now, their data does go back to 2004, but the interest rate series that they used to use was discontinued, so it’s not accurate to compare their data today with anything before 2012.

Most Affordable U.S. Housing Markets

A map of the United States showing the most affordable housing markets according to Q2 2023 data. All markets are on the eastern side of the country. Cumberland, MD has the highest affordability rate at 93.5%, followed by Elmira, NY at 92.8%.

These were the most affordable markets in the second quarter and their locations should not be of any great surprise. Average sale prices in these markets were measured around $203,000—that’s just marginally above 50% of the national sale price in the quarter, which was $402,600.

Least Affordable U.S. Housing Markets

A map of California showing some of the least affordable housing markets in the United States. Los Angeles is the least affordable at 4.1%, followed by Anaheim at 5.7% and Napa at 6.6%.

And unfortunately this should not surprise you either. On the other end of the spectrum, the top-10 least affordable housing markets were all in California, but it gets worse than that. The top 15 least affordable markets again, all in California, and 19 out of the top 25 were in the Golden State!

As far as I can see, the ownership housing market is still showing remarkable resiliency, especially given that mortgage rates have more than doubled from their lows and they’ve risen from 4.8% at the start of the second quarter of last year to 7% at the end of the second quarter of 2023.

Now, I still expect to see rates starting to slowly move lower as we go through the second half of the year. This will help with prices and, to a degree, affordability, but until we see a significant increase in the number of homes listed for sale, the market is going to remain unbalanced.

As always, I’d love to hear your thoughts on this subject so feel free to leave your comments below. Until next month, stay safe out there and I’ll see you soon. Bye now.

To see the latest real estate market data for your area, visit our quarterly Market Updates page.

About Matthew Gardner

Buyers • August 11, 2023

Turnkey vs. Fixer-Upper: Pros and Cons

by Gary Peterson

Turnkey vs. fixer-upper properties. This modern home is a quintessential turnkey property. It has fresh landscaping, pristine blue siding, scuff-free white trim, and new exterior lighting.

The beauty of real estate is that different properties satisfy different needs. Although single-family homes are great for putting down roots, that may not be your motivation for purchasing your next home. If you’re looking to buy a property with the intent of renting it, both turnkey and fixer-upper listings will cross your path during your home search. The main difference between the two is the condition of the property when you buy it. The right one for you depends on your needs as a homeowner and your goals as a landlord.

What is a turnkey property?

Turnkey properties are move-in ready from day one, which means they’re ready for you to rent them out immediately. Whether it’s a new construction home or a recently remodeled listing, these properties are in tip-top shape when they hit the market. Companies that specialize in renovating and selling these properties may also offer property management services, which may appeal to you if you’re looking for a more hands-off approach to managing your investment property.

What does fixer-upper mean in real estate?

Compared to turnkey listings, fixer-uppers are on the opposite end of the investment property spectrum. Buying a fixer-upper means you’re purchasing a home that needs repairs, remodeling, and some major TLC before it’s ready to rent out. These properties are diamonds in the rough; you’re betting on your ability to make high ROI home upgrades that will attract future renters and put money in your pocket.

As an example of turnkey vs. fixer-upper homes, a heterosexual Caucasian couple are remodeling their fixer-upper property. They are re-painting the interior to prepare the property for renters.

Image Source: Getty Images – Image Credit: StefaNikolic

Turnkey vs. Fixer-Upper: Pros and Cons

Turnkey Pros

Because they are move-in ready, turnkey listings have the potential to generate cash flow right away. Without any pending renovations in your way, you can open up the property to renters as soon as you take possession. They’re primed and ready to place in the hands of a property management company, which means you’ll get passive income without having to deal with day-to-day operational tasks. You can also ask the listing agent for permission to use their photos, which can help your rental stand out amongst the competition in your area.

Turnkey Cons

So, what’s the catch? These benefits all come at a cost; turnkey properties typically cost more than fixer-uppers. You’ll pay a premium for the pristine condition and the buttoned-up appearance of these properties, so it’s important to have a strategy to save money for your home purchase. Also, handing off property management duties to a third party means you’ll have less control over the renting process.

