Market News • Matthew Gardner • May 5, 2023

Q1 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

Continuing the trend that started last summer, employment growth in Utah continues to taper. Over the past 12 months, the state added 52,600 jobs. At an annual rate of 3.2%, this was the slowest percentage growth since Utah started recovering jobs post-COVID. Although this is an improvement over the rate in the last quarter, annual adjustments to the data gave early 2023 data a boost. The counties covered by this report added more than 38,600 new jobs over the past year, representing a growth rate of 2.8%. The fastest growing county was Summit, with a 4.8% increase in employment. The slowest was Morgan County, where the job level rose .7%. Utah’s unemployment rate in February was 2.4%, matching the level at the end of 2022. The labor force continues to grow but, so far, it has not caused the jobless rate to rise, which is very impressive.

Utah Home Sales

❱ In the first quarter of the year, 5,251 homes sold. This was down 21% compared to the first quarter of 2022. Sales were .2% higher than in the fourth quarter of last year.

❱ Year over year, sales fell across the board. Compared to the fourth quarter, sales rose in Utah and Weber counties but fell in the rest of the market areas covered by this report.

❱ The number of homes for sale plummeted by one third when compared to the fourth quarter of 2022, making any increase in sales rather impressive.

❱ Pending sales jumped 38.3% from the fourth quarter, suggesting that closings in the second quarter of this year may rise further.

A bar graph showing the annual change in home sales for various counties in Utah from Q1 2022 to Q1 2023. All counties have a negative percentage year-over-year change. Here are the totals: Davis at -10.3%, Weber at -18.2%, Utah -21.7%, Salt Lake -22.4%, Summit -32.2%, Wasatch -35.8%, and Morgan -42.1%.

Utah Home Prices

❱ The average sale price in the first quarter of the year fell 5.3% compared to the first quarter of 2022 to $603,340. Prices were also .1% lower than in the fourth quarter of 2022.

❱ Median listing prices in the first quarter were 3.7% higher than at the end of last year, suggesting that home sellers remain confident about the spring market. Of the counties covered by this report, only Wasatch and Morgan counties saw listing prices fall compared to the prior quarter.

❱ Year over year, prices rose in Wasatch County but fell in the other markets. Compared to the fourth quarter of 2022, prices rose in Morgan, Summit, and Wasatch counties.

❱ The market is correcting. Although this may not be something sellers want to see, it is important to return to some sense of normalcy following the frantic, low-mortgage-rate-induced market of the pandemic period. There will be a relatively modest decline in prices in the coming months, but I expect home values to rise again in the second half 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 and Davis counties have a percentage change in the -7% to -4.9% range, Weber, Salt Lake, Summit, and Utah are in the -4.8% to -2.7% change range, and Wasatch is in the 1.8%+ change range.

A bar graph showing the annual change in home sale prices for various counties in Utah from Q1 2022 to Q1 2023. Wasatch is at 20.7%, Weber -3.5%, Utah -3.8%, Salt Lake -4.3%, Summit -4.4%, Morgan -5.3%, and Davis -6.4%.

Mortgage Rates

Rates in the first quarter of 2023 were far less volatile than last year, even with the brief but significant impact of early March’s banking crisis. It appears that buyers are jumping in when rates dip, which was the case in mid-January and again in early February.

Even with the March Consumer Price Index report showing inflation slowing, I still expect the Federal Reserve to raise short-term rates one more time following their May meeting before pausing rate increases. This should be the catalyst that allows mortgage rates to start trending lower at a more consistent pace than we have seen so far this year. My current forecast is that rates will continue to move lower with occasional spikes, and that they will hold below 6% in the second half of this year.

A bar graph showing the mortgage rates from Q1 2021 to the present, as well as Matthew Gardner's forecasted mortgage rates through Q1 2024. After the 6.79% figure in Q4 2022 and 6.37% in Q1 2023, he forecasts mortgage rates dipping to 6.26% in Q2 2023, 5.78% in Q3 2023, 5.43% in Q4 2023, and 5.28% in Q1 2024.

Utah Days on Market

❱ The average time it took to sell a home in the counties covered by this report rose 42 days compared to the same period in 2022.

