Living May 1, 2023

Your Guide to Going Solar

To reduce your carbon footprint, increase your household’s sustainability, and add value to your property, solar power may be right for you. Understanding how solar works and how to maximize its benefits are key first steps in your journey to becoming a solar energy-producing household.

How does solar power work?

The technology that turns your house into a solar energy-harnessing hub is called photovoltaics, more commonly known as PV. PV works by fielding direct sunlight and absorbing its photons into the solar panels’ cells, which then creates electricity that provides energy for your home. This energy reduces your home’s output of carbon and other pollutants, which translates to cleaner air and water.

With the sun as your power source, the majority of the power generation occurs during the middle of the day, making summer the highest producing season. Rooftop panels work best when they are exposed to sunlight, free of shade or shadow from nearby trees or structures. Given the sun’s east-to-west path, south-facing roofs are best-suited for maximizing your solar power. To see if your roof is set up for success, consult a mapping service or solar calculator to establish your roof’s suitability. If your roof isn’t up to standard, you can explore alternatives such as ground mount solar installations and community solar gardens.

Components of Solar Power

  • Solar Panels: Capture the sun’s energy
  • Inverter: Converts the sun’s energy to a form that powers devices
  • Racking: The foundation that holds your solar system in place
  • Batteries: Store the energy generated
  • Charge Controller: Controls how quickly the batteries charge

 

A brick home with solar panels covering its steep roof.

Image Source: Getty Images – Image Credit: hansenn

 

What are the benefits of solar power?

Sustainability: Having a renewable source of energy coursing through your home reduces your household’s carbon footprint by converting a significant portion of your home’s energy to solar power.

Save Money: How much money you save by going solar depends largely on how much energy your household consumes and the energy output of your solar panels. The cost of solar power has steadily decreased over time, so you are more likely to save as time goes on. For information on state incentives and tax breaks, explore what options apply to your home by visiting DSIRE (Database of State Incentives for Renewables & Efficiency®).

Utilities: Whether your utility company charges a flat rate for electricity or charges variable rates throughout the day based on electricity production—i.e., higher rates in the afternoon, lower rates at night—solar power offsets the price you are charged for electricity. It becomes even more valuable during those higher-rate periods or during seasonal fluctuations in utilities costs.

Sell Solar Power Back: Homeowners can sell their solar energy back to utilities through “Net-metering” plans. When your power generation rate is greater than your household’s consumption rate, the end result on your electric bill is a net energy consumption. Refer to DSIRE for region-specific regulations and policies.

Home Value: Studies have shown that buyers are willing to pay more for homes with solar panels. The Appraisal Journal, published by the industry-leading appraisers association The Appraisal Institute, found that homes with solar PV systems increased their home value by $20 for every $1 saved on utility bills annually.

Although the right solar solution looks different for each household, what remains true across the board is that solar power creates more sustainable homes while increasing home value. Taking all this information into your solar power plans will help to improve your home’s renewable energy output and reduce your carbon footprint.

Market NewsMatthew Gardner April 27, 2023

Q1 2023 Western Washington Real Estate Market Update

The following analysis of select counties of the Western Washington real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

 

Regional Economic Overview

The pace of employment growth in Western Washington continues to slow. The region added only 90,340 new jobs over the past 12 months. That said, the annual pace of employment growth was a respectable 3.6%. Three counties have not recovered completely from their pandemic job losses: Whatcom, Skagit, and Snohomish. However they are short by just under 10,000 jobs, which should be recovered by this fall. Regionally, the unemployment rate in February was 4.1%, which was marginally above the 3.8% level of a year ago. The employment outlook has improved modestly, with the likelihood of a recession in 2023 down to about 50%. That said, I expect the pace of job growth to continue to slow as businesses remain concerned about a contraction in consumer spending, as well as facing tighter credit conditions following recent bank failures.

Western Washington Home Sales

❱ In the first quarter of the year, 10,335 homes sold. This was down 30.9% from the same period in 2022 and 18.9% lower than in the fourth quarter of 2022.

❱ Lower sales activity was more a function of the limited number of homes for sale than anything else. Listing activity in the first quarter of 2023 was down 43% from the final quarter of 2022.