Fixer-Upper Pros

Searching for homes in less-than-pristine condition can give you a leg up as a buyer. Fixer-upper homes tend to have less competition from buyers than turnkey properties, since not everyone is willing to take on a major remodeling project. Talk to your agent about how to make the best offer. Given their lessened condition, you can oftentimes get a great deal on these homes with the right strategy. And the best part is, your remodeling efforts will increase the home’s value over time. The more effort you put in, the more the property will be worth, which means higher ROI potential.

Fixer-Upper Cons

Here’s the downside with fixer-uppers: tapping into their potential requires pouring money into the property. Exactly how much you can expect to spend on a fixer-upper varies by location, the size of the home, and the scope of repairs and renovations needed. Tackling some remodeling projects DIY can save you money, but if certain projects require more skilled hands, it may be best to hire a professional. And for all your planning, it’s impossible to predict the future. Projects may go over budget, material costs may rise, and the market may look completely different when you’re ready to rent out your property than it did when you bought it.

Connect with me and I can help you determine which property type is right for you.

Matthew Gardner • August 3, 2023

Q2 2023 Utah Real Estate Market Update

by Gary Peterson

The following analysis of select counties of the Utah 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 it slowed in the first quarter of 2023, employment growth has stabilized in Utah. The state added 52,400 jobs over the past 12 months, which represents an annual growth rate of 3.1%. The counties covered by this report added almost 33,000 new jobs over the past year, representing a growth rate of 2.4%. As we saw in the first quarter of the year, the fastest growing county was Summit, which had a 5.8% annual growth rate. The slowest was again Morgan County, where the job level rose 1.6%. Utah’s unemployment rate in May was 2.5%, up .03% from the level in the second quarter of 2022. At the county level, the lowest jobless rate was in Morgan County (1.8%) and the highest was in Weber County, where 2.5% of the workforce was without a job. In aggregate, the unemployment rate within the counties contained in this report was only 2.3%.

Utah Home Sales

❱ In the second quarter, 6,939 homes were sold in the areas covered by this report. This was down 21% compared to the second quarter of 2022 but was 28.3% higher than in the first quarter of this year.

❱ Year over year, sales fell across the board. However, sales increased by double digits in every county covered by this report compared to the first quarter.

❱ It is quite likely that the higher number of homes sold compared to the previous quarter was a result of the impressive increase in the number of homes for sale. Inventory rose 12.6% over the first quarter.

❱ Pending sales rose 14.6% from the first quarter, suggesting that closings in the upcoming quarter will likely rise.

A graph showing the annual change in home sales by county for Utah from Q2 2022 to Q2 2023. Weber had the least drastic change at -16.5%, while Morgan had the largest change at -40.5%. Counties like Utah and Salt Lake were in the middle at around -20%.

Utah Home Prices

❱ The average sale price in the quarter fell 5.4% from the second quarter of 2022 to $629,289. However, sale prices were 4.1% higher than in the first quarter of 2023.

❱ Median list prices in the second quarter were 8.5% higher than in the first quarter of the year. It’s interesting to see sellers’ continued confidence given the significant increase in mortgage rates the market has experienced.

❱ Year over year, prices rose in Summit County but dropped in the other markets. Compared to the first quarter, prices rose in every county other than Wasatch, where they fell 12.7%.

❱ It was notable that the markets that saw list prices rising were in the more affordable areas. Expensive counties, such as Morgan, Summit, and Wasatch, all had lower median list prices than in the first quarter of this year.

A map showing the real estate home prices percentage changes for various counties in Utah. Different colors correspond to different tiers of percentage change. Morgan had a percentage change in the -17% to -12.6% range. Weber, Davis, Salty Lake, and Utah were in the -8% to -3.6% change range. Wasatch was in the -3.5% to 0.9% change range. Summit was in the 1%+ change range.