❱ Homes again sold fastest in Salt Lake County and slowest in Summit County. All areas saw average market time rise compared to the prior quarter as well as the same quarter in 2022.

❱ During the quarter, it took an average of 67 days to sell a home, which was an increase of 9 days compared to the final quarter of 2022.

❱ Although average market time rose compared to the fourth quarter of last year, the increase was not significant. Lower inventory levels may lead to market time pulling back again as we get into the spring months, or at least levelling out.

A bar graph showing the average days on market for homes in various counties in Utah for Q1 2023. Salt Lake County has the lowest DOM at 60, followed by Davis at 63, Morgan and Utah at 64, Weber at 69, Wasatch at 72, and Summit at 77.

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.

Higher financing costs and lower affordability rates are acting as headwinds in the housing market, which is offsetting the benefit that housing normally sees from a growing economy. I have stated previously that home prices in Utah would continue to moderate but that a major downward correction was unlikely. That prediction appears to have been accurate. I believe that the market is very close to bottoming out given low inventory levels, rising pending and closed sales, and higher listing prices—all of which benefit home sellers. That said, lower home prices and longer days on market tend to favor home buyers.

A speedometer graph indicating a balanced market in Utah in Q1 2023, leaning toward a seller's market.

Ultimately, I would describe the market as balanced, but I am tilting the needle just a little in favor of sellers. I expect that mortgage rates will start to stabilize as we move through the spring and then start to drop a little. If this occurs and inventory levels do not rise significantly, then we will certainly be back in a position that more firmly favors home sellers.

About Matthew Gardner

Matthew Gardner - Chief Economist for Windermere Real Estate

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.

Living • May 1, 2023

Managing Your Investment Property: DIY vs Hiring a Professional

by Gary Peterson

A young Caucasian man signs a rental contract with his landlord, a young Black woman, in the open kitchen area of a house. She holds a clipboard and keys as the tenant signs the paperwork.

Owning real estate is an efficient and productive addition to your investment portfolio. For an investment property that you don’t plan to live in, whether it’s your second home or you’ve done this a few times before, you’re faced with decisions about how to best use that investment for your goals.

Some investors will remodel their new property and sell it for a return. Others will use it for their vacation home, rent it to other vacationers, or both! But if your goal is to earn income over the long term from this property, you’re likely asking yourself, now what?

Renting to long-term tenants is a great strategy to build your wealth, but it is by no means a passive endeavor. From finding tenants, to managing the property, to finding new tenants again, you’ll need to weigh your options of taking on all the responsibilities or hiring a professional property manager. Managing your own rental takes time, money, and organization that can get in the way of life’s other responsibilities. Between accounting, adhering to local laws and regulations, property maintenance, and creating procedures for working with tenants, your plate will be full. If these responsibilities are too much to handle, the commission charged by a property management company may be a welcomed expense.

Your Local Landlord Tenant Laws and Regulations

The laws and regulations for rental properties differs across states, counties, and cities. Some locations are more regulated than others and whoever manages the property will need to be an expert in each.

If you decide to do it yourself, you’ll need to make sure you’re aware of the responsibilities and requirements for landlords in leasing, property maintenance, and payments. Check your local government’s website for more information and consider joining a local landlord association who provides support and updates for its members. To avoid getting into legal trouble, you’ll want to make sure your procedures are within the law, including how you tour and ask tenants to apply. It’s also recommended that you have a lawyer review your lease contract before accepting tenant applications.

Most professional property managers are aware and practiced in the local laws and regulations. They will also likely have a lease template that has been reviewed by lawyers, so they know it’s legal and enforceable. When talking with your local Windermere Property Management office, be sure to ask them about their processes for following the local laws, including their leasing procedures.

Investment Property: Managing the Money

Another important consideration is how you’ll manage the monies for your investment property. You’ll need to manage the security deposit, any fees you plan to charge, a way to take the monthly rent payment, and a savings account for property maintenance.

If you plan to manage the unit yourself, you’ll need to set up bank accounts in accordance with the local laws and keep track of the accounting for tax season. You’ll also want to make it easy for your tenants to pay rent. Check to see if your bank offers some form of ACH that you can set up or inquire about where tenants can send checks for deposit.