❱ Home sales fell across the board compared to the same quarter of last year and were lower in every county compared to the final quarter of 2022.

❱ Pending sales rose in all but three counties compared to the fourth quarter of 2022. This suggests that sales in the second quarter of the year may tick higher. That said, the region is in dire need of more inventory.

A bar graph showing the annual change in home sales for various counties in Western Washington from Q1 2022 to Q1 2023. All counties have a negative percentage year-over-year change. Here are the totals: San Juan at -7.8%, Island at -21.9%, Skagit -23.6%, Kitsap -26.6%, Mason -28.2%, Lewis -29.3%, Pierce -29.7%, King -31.7%, Whatcom -32%, Snohomish -32.4%, Clallam and Grays Harbor -32.7%, Thurston -36%, and Jefferson -36.9%.

Western Washington Home Prices

❱ Home prices fell an average of 6.9% compared to the first quarter of 2022 and were 1.3% lower than in the fourth quarter of 2022. The average home sale price in the first quarter of 2023 was $692,866.

❱ Compared to the fourth quarter of 2022, prices were higher in Kitsap, Skagit, Lewis, San Juan, and Whatcom counties.

❱ Even though prices fell in the region, five counties saw sale prices rise very modestly from the first quarter of 2023.

❱ It’s worth noting that median listing prices rose in all but two markets compared to the previous quarter. This suggests that sellers are getting a little more comfortable with the market. If listing prices continue to rise, one can surmise that home prices will follow suit.

A map showing the real estate home prices percentage changes for various counties in Western Washington. Different colors correspond to different tiers of percentage change. Grays Harbor and Snohomish Counties have a percentage change in the -12.7% to -9.5% range, Clallam, Jefferson, Island, and King counties are in the -9.4% to -6.2% change range, Whatcom, Mason, Thurston, and Pierce are in the -2.8% to 0.4% change range, and Lewis, San Juan, and Skagit counties are in the 0.5%+ change range.

A bar graph showing the annual change in home sale prices for various counties in Western Washington from Q1 2022 to Q1 2023. San Juan County tops the list at 1.2%, followed by Skagit and Lewis at 1.1%, Kitsap at 0.5%, Whatcom at 0.4%, Thurston at 1.1%, Pierce at -2.3%, Mason at -2.4%, Clallam at -7.3%, Island at -8.4%, King at -8.6%, Jefferson at -9%, Grays Harbor at -10.1%, and finally Snohomish at -12.7%.

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.

Western Washington Days on Market

❱ It took an average of 56 days for a home to sell in the first quarter of this year. This was 32 more days than in the same quarter of 2022 and 16 days more than in the fourth quarter of last year.

❱ King County remains the tightest market in Western Washington, with homes taking an average of 41 days to sell. Homes in San Juan County took the longest time to sell.

❱ Market time rose in all counties contained in this report compared to the same period in 2022 and compared to the fourth quarter.

❱ The greatest increase in market time compared to a year ago was in Grays Harbor County, where it took an average of 41 more days for homes to sell. Grays Harbor County also saw the greatest increase in market time compared to the final quarter of 2022 (from 46 to 76 days).

A bar graph showing the average days on market for homes in various counties in Western Washington for Q1 2023. King County has the lowest DOM at 41, followed by Snohomish at 42, Kitsap at 46, Pierce and Island at 49, Thurston at 50, Jefferson and Skagit at 51, Whatcom at 54, Mason at 57, Clallam at 66, Lewis at 68, Grays Harbor at 76, and San Juan at 89.

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.

Although the regional economy is still expanding, it continues to show signs of slowing. With the probability of a national recession this year now fifty-fifty, I do not see any reason for buyers to lose confidence in their housing decisions based purely on economic factors. Sellers appear to be a little more confident in the market as demonstrated by rising listing prices. Periods of lower mortgage rates and the lack of homes for sale are both likely contributors to this. Whatever the case may be, I am not seeing any signs of panic in the market.

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

Even in the face of higher financing costs, low inventory levels support home values, and the data suggests that the worst of the price declines are now behind us. The region had fewer sales, modestly lower prices, and higher average days on market, all of which favor home buyers. However, lower inventory levels, higher pending sales, higher listing prices, and a higher absorption rate of homes that are for sale favor sellers. As such, I am moving the needle towards a balanced market, but one that ever so slightly favors 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.