A bar graph showing the annual change in home sale prices by county in Utah from Q2 2022 to Q2 2023. Summit County tops the list at 10%, while Morgan County had the greatest decline at -16.8%. Salt Lake and Utah Counties were toward the middle at around -6%.

Mortgage Rates

Although they were less erratic than the first quarter, mortgage rates unfortunately trended higher and ended the quarter above 7%. This was due to the short debt ceiling impasse, as well as several economic datasets that suggested the U.S. economy was not slowing at the speed required by the Federal Reserve.

While the June employment report showed fewer jobs created than earlier in the year, as well as downward revisions to prior gains, inflation has not sufficiently slowed. Until it does, rates cannot start to trend consistently lower. With the economy not slowing as fast as expected, I have adjusted my forecast: Rates will hold at current levels in third quarter and then start to trend lower through the fall. Although there are sure to be occasional spikes, my model now shows the 30-year fixed rate breaking below 6% next spring.

A bar graph showing the mortgage rates from Q2 2021 to the present, as well as Matthew Gardner's forecasted mortgage rates through Q2 2024. After the 6.79% figure in Q4 2022, 6.35% in Q1 2023, and 6.51% in Q2 2023, he forecasts mortgage rates going to 6.55% in Q3 2023, 6.31% in Q4 2023, 6.03% in Q1 2024, and 5.72% in Q2 2024.

Utah Days on Market

❱ The average time it took to sell a home in the counties covered by this report rose 36 days compared to the same period a year ago.

❱ Homes sold fastest in Salt Lake County and slowest in Summit County. All areas saw average market time rise compared to the second quarter of 2022, but market time fell in all areas compared to the first quarter of this year.

❱ During the second quarter, it took an average of 54 days to sell a home. Market time fell 13 days compared to the first quarter of 2023.

❱ It was impressive to see the length of time it took to sell a home in the region fall significantly despite more inventory and higher financing costs.

A bar graph showing the days on market by county for homes in Utah in Q2 2023. Salt Lake County had the lowest DOM at 37, while Summit had the highest at 78. Utah and Wasatch Counties were in the middle at around 50 days on market.

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.

In the first quarter Gardner Report, I suggested that the region was “very close to bottoming out” in respect to price. It appears I underestimated the resilience of Utah’s housing market. Given all the data presented here, the only thing that favors buyers is that there are more homes for sale. That said, while inventory levels have risen, they remain remarkably low by historic standards. This doesn’t come as a surprise given that 87.6% of all homeowners with a mortgage have rates below 5% and 31.6% have rates at or below 3%. If they don’t have to sell, why would they?

A speedometer graph indicating a balanced market bordering on a seller's market in Utah for Q2 2023.

This will keep inventory tight. The only question that remains is how long the market can tolerate high mortgage rates and decreasing affordability. Given all the above factors, I have moved the needle a little more in favor of sellers. I can’t go so far as to suggest that sellers are in a totally dominant position, but they still have the upper hand.

About Matthew Gardner

Matthew Gardner - Chief Economist for Windermere Real Estate

Market Updates • Matthew Gardner • July 24, 2023

Housing Market 2023: Home Prices, U.S. Demographics, and More

by Gary Peterson

Harvard University’s latest edition of “The State of the Nation’s Housing” has arrived, and Windermere Chief Economist Matthew Gardner is here to break down what the data presented in the report means for the U.S. housing market in 2023 and beyond.

Housing Market 2023

Hello there, I’m Windermere Real Estate’s Chief Economist Matthew Gardner, and welcome to this month’s episode of Monday with Matthew. I spend a lot of time reading reports that relate to the housing market, but there is one in particular I’m always impatiently waiting for, and it’s published by my colleagues at the Joint Center for Housing Studies at Harvard University. Every year they release the The State of the Nation’s Housing report and it’s packed full of fascinating data about the ownership and rental housing markets, demographics, and it also discusses the challenges that lay ahead. So today, I wanted to touch briefly on just a few of the report’s high points, but I highly recommend you download it from their website.