Professional management companies will have an accountant who manages the funds and tracks the income and expenses for property owners. You’ll likely set up a deposit and withdrawal agreement to make it easy to get your monthly check and pay any invoices. You can imagine the amount of time this saves!

When interviewing with a property manager, ask them where they hold deposits and their systems for rent payments. Oftentimes they’ll have software that makes it easy for tenants to pay online and track the monies they receive from tenants. Be sure to understand how you get paid as well and when you can expect those payments to be made each month.

A young heterosexual Hispanic couple shake hands with their property manager in the open kitchen area of their modern investment home. The kitchen has black cabinets and stainless-steel appliances. The ceiling is hardwood and there is a band of windows around the unit just below it.

Image Source: Getty Images – Image Credit: Hispanolistic

Moving In Tenants and Investment Property Maintenance

The beginning of a tenancy can set the tone for the rest of the lease. Build trust and respect with your tenants from day one; be upfront with your expectations for communication, especially about maintenance issues. It all starts with a move-in condition report.

A move-in condition report is a detailed document that notes the state of the property before the tenants have lived in it so that you can compare that to its condition when they move out. This helps you understand what damage, if any, is the tenant’s responsibility and what comes out of your pocket.

If you plan to manage the property yourself, you’ll want to find resources online or from your local landlord association about the best practices for move-in to make sure you don’t miss anything important as you inspect the exterior and interior of your rental property with the tenants.

Professional property managers have a wide range of services, which means even if you don’t hire one to handle every aspect of the rental, they may offer support with move-in. Their experience and knowledge will come in handy, along with their tried and tested procedures, leaving less to chance when the tenants move out.

Maintaining the property will differ for each investor depending on the condition of the home, the appliances, and your local laws that outline responsibilities for all parties involved. In some cases, you may never hear from a tenant about an issue or request, while other cases will require more hands-on work.

As a landlord, it’s a good practice to have a list of vendors you trust to handle common issues and emergencies. You also have the option to do the handiwork yourself if you are nearby and equipped to do so. Be sure your tenants know and understand how you’ll handle maintenance requests and work with them to schedule appointments.

Property managers usually already have a list of preferred vendors who they have worked with before. They will likely have someone at the ready for a wide range of issues which comes in handy, especially in the wake of large incidents that can book up the service providers in the area.

When interviewing professionals, be sure to ask them about their experience with moving tenants in, and their procedure and vendor list for maintenance requests. You’ll also want to know how they’ll communicate with you and manage payment for the invoices.

Which One Is Right For You?

After taking these factors into consideration, it’s up to you to determine what makes the most sense for your needs and lifestyle. If you feel comfortable managing your investment property and you know you have the time and ability to handle maintenance requests in a timely manner (especially emergencies), then being a landlord is right for you.

However, if you prefer to be more hands off and use the property for passive income with less effort on your part, hiring a professional for a commission might be worth it.

Market News • Matthew Gardner • April 25, 2023

Mortgage Rate Predictions and Misconceptions

by Gary Peterson

The Federal Reserve Bank of New York just released their 2023 Housing Survey, which shows how the U.S. population feels about the housing market. Windermere Chief Economist Matthew Gardner digs into the mortgage rate predictions, showing how demographics played a role in the results.

This video on mortgage rate predictions 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.

Mortgage Rate Predictions

Hello there! I’m Windermere Real Estate’s Chief Economist Matthew Gardner. This month we’re going to take a look at the latest SCE Housing Survey, which gives us a really detailed look at consumers’ psyche in regard to the housing market.

I’ve always been fascinated by surveys, as they frequently give me insights that I simply don’t get from just looking at raw data and, as luck would have it, the New York Fed just released its 2023 Consumer Expectations Housing Survey. Now, this particular survey has always given me some great and often surprising insights as to how the U.S. population views the overall housing market. We certainly don’t have time to cover all of the questions that the survey poses, but there was one section I wanted to share with you today as it really resonated with me, and it relates to mortgage rates.

Will mortgage rates continue to rise?

A double line graph showing mortgage rate predictions. Specifically, it shows the average interest rates for 30-year fixed-rate mortgages from 2014 to 2023 and ends with the predicted values by U.S. households as captured in the Federal Reserve Bank of New York in their 2023 Housing Survey. People think the rate will be 8.8% three years from now and 8.4% one year from now.