Market NewsMatthew Gardner April 25, 2023

Mortgage Rate Predictions and Misconceptions

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

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 separated by educational level completed as captured in the Federal Reserve Bank of New York in their 2023 Housing Survey. In the light blue line, respondents with a GED or less think the rate will be 9.4% in one year. In the dark blue line, respondents with a Bachelors degree think the rate will be 6.7% one year from now.

 

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

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 separated by educational level completed as captured in the Federal Reserve Bank of New York in their 2023 Housing Survey. In the light blue line, respondents with a GED or less think the rate will be 10.1% in three years. In the dark blue line, respondents with a Bachelors degree think the rate will be 6.4% three years from now.

 

And when asked to look three years outrespondents 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

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 separated by housing status as captured in the Federal Reserve Bank of New York in their 2023 Housing Survey. In the light blue line, renter household respondents think the rate will be 10.9% in one year. In the dark blue line, homeowner household respondents think the rate will be 7.3% one year from now.

 

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

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 separated by housing status as captured in the Federal Reserve Bank of New York in their 2023 Housing Survey. In the light blue line, renter household respondents think the rate will be 12.1% in three years. In the dark blue line, homeowner household respondents think the rate will be 7.4% three years from now.

 

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

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 April 17, 2023

How to Declutter Before Selling Your Home

To sell your home for the best price, it needs to be in pristine condition. You’ll work with your agent to identify high-ROI remodeling projects and various ways to improve the property, but all that is a moot point if you don’t declutter before selling your home. Here are some helpful tips to get started.

Declutter Before Selling Your Home

Getting your home cleaned up and organized is a precursor to capturing appealing listing photos and having successful open houses. You’ll be opening your doors to crowds of interested buyers, and it’s essential that your home feels like a place they want to live. Decluttering will also get you prepared for home staging, whether you’re hiring a professional or staging your home DIY. All these preparatory measures work together to make your home as appealing as possible to a wide pool of buyers.

Decluttering also helps to kickstart the transition of moving out. Homeowners are attached to their homes, and the selling process can bring a lot of those emotions to the surface. By going through your home room by room, sorting through your possessions and paring them down, you’re simultaneously beginning to process the life changes in your near future. Plus, by getting an early jump on organizing your home, it will make moving day a whole lot easier.

For buyers, space equals opportunity, so a tidy, uncluttered home allows them to fill it with their imagination. As such, it’s crucial that buyers see decluttered, spacious areas when they walk into your home or browse through listing photos online.

 

A young Caucasian woman starts to declutter before selling her home. She places books into a box labeled “donation books” in her home office.

Image Source: Getty Images – Image Credit: miodrag ignjatovic

 

How to Declutter Your Home

Take a deep breath; your decluttering doesn’t have to get done all in one sitting. Tackle your home room by room, taking stock of items as you go. The tried-and-true home organization method of keeping boxes labeled “donate,” “keep,” and “throw away” applies here. Separating items by their destinations will help you reduce piles of clutter in no time.

To properly declutter before selling, consider your moving timeline. Between your discussions with your agent and your preparations for your next home, moving day can go from a seemingly distant point in the future to tomorrow in a hurry. Planning a yard sale can help to give yourself a specific deadline by which you need to have finished giving the house a clean sweep.

Emphasize tidiness in small and narrow areas such as hallways, closets, and storage rooms and consider hanging mirrors to make these areas feel less cramped. These little tricks of the trade can help to give the impression that even the spatially limited areas of your home feel bigger. Scrub, wash, and dust the house top to bottom, even the commonly missed cleaning spots. A home that’s sparkling clean is more welcoming to buyers.

Let’s talk about additional preparations that will put your home in the best position to sell. I know what buyers in the area are looking for, so lean on me for advice as you get ready to hit the market.

Design April 3, 2023

What Is a Tudor Style House?

One look at a Tudor style house and you’re instantly transported to the English countryside. This distinct architecture dates back hundreds of years, borrowing elements of Renaissance and Gothic design, and later experienced a revival in the United States that continued to grow in popularity through the mid-twentieth century. Similar to cottage homes, their medieval imagery evokes a storybook charm, and their unique combination of materials makes for a truly signature look.