What’s happening in the housing market?

A double line graph showing home price and apartment rent growth from 2004 to 2023. The year-over-year changes were stable between 2011 and 2020, rising to roughly 20% YOY by 2022 and have declined sharply during the past year. Housing market 2023.

As we all know, the for-sale housing market started softening in mid 2022 in response to rising interest rates and deteriorating affordability. What was particularly notable was that seasonally adjusted home prices fell month over month last July and that was the first monthly drop in over a decade. And over in the rental market, asking rents—while still up year over year—also saw their pace of growth slow considerably, and that is a concern.

Is home construction slowing down?

A line chart showing the number of single-family homes under construction from 1970 to 2022. After a steady increase from 2010 to 2022, single-family construction has dropped dramatically while multifamily development has remained strong. Housing market 2023.

As you see here, multifamily construction continued to rise last year even as rental demand was softening. In fact, 547,000 new multifamily units were started in 2022, the highest number since the mid-1980s, and the 960,000 units under construction in March 2023 was the highest number seen in half a century. On the ownership side, it wasn’t surprising to see single-family construction falling significantly as buyers reacted to sharply higher borrowing costs.

The report also suggested that the decline in new construction was particularly acute for lower-priced homes. Builders just can’t produce entry-level product with current material, labor, and land costs; limited lot availability; and regulatory barriers such as minimum lot sizes that restrict production of entry-level housing production.

U.S. Population Demographics

A bar graph showing the annual population change in millions from 2011 to 2022. Both the natural population change and net immagration steadily decreased from 2014 to 2021 before rebounding slightly in 2022.

Now turning to demographics. Population growth—naturally the primary long-term driver of household growth—remains historically low. Overall, the U.S. population grew by 1.26 million people last year, or just 0.38%. Now, while this does represent a slight uptick from previous years that’s really not saying much as U.S. population growth hit 100-year lows in 2019, 2020, and 2021.

Increases in a country’s population come in two ways. The first is “natural” growth—which equals the number of persons born minus the number that have died—and the second is via immigration. Now, gains from immigration can be fickle because they are subject to unpredictable government policy changes as well as economic cycles here in the U.S. as well as in other countries. But natural growth is more predictable because it is driven by slow-moving factors like birth and mortality rates. Until last year, natural growth had been the primary source of population growth in the U.S., but, as you saw in that last chart, things have shifted.

U.S. Population Growth & Migration

A map of the United States showing the counties with the greatest natural growth. There are many in Southern California, a few in western Washington Stage, a cluster in east Texas, and various counties spread throughout the Midwest and East Coast.

This map shows counties with the highest level of natural growth and it’s dominated by large metro markets in California, Texas, Southern Florida and parts of the Northwest. But, what I found very interesting was that the numbers were remarkably low. Only six counties—three in California, two in Texas, and one in New York—saw natural growth above the 10,000 level and 75% of counties across the country saw negative natural growth.

A map of the United States showing the counties with the greatest domestic migration. There are many in Florida and other states along the East Coast. There are several clusters throughout the Mountain West as well as a handful in East Texas.

So with natural growth slowing, states will understand the importance of attracting new residents from other markets as domestic migration will become a more important driver of household growth and housing demand. Here you see that Maricopa County, AZ saw the largest gains from domestic migration but, statewide, Florida dominated last year with 319,000 people moving there. Texas came in second with a net gain of over 230,000 people. But on the other end of the spectrum, California was the biggest loser with net 343,000 people leaving, followed by New York who lost 300,000 residents.

A map of the United States showing the counties with the greatest international migration. There are several counties represented in western Washington State, southern California, southwestern Arizona, and south Florida. There are a few dozen counties scattered throughout the Northeast.

It was international migration that accounted for a full 80% of total growth last year and it was the largest source of total population growth for 26 states and 29% of all counties across the country. The biggest winners were LA County in California, Miami-Dade County in Florida, and Harris County, Texas.