The first question asked was where they expected mortgage rates to be one year from now. And as you see here that, on average, households expected rates to rise all the way up to 8.4%. Although some may see this as extreme, you can see that in the 2022 survey respondents predicted rates would hit 6.7%, almost exactly where they were at the beginning of this March.

And when asked where they thought rates would be three years from now, on average, households expected to see them climb to 8.8%. Now, that’s a rate we haven’t seen since early 1995!

Well, I’m not sure about you, but I was very surprised by these results as they counter just about every analyst’s expectation regarding where rates will be over the next few years. In fact, myself and every economist I know believes that rates will slowly pull back as we move through this year. I haven’t seen a single forecast suggesting that mortgage rates will rise to a level this country hasn’t seen in decades.

But as they say, the devil’s in the details. When I dug deeper into the numbers, it became very clear to me that demographics played a pretty big part in guiding people’s answers. Let me explain.

1-Year Mortgage Rate Expectations by Education

Here the data is broken down by educational achievement. You can see that survey respondents who didn’t have a college degree thought that mortgage rates would rise to 9.4% within a year. But college graduates were far more optimistic, and they expected rates to be in the high 6’s.

3-Year Mortgage Rate Expectations by Education

And when asked to look three years out, respondents without degrees expected rates to break above 10%. While college graduates saw them pulling back a little from their one-year expectations of 6.7%, down to 6.4%.

Now we are going to look at the survey results broken down by housing tenure.

1-Year Mortgage Rate Expectations by Tenure

And here you see that renters expect mortgage rates to be at almost 11% within a year. And homeowners also saw them rising, but only up to 7.3%.

3-Year Mortgage Rate Expectations by Tenure

And over the next three years, renters expected rates to break above 12%. That’s a level not seen since the fall of 1985. But homeowners expected to see rates at a somewhat more modest 7.4%.

So, what does this tell us? I see two things.

Firstly, the rapid increase in mortgage rates that we all saw starting in early 2022 has a lot of people believing that we will see rates continuing to rise, sometimes at a very fast pace, over the next few years. I mean, if it happened before, why can’t it happen again? And this mindset leads me to my second point, which is that it’s very clear that a lot of would-be home buyers just don’t understand how mortgage rates are calculated.

The bottom line here is that I see a potential buyer pool out there that needs educating and that can give an opportunity to brokers to discuss how rates are set and where the market is expecting to see them going forward.

This may alleviate the concerns that many households have who may be thinking that they will never be able to afford to buy a home because of where they expect borrowing costs to be in the future. Education is everything, don’t you agree?

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

Buyers • April 17, 2023

10 Important People in the Home Buying Process

by Gary Peterson

An older heterosexual Caucasian couple talks to an important person during their home buying process, their real estate agent. The real estate agent smiles as they review the terms of a real estate contract.

It takes a village to purchase a home. Though it’s ultimately you who is paying for the property, successfully purchasing a home is a result of several people’s contributions. It helps to know who these individuals are, how they responsibilities pertain to your home purchase, and when you’ll encounter them during your journey. Here are ten important people to keep in mind during the process of buying a home.

10 Important People in the Home Buying Process

1. Real Estate Agent

You’ll be represented by a buyer’s agent throughout the home buying process. Their access to resources and their specialized knowledge will help you find the home you’re looking for and make an offer to the seller. They will be by your side from day one, through closing and beyond. When searching for a real estate agent, ask questions to gain an understanding of their professional expertise as well as their personality. You’ll be working closely together throughout the process, so it’s important to identify someone who is compatible.

2. Mortgage Lender

You need financing to buy a home. Mortgage lenders offer different home loans to match what buyers can afford and what homes they’re looking to purchase. After identifying which lender you’d like to work with, a helpful first step is to get pre-approved for a mortgage by submitting financial information for their review. This helps to speed up the home buying process and solidifies your offer by demonstrating that you’re ready to buy.

3. Mortgage Broker

Your mortgage broker will work with you to find favorable mortgage terms for your home loan. Whereas your real estate agent works with you to find a home and communicates with the seller on your behalf, your mortgage broker works on the financial side of the transaction. Once you’ve chosen the right loan product, they’ll hand things off to the lender.