 

A profile shot of a brown and white English Tudor style house with a thatched roof and a tall chimney. The siding is made up of half-timbering wood patterns and brick accents. The garden surrounding the home is in full bloom, producing lettuce and spices.

Image Source: Getty Images – Image Credit: oversnap

 

Features of Tudor Style Houses

Known for their brown-and-white color scheme, Tudor style houses are typically built from stone or bricks, with a façade of stucco and exposed timbering framing. The framing creates straight lines that connect each level of the home, giving it a sense of geometry. Their steep-pitched, intersecting gabled roofs are tailor-made for climates that experience high levels of precipitation; snow slides off before accumulating, and rainwater has a natural path to the gutter system.

 

The interior of a brown and white English Tudor style house with exposed wood ceiling beams. The furniture is soft Victorian-style, and the accent pieces are dark mahogany wood.

Image Source: Getty Images – Image Credit: IPGGutenbergUKLtd

 

From the outside of a Tudor home, you can imagine sitting around the hearth under exposed wood ceiling beams, taking in the cozy atmosphere as the fireplace crackles. And your imagination would be spot on! A large fireplace is a central feature of these homes, given that they were the primary heating source for households early on in their history. Arched entryways with stonework accents, decorative chimneys, and narrow, closely grouped windows are also defining features of Tudor architecture.

 

The front façade of a brown and white Tudor style house with interlocking gabled roofs, brick accents, a tall chimney, several windows, and a decorative front entrance with stone masonry framing the doorway. There are several shrubs and a hedge in the front yard garden beds.

Image Source: Getty Images – Image Credit: peterspiro

 

Once World War II-era housing development began to shift toward addressing suburban sprawl affordably, the masonry-heavy Tudor style house became less popular. However, they are still found throughout the U.S. today.

Market NewsMatthew Gardner March 28, 2023

Will Rising Foreclosures Impact the Housing Market?

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 4th quarter of 2022. Yes, this is down from the peak seen in early 2021 when it was a whopping 788 but as shown here, it’s far higher than we saw before the housing crisis. Buyers over the past several years had very good credit and, given the tight labor market, we are certainly in a very different place than back before the housing bubble burst.

 

Mortgage Debt Payments Percentages 2007-2022

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

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.

Buyers March 21, 2023

How to Search for a Home: Buying Guide

The right home is out there, you just have to find it. This may seem like an oversimplification of the home search process, especially for first-time home buyers who haven’t been through it before. But once you’ve figured out your budget and discussed your needs with your real estate agent, you’ll be off and running. Here is a quick guide to help you get started on your home buying journey.

How to Search for a Home

Which houses can I afford?

Before you go perusing pages and pages of listings online, you’ll want to know your budget. Remember that while a home’s listing price is the main character in the list of home buying expenses, it’s not the only cost you’ll encounter. Knowing the full spectrum of the costs associated with buying a home will help you paint a clear picture of what you can afford. Once you’re familiar with these costs, you can strategize ways to save money to buy a house and plan to make a down payment.

To get an idea of what’s affordable, 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 down payment amounts to get estimates of your monthly payment for any listing price.

 

Mortgage Pre-Approval

Another way you can supercharge your home search efforts is to get pre-approved for a mortgage. Pre-approval has several benefits for prospective home buyers. It helps you understand the different types of home loans available to you and what interest rate you can expect when the time comes to lock in your mortgage. It also streamlines the home buying process once you’ve found the property you’d like to pursue.

 

A young heterosexual Caucasian couple view real estate listings on their laptop at the dining room table. The home is decorated with modern furniture and house plants.

Image Source: Getty Images – Image Credit: Georgijevic

 

How do I find the right home?

Understanding your needs as a homeowner will help you narrow your selection pool. Before you start your home search, make a list of must-have and nice-to-have home features. This will inform your discussions with your real estate agent. Once they know what you consider a dealbreaker, they can pinpoint the right candidate homes.

So, where can you find available homes? Yes, driving around your neighborhood looking for “For Sale” signs is one way to go about it, but a vast majority of home shopping occurs online. Real estate websites like Windermere.com have advanced home search tools that allow you to filter by location, price, number of bedrooms and bathrooms, etc., plus helpful features like virtual tours, professional photography, maps, and more.