These were just some of the highlights of the report and the biggest conclusions I found were that, in the ownership market, supply will remain tight in the resale arena and new construction will not fill that void, especially as it comes to the entry level product. Housing affordability will not improve. This will continue to be a big issue across the country.

An oversupply of apartments coming online will further moderate rents, but renters will also find affordability to be a big concern. Demographic trends suggest that low domestic population growth going forward will lower new household formations and it’s quite likely that population and household growth will start to rely wholly on immigration earlier than the government expects.

So, there you have it. As always, I’d love to hear your thoughts on this subject so feel free to leave your comments below. Until next month, stay safe out there and I’ll see you soon. Bye now.

To see the latest real estate market data for your area, visit our quarterly Market Updates page.

About Matthew Gardner

Market News • Matthew Gardner • June 29, 2023

2023 Top 10 Predictions | Mid-Year Update

by Gary Peterson

2023 Top 10 Predictions | Mid-Year Update

Windermere Chief Economist Matthew Gardner revisits his Top 10 Predictions for 2023. Reviewing his forecasts for home prices, mortgage rates, and more, he highlights recent changes in the real estate market and updates his predictions for the near future.

Top 10 Real Estate Market Predictions 2023 | Mid-Year Update

Hello there, I’m Windermere Real Estate’s Chief Economist Matthew Gardner and welcome to this month’s episode of Monday with Matthew. You may remember that at the end of last year, I published my Top-10 Predictions for 2023 and, as we hit the mid-year mark, some of you have been asking me how well my forecasts have been holding up. So, I thought it would be interesting to take another look at them to see how accurate they have or have not been! These were the predictions I made last November, and they covered everything from my expectations for home sales and prices to shifting government policies.

U.S. Home Sale Prices

A line graph showing the year-over-year U.S. home sale prices from May 2022 to April 2023. The YOY price change drops from 15% to below 0%, while the MOM price change oscillates between roughly 4% and -4.5%, bottoming out in July of 2022.

My first forecast suggested that sale prices would fall in 2023; however, I was not expecting any sort of systemic decline in values. Here you can see that year-over-year prices are down by a bit less than 2%, but when you look at how prices have changed month over month, they rose by 3.6% in April and are up by more than 6% since the end of last year.

I stand by my forecast that the median sale price in 2023 will be modestly lower than the 2022 number; and the monthly increase in sale prices that we have seen so far this year also supports my forecast that we are not seeing any long-term decline in home values.

2023 Mortgage Rates

A line graph showing the mortgage rates so far in 2023, peaking above 7% in late February and late May. Otherwise, they have remained between 6% and 7%.

Although mortgage rates have broken above 7% eight times so far this year—the first time because of the banking crisis, and the second because of the looming debt ceiling—I expect them to become a little less frantic as we move through the second half of the year. That said, my call for them to drop below 6% this year is now likely to be inaccurate given where they are today. I still expect them to drop into the “fives” though, but not until early next year.

Is housing inventory increasing?

A line graph showing the inventory of homes for sale in the U.S. from January 2020 to March 2023. In million, the number has gradually decreased from just above 1.5 to just above 1.0, bottoming out between January and March 2022 at below 1.0.

Listing activity saw a very modest late spring bump, but for perspective, the number of homes for sale is running at about 40% of its long-term average, and I still don’t see much growth this year. Why? Well, by my calculations, there could be over 20 million homeowners with mortgage rates around 3%. Why would they move!

Is 2023 a buyer’s or seller’s market?

A line graph showing the months of inventory for homes between 2017 and 2023, and whether that value corresponds to a seller's market, a balanced market, or a buyer's market. Most of the data points are in the seller's market range for these years, and Matthew Gardner predicts it is unlikely that we'll see a buyer's market in 2023.

And with limited inventory, the market still “technically” favors home sellers. Now, this is a little speculative because what defines a traditional “buyer’s” or “seller’s” market varies by location, but with relatively few homes on the market and the share of homes with price reductions dropping and list prices rising again, I just can’t see a buyer’s market appearing this year.