4. Underwriter

Another key player in the mortgage process is the underwriter. Underwriters review mortgage applications, looking at credit history to assess your ability to pay your loan. A mortgage loan doesn’t get the green light without an underwriter’s approval; if they find any issues, they’ll either deny the loan or require the applicant to provide more information before deciding.

5. Home Inspector

The home inspection is key to the home buying process. It gives you a chance to get a thorough examination of the home to discover which repairs need addressing, if any. The findings of the home inspector’s report will set the table for continued negotiations with the seller and their agent. Buyers will often include a home inspection contingency in their offer to allow for renegotiation or canceling the contract entirely.

A Caucasian man home inspector works during the home buying process. He shines a flashlight at plumbing pipes in the basement.

Image Source: Getty Images – Image Credit: Jupiter Images

6. Home Appraiser

A professional appraiser will determine a home’s appraised value, which ensures that the lender is loaning the correct amount of money. Home appraisers are third parties to real estate transactions; they have no vested interest in either side of the deal. The home’s square footage, features, and condition all factor into their assessment. If there’s a discrepancy between a home’s appraised value and the loan amount, you and the seller will go back into negotiations.

7. Seller

It takes two to tango. The seller is your counterpart in the home buying process, and they want to sell their home for the best price to the right buyer. Accordingly, you’ll work with your agent on how to make an offer that’s most appealing to the seller. This looks different for each real estate transaction. For example, if you find yourself in a bidding war, the seller may value offers that show flexibility toward the inspection and contingencies. Talk to your agent for more information.

8. Listing Agent

The listing agent represents the seller. Your agent will work with them to iron out the details of your offer and move the deal along toward completion. After the home inspection, the listing agent will also be the main point of contact for any repair requests.

9. Title Company

Before the home is officially yours, a title company will conduct a search of the property’s history and public records to make sure its title is in good legal standing. Titles and deeds have very specific language that makes the transfer of ownership official. Title companies will make sure that everything in these documents is properly recorded during the closing process.

10. Homeowners Insurance Company

Once you’ve purchased a home, you need to protect it. Homeowners insurance policies cover your home, your belongings, injury, or property damage to others, and living expenses if you are temporarily displaced from your home due to an insured disaster. The coverage you’ll need will depend on your home’s location and condition, but what’s most important is that you’re fully protected as a homeowner.

Selling • April 3, 2023

8 Tips for First-Time Home Sellers

by Gary Peterson

A heterosexual Hispanic couple smiles with their real estate agent looking at his tablet as they work together to sell their home. They are first-time home sellers. They all stand in a staged living room next to a window.

You’ve seen “For Sale” signs around your neighborhood, but what does it take to actually put your home on the market? First-time home sellers often enter the selling process unaware of what’s to come, their heads full of questions. Understanding the selling process will inform your conversations with your real estate agent and will help you stay organized and on schedule as you sell your home for the first time.

8 Tips for First-Time Home Sellers

1. Know the Costs of Selling a Home

Though you’ll eventually walk away from the sale of your home with a lump sum in your pocket, the selling process isn’t without its costs. Real estate agent commission costs typically account for five to six percent of the sale price, but they’re not the only expense you’ll encounter on your selling journey. Between repairs, home upgrades, staging, escrow fees, Capital Gains Tax and more, it’s important to budget for these costs before listing your home.

2. Find the Right Agent

A successful selling experience starts by working with a professional real estate agent. Real estate agents specialize in keeping up with local market conditions, they have the tools to competitively price your home, and they understand what is driving buyer interest in your area. But beyond these qualities, it’s important that first-time home sellers choose an agent who understands their goals and cares about their happiness. Selling a home can be an emotional roller coaster and having a trusted expert beside you will help you navigate its ups and downs.

3. The Importance of Home Staging

Whether you hire a professional or decide to stage your home yourself, what’s important is that you make the commitment. Staging your home creates universal appeal, capturing the attention of the widest possible buyer pool. If your interior is too personalized, it makes it harder for buyers to see themselves in your home. Staging makes financial sense as well, as it often equates to higher sales prices. According to a 2020 survey performed by the Real Estate Staging Association (RESA®), of the 13,000 homes surveyed, 85% of staged homes sold for 5-23% over list price.¹

4. High ROI Remodeling Projects

Remodeling projects cost a significant amount of money; there’s no way around it. This is where your agent’s expertise can help you spend wisely: they can inform you of which home features and upgrades are driving buyer interest in your area. Target the high ROI remodeling projects that increase home value to get the most bang for your buck and know which remodeling projects to avoid when selling your home.

A young Caucasian man lays on his back in a bathroom with white hexagon tile flooring and white subway tile walls. A first-time home seller, he uses a wrench to turn the drainpipe under the bathroom sink as he prepares to sell his home.

Image Source: Getty Images – Image Credit: Hispanolistic

5. Pre-Listing Inspection

Anything that could potentially give your home a competitive advantage over other listings is worth discussing with your agent. One such strategy is conducting a pre-listing inspection before putting your home on the market. Not only do pre-listing inspections give sellers a better understanding of what repairs may be in order, but they also streamline the selling process by transparently disclosing the details of a property’s condition to the buyer. These reports are especially helpful in competitive markets, since buyers are more likely to waive inspections.

6. How to Price Your Home

Of all the information coming at you during the selling process, you’ll likely have your mind set on getting the best price for your home. Determining home value is one area where real estate agents excel; their Comparative Market Analysis (CMA) will help them set an accurate and competitive figure. It’s important to separate your emotional attachment to your home from your agent’s calculations. In your mind, your home possesses a certain value, but that may not match what it can realistically fetch on the market. Sometimes it may be even more than you thought!

7. Safety Tips for Open Houses

The more buyer interest you’re able to drum up, the better. Open houses play an important role in the selling process in that they allow buyers to experience the property firsthand. Making this connection requires opening your doors to strangers, which is cause for taking the appropriate safety measures. Remove all prescriptions from your medicine cabinets, lock up precious belongings and personal information, make sure all doors and windows are locked at the end of each day, and discuss your buyer screening process with your agent so you’re on the same page.

8. Moving Timeline

The planning doesn’t stop once you’ve sold your home. Before the ink is dry on your real estate contract, your gears will be turning about how to efficiently move into your new home. We’ve created an interactive Moving Checklist with a step-by-step guide to the moving process, from twelve weeks before moving day all the way up until you make your move. The list is also available as an interactive web page and downloadable PDF here:

For more information on the selling process from list to closing, visit our comprehensive selling guide here:

1: Real Estate Staging Association (RESA®). “The Consumer’s Guide to Real Estate Staging.” Realestatestagingassociation.com. 2020.

Market News • Matthew Gardner • March 28, 2023

Will Rising Foreclosures Impact the Housing Market?

by Gary Peterson

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

A bar graph showing U.S. foreclosures starts from 2007 to 2022. The numbers spiked in 2009 at over 2 million foreclosure starts and gradually decreased every year until 2022, where the numbers increased from 2021. Though they were 181% higher in 2022 than in 2021, it’s important to note that foreclosure starts in 2022 were 31% lower than 2019 and 88% lower than the 2009 peak.

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

A map showing foreclosures starts for each state in the U.S. California, Texas, and Florida have the highest number of foreclosure starts inn 2022. California had 27,541, Florida had 24,190, and Texas had 23,151.

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

A line graph showing the median FICO scores for new mortgages from Q1 2003 through Q3 2022. The median FICO score generally decreased from 2003 to the low of 707 during 2007, then gradually increased throughout the years 2008-2022. The median FICO score inn Q3 2022 was 766.

The median FICO score for new mortgages was 766 in the 4^th 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

A line graph showing mortgage debt payments as a percentage of disposable personal income for home buyers from Q1 2007 through Q3 2022. In 2007, mortgage debt payments were around 7% of disposable personal income, in Q3 2022 it was 3.99%. Between those two points in time, the percentage gradually and consistently decreased.

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

A map showing the percentage of equity rich households for each state in Q4 2022. The highest values are Vermont at 76.6%, Florida at roughly 62%, and California at 61.5%.

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

Living • March 21, 2023

7 Tips for Cleaning Your Appliances

by Gary Peterson

A young Caucasian woman wears yellow rubber gloves as she cleans her glass stovetop in her kitchen. The kitchen has white cabinets, white backsplash, and is minimally decorated with a couple cutting boards on the counter.

Your appliances help your home run like a well-oiled machine. But without the proper cleaning and maintenance, they can make your life more complicated. When thinking about the most helpful cleaning tips around the house, we often center our efforts on open, high-foot-traffic areas. However, spending some time cleaning your appliances will have your home feeling fresher than ever.

7 Tips for Cleaning Your Appliances

1. Cleaning Your Refrigerator

Your refrigerator is the lifeblood of your food supply. A clean refrigerator equates to fresher food and a healthier household. Start by clearing the shelves and bins so you can access the tough-to-reach spots and corners. Wipe everything down with soap and warm water or try an equal-parts mixture of vinegar and water as a cleaning solution. This is also a good time to reorganize your refrigerator to cut down on food waste.

2. How to Clean Your Microwave

One simple cleaning hack can have your microwave looking brand new. Fill a microwave-safe bowl or container with water and heat it up until it starts to boil. Turn off the microwave and let the heated water sit for at least five minutes, then safely remove it. By heating up the water, the food particles caked on the walls of your microwave will be much easier to wipe away. To eliminate germs, disinfect your microwave’s handle and buttons.

3. Espresso Machine / Coffee Maker

If your coffee maker is kaput, your whole morning routine gets thrown off. Whether you use a stovetop coffee maker, French press, espresso machine, or a good old coffee pot, performing regular maintenance will decrease bacteria and mold growth. Periodically separate the removable parts of your coffee maker and wash them thoroughly with warm soap and water. If you have a coffee press, run the parts through the dishwasher occasionally to prevent buildup in the mesh.

A closeup shot of a person’s hands. Wearing yellow rubber gloves, they clean the face of an electric stove and oven range.

Image Source: Getty Images – Image Credit: kirstyokeeffe

4. Dishwasher Cleaning Tips

If your dishwasher isn’t clean, your dishes won’t be either. Get it in pristine condition with a few simple cleaning tips. After cleaning all food scraps and gunk from the drain, wipe down the gaskets with warm soapy water. Though there are a variety of dishwasher cleaning products available, you can give your appliance a thorough deep cleaning with vinegar and baking soda. Fill a dishwasher safe container with one to two cups of vinegar and place it in the top rack. Run a cycle without dishwasher detergent nor other dishes. Once the cycle is complete, sprinkle roughly a cup of baking soda along the bottom rack and run another cycle.

5. How to Clean Your Stove Top

No matter how tidy you are as you cook your stove top will collect debris and buildup from splattering oil, butter, and food particles. Throw on some rubber gloves and get ready to give it some elbow grease. Soaking food buildup with warm water will break it down and make cleanup easier. Use a hard plastic scraper to get gas or electric stove tops totally clean, and use a warm, soapy sponge to make your glass top range sparkle. If your stove has removable burners, remove them and soak them in water to make them shine like new.

6. Cleaning Your Washing Machine

Seeing stains in your freshly washed loads of laundry? It’s time to give your washing machine some TLC. Fortunately, your washing machine can do most of the cleaning work itself. Add a little vinegar to the drum and run a cycle on your machine’s hottest setting. Many newer models come with self-cleaning features and higher energy efficiency ratings to save water on each load.

7. Dryer Cleaning Tips

Don’t forget about your dryer, too! Dryer maintenance is largely a matter of cleaning out the lint traps regularly (after each use) and vacuuming the mesh. Without proper maintenance, your dryer can get clogged, leaving your washed clothes damp. And if enough dryer lint builds up, it could start a fire.

Buyers • March 7, 2023

Homeownership Terms to Know: Pre-Approval, Pre-Qualification & More

by Gary Peterson

A young Black heterosexual couple shakes hands with a Caucasian real estate agent after they have gone through pre-approval for a mortgage to buy a house.

Throughout the home buying process, you’ll encounter several checkpoints. At every stop, you’ll get closer to the ultimate goal of purchasing your next home. Each one satisfies unique criteria required to become a homeowner, and each one has its own terminology. Before you begin your home buying journey, it’s helpful to know about pre-approval, pre-qualification, and proof of funds, and the role they play in a real estate transaction.

Pre-Qualification and Pre-Approval

What is pre-qualification?

Pre-qualification and pre-approval go hand in hand, but one precedes the other. Pre-qualification is a very early step in the home buying process leading to pre-approval. After sharing your financial information with your bank or lender, they’ll give you an estimate of the loan amount you can expect to qualify for. During this time, you’ll learn about the different home loans available to you to help you decide which is best. Pre-qualification usually only takes a few business days.

What is pre-approval?

A sibling to pre-qualification, pre-approval takes things a step further. Once you submit a mortgage application, you’ll provide your lender with the required information to perform a financial background check to assess your creditworthiness. You’ll get a pre-approval letter showing the lender’s offer of a specific loan amount, so you’ll know how much you can borrow. You’ll also get a better understanding of what interest rate you can expect to pay on your loan. Mortgage pre-approvals are typically valid for 60 to 90 days.

Once you’ve gone through the pre-approval process, it’s helpful to know which homes you can afford. Use our free Home Monthly Payment Calculator by clicking the button below. With current rates based on national averages and customizable mortgage terms, you can experiment with different values to get an estimate of your monthly payment for any listing price.

A close up shot of a real estate agent presenting a pre-approval mortgage agreement to their client. There is a calculator, a key, and a small model of a house on the real estate agent’s desk.

Image Source: Getty Images – Image Credit: Thitiphat Khuankaew

What is a proof of funds letter?

Simply put, in real estate, a proof of funds letter is a document that proves to the seller that you have enough money available to purchase the home. Proof of funds letters may vary depending on the terms of the transaction. For example, if you’re making an all-cash offer, your letter will prove that you have enough liquid cash to complete the deal.

Market News • Matthew Gardner • February 28, 2023

Renting vs. Buying a Home: The Financial Benefits of Homeownership

by Gary Peterson

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

Design • February 20, 2023

What is a Rambler House? 5 Features of Ranch-Style Architecture

by Gary Peterson

A white rambler home with a large tree in the front yard.

The distinct rambler architectural style is known by several names: rambler, ranch house, California ranch, and more. Whatever you call it, it has played an important role in the evolution of the American home. From its spacious interior to its welcoming layout, these homes are tailor-made for a comfortable home life.

History of the Rambler House

It wasn’t until the 1950s and 1960s that the rambler became a staple of domestic American life as the suburban boom reached new heights. The intention behind the architecture was simple: design the perfect post-war American home. The term “rambler” was a reference to the way the single-story design sprawled—or rambled—across the landscape. This home design mirrored the landscape of the American West and allowed for expansive views of surrounding land on a level plain.

Over time, the rambler style began to take on elements of modern design and eventually evolved into split-level homes, creating variants such as “raised ranch style,” “suburban ranch style,” and “storybook rambler.” To this day, these homes are found in great numbers across the country.

Image Source: Getty Images – Image Credit: pbk-pg

5 Features of Ranch-Style Rambler Homes

1. Low-Pitched Roof and Eaves

Similar to the Craftsman style home, it’s common for ranch-style homes to have low-pitched roofs and overhanging eaves. These architectural features help to give ranch-style homes their distinct sprawling look.

2. Open Floorplan

Ramblers are known for their open interiors that allow for easy movement throughout the home’s horizontal spaces. The spacious layout is often anchored by a central area which creates a feeling a continuity between rooms, a concept that was influenced by modern architecture.

3. One-Story Buildings

Though their wide layouts make for large footprints, the majority of rambler homes are one-story structures. The terms “rambler” and “ranch house” are used interchangeably. However, raised ranch houses and split-level ranch houses will often have a basement, whereas the classic rambler home is a one-story building with a ground-level entry.

4. Attached Garage

This was one of the first architectural styles to incorporate an attached garage into the home design. This evolution in home design perfectly suited the needs of the modern American family in the 1950s and 1960s.

5. Connection to the Outdoors

In another nod to modernist homes, ramblers often prioritized outdoor spaces for entertaining and gathering. This connection to the outdoors is reinforced by large windows and easy access to back patios to create a connection between nature and the home itself.