 

What are the different house styles?

Familiarizing yourself with the different architectural styles will help to inform your home search. Understanding the differences between a Craftsman home and a Cottage home can make a big difference when you’re house hunting. Each style has its own unique characteristics, perspective on space, and flair. Knowing what kind of architecture and home design you’re drawn to will also help your agent conduct more efficient home searches.

Working with a Real Estate Agent

Your real estate agent will be your greatest resource during your home search. They have access to the Multiple Listing Service (MLS), the largest network of homes on the market. Your agent will use the MLS to create customized searches for available listings and can easily connect with sellers’ agents to coordinate next steps.

Living March 7, 2023

What’s a Home Warranty and Why Do You Need One?

To be a homeowner is to understand that things can change at a moment’s notice. It’s only a matter of time before the systems in your home break and your appliances are on the fritz. But this inevitable truth isn’t meant to be all doom and gloom. Fortunately, you can protect yourself against these events with a home warranty.

What is a home warranty?

A home warranty and homeowners insurance both protect homeowners against unexpected events. A standard homeowners insurance policy typically covers your home, your belongings, injury, or property damage to others, and living expenses if you are unable to live in your home temporarily because of an insured disaster.

The policy likely pays to repair or rebuild your home if it is damaged or destroyed by disasters, such as wildfires, a winter storm, or lightning. Your belongings, such as furniture and clothing, are also insured against these types of disasters, as well as theft. Some risks, such as your home flooding, are routinely excluded from homeowners insurance policies.

A home warranty picks up where homeowners insurance leaves off by covering some or all of your HVAC, electrical systems, plumbing, and major appliances. A home warranty contract pays for the repair costs associated with these household items. However, if something in your home has not been properly maintained, your home warranty likely won’t cover it. Clarify the specifics of your policy’s language regarding proper maintenance with your warranty provider to avoid potential disagreements. Most home warranties are good for one year with the ability to renew annually.

What does a home warranty cover?

Home warranty policies vary by provider and location. Different coverages offer different protections among your home’s systems and appliances, or a combination of the two. Fees vary as well, based on your plan’s coverages and applicable service fees.

 

A young interracial heterosexual couple sits at their dining room table in the open concept kitchen of their new home reviewing their home warranty policy printed out with their laptop open.

Image Source: Getty Images – Image Credit: PeopleImages

 

Why do you need a home warranty?

Home warranties have several benefits both for buyers and sellers. For buyers, you can rest assured that your appliances are covered if and when they break down. This saves you from unexpected repair bills from having to hire a contractor. And when selling your home, a home warranty can serve as a way to differentiate your property over other listings. When buyers know a home is protected with a warranty, they can buy with confidence.

Finding the Right Home Warranty

As with anything in the home buying or selling process, it’s important to shop around when searching for the right home warranty policy. During your discovery process, ask questions about the policy’s costs, its dollar amount limit, which items it covers, and its applicable fees including service calls. Talk to your agent about trusted warranty providers in your area.

Market NewsMatthew Gardner February 28, 2023

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

This video is the latest in our Monday with Matthew series with Windermere Chief Economist Matthew Gardner. Each month, he analyzes the most up-to-date U.S. housing data to keep you well-informed about what’s going on in the real estate market.


 


Renting vs. Buying a Home

One of my followers asked me about some of the financial benefits of owning your home as opposed to renting. I find this topic interesting as there really is a “laundry list” of reasons that, from a financial standpoint, owning a home is better than renting.

I’m Matthew Gardner Chief Economist at Windermere Real Estate and welcome to this month’s episode of Monday with Matthew. Let’s get to the topic at hand. Of course, I don’t have time to go through them all today but here are the ones that I think are the most compelling: wealth building and tax benefits.

The Financial Benefits of Homeownership 

The first thing to understand is that, over time, a mortgage becomes easier to afford. You see, when you buy a home, the mortgage payments themselves don’t change and, over time, your earnings rise but the mortgage payment doesn’t. Simply put, unlike renters who generally see their rents going up every year, your mortgage payment never will and because you’ll hopefully be making more money as time goes by, the share of your income that you spend on a mortgage payment becomes less & less.

The next advantage to owning your home is that it is a good long-term investment. Of course, some will say that this is not the case because we went through the housing bubble bursting back in 2006 but there have actually been very few times in history when home prices have seen any long-term downward adjustment.

Now I know some will say that investing in stocks would give you a higher long-term return. My response to that would be I’ve never seen anyone living under a stock certificate. Have you?

My next reason for believing that ownership is better than renting is rather simple, and that is because a portion of every mortgage payment you make goes toward reducing the principal amount of the loan. Of course, during a majority of the term of the mortgage most of the payment is going towards interest but, a small portion is paying down the debt itself—in essence making it a forced savings plan, building wealth along the way.

Tax Advantages of Owning a Home

But what about the tax advantages? Owning a home offers unique and substantial ways to save on your taxes every year. Firstly, you can deduct your real estate taxes every year. Now, tax reform has limited the total allowed deduction, but it is still meaningful. You can also deduct the interest you pay on your mortgage. Again, there are some limitations but, depending on where you live you could save a significant amount.

And finally, let’s talk Capital Gains Taxes. When you sell your primary residence and have seen its value grow since you purchased it, up to $250,000 of that profit (if you’re a single person) or $500,000 if you’re married and filing jointly is tax free. Now, this is only true if you meet certain requirements with the biggest one being that you have to have lived in the house for a minimum of two years during the preceding five-year period.

If that’s not enough to convince you that there are very significant advantages to owning a home over renting, I will leave you with one last datapoint that you may find of interest.

Renting vs. Owning a Home: Household Net Worth

Using Federal Reserve data as a base, I’ve been able to calculate the median net worth of a household in America who owned their homes versus a household that rents.

  • In 2022, the median household wealth of a homeowner household here in America was approximately $330,000.
  • The median household wealth for a renter household in this country last year was just $8,000.

As you can see, that’s quite the discrepancy between the two. I think it’s very clear that homeownership for a vast majority of families is how they create most of their wealth.

I hope you found this topic of interest. Of course, if you have any questions or comments please do let me know as I do enjoy hearing from you. Take care and I look forward to talking to you all again next month.

 

Data combined and calculated by Windermere Economics


About Matthew Gardner

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.

Design February 20, 2023

What Makes a Home Modern? 6 Features of Modern Architecture

Sleek, sustainable design, open concept floor plans, minimalism, and eco-conscious thinking are defining characteristics of modern architecture. These concepts were formed in the early to mid-twentieth century as part of the modern art movement which encompassed art deco interior design and mid-century modern architecture among other styles. Here’s a breakdown of the features that define modern architecture.

6 Features of Modern Architecture

1. Clean Geometric Lines

At the heart of modernist values lies the simplification of form. Ornate decorations quickly became a thing of the past as designers became focused on taking a no-frills approach to home design. Modernist homes have a very linear feel with straight lines and exposed building materials, as opposed to more irregular shapes that were popular in the past.

2. Multifunctional Spaces

Multifunctional living spaces are a foundational element of modern homes. Built-in storage is commonly used to reflect this multi-purpose, space-saving feel. This gives added significance to the spaces in a home by upping each one’s utility. It creates an environment where everything has purpose.

3. Eco-Friendly

Modern homes are well suited for technological and eco-friendly home upgrades, as well as eco-friendly building materials and energy efficient practices, and flat roofs to accommodate solar power. A new trend is to decorate each room with plants for a calming, soothing effect. Large windows are abundant in modern architecture, allowing light to fill and expand the interior space, bringing the natural world indoors.

 

The interior of a modern home kitchen with granite countertops, hardwood floors, dark oak cabinets, and a stainless-steel range and dishwasher.

Image Source: Getty Images – Image Credit: irina88w

 

4. Post-and-Beam Structure

Exposed wood posts and ceiling beams are classic elements in modern architecture and modern offshoots like farmhouse interior design. Modern homes significantly emphasize the structure rather than hiding the bones behind drywall. In new modern homes the post-and-beam structure can be made of concrete, iron, or other materials. The visible horizontal and vertical beams reinforce the clean geometric lines of the space.

5. Open Concept

Modern design strives to