Are home prices falling?

A line graph showing U.S. median list prices for homes between January 2022 and April 2023. Prices were roughly $330,000 in January 2022, climbing to almost $400,000 during summer 2022, bottoming out at below $370,000 around January 2023, and returning to $390,000 by April 2023.

Well, this doesn’t look to be meeting my forecasts, does it! Sellers have been pretty bullish so far this year, but I would add that this is not true across the whole country. List prices are still down significantly in markets such as Hailey, Idaho; Jasper, Alabama; and Elko, Nevada, where list prices for single-family homes are down between 30 and 50% from their peak. So, I admit that the country has outperformed my forecast for list prices.

Return to Office Statistics 2023

A graph and table showing the number of U.S. employees subject to newly effective return-to-office mandates. May 2023 has the highest value at nearly 600,000 employees. Matthew Gardner predicts more employees will get clarity on these policies in 2023.

As I had expected, the pace of workers heading back to the office has not been very robust. In fact, the share of people in the office full time dropped to 42% in the second quarter of 2023, down from 49% in the first quarter, that according to The Flex Report. Meanwhile, the share of offices with hybrid work arrangements hit 30% in the quarter, up from 20% the previous quarter. But I still expect to see more workers heading back to their offices, albeit very reluctantly.

New Home Permits and Starts Have Fallen

A line graph showing the number (in thousands) of U.S. single-family new home starts from January 2021 to March 2023. The numbers have almost entirely stayed in the 800-1,200 range, peaking above 1,200 in March 2021 and certain points between November and March 2022. In March 2023, the number of starts sat at just above 800,000.

With new home permits down 21% year-over-year, and new home starts off by 28%, I think its accurate to say that activity in the new construction sector has slowed. Builders continue to be hit by high financing rates as well as high material prices.

Are U.S. home prices dropping?

A map graphic showing 2023 U.S. home sale prices relative to their 2022 highs for select cities. Johnstown, PA has the greatest difference at -39.1% and Duluth has the least at -19.6%. Overall, Matthew predicts that the markets where home prices rose the fastest in recent years will experience a downturn.

As we all know, not all markets are created equal, and this chart shows how far below their 2022 highs some of the country’s metro areas are. On the opposite end of the spectrum, there are some markets where prices have already exceeded the highs seen last year (see map below).

A map graphic showing 2023 U.S. home sale prices relative to their 2022 highs, specifically some markets where prices have already exceeded the highs seen last year: Pueblo, El Paso, Hilo, and others.

Housing Affordability 2023

A line graph showing a homeownership affordability index from January 2020 to March 2023. The affordability line sits at 100. From January 2020 to May 2021, the trend line was above 100. It consistently dipped after that until January 2023, sitting just below 80.

Affordability has not improved, mainly due to home prices that remain out of sync with incomes as well as financing costs that remain well above the level that buyers had become used to. I still believe that this will not improve in 2023.

A power point slide showing recent changes in support of zoning changes including House Bill 1110, The New York Housing Compact, Florida SB-88, and the Make Virginia Home Plan.

And finally, I told you that governments would start to move to address the significant housing shortage that the country is experiencing, and they have. As you can see, in Washington State, Governor Inslee recently signed House Bill 1110 into law which allows the development of duplex up to six-unit buildings within any area zoned for single-family-only development. Additionally, jurisdictions in a significant number of states are either pursuing legislation to tackle this problem or have at least created task forces to look at the issue. It’s a good start, but more needs to be done.

Although it’s really cheating to grade one’s own work, I think that I have been pretty accurate with my forecasts. Yes, I was too pessimistic when it came to list prices and a little optimistic regarding the direction of mortgage rates. But other than those two items, the data seems to suggest that the housing market is headed in the direction that I had suggested.

What do you think? I’d love to hear your thoughts on this subject so leave your comments below. As always, stay safe out there and I’ll see you all next month. Bye now.

To see the latest real estate market data for your area, visit our quarterly Market Updates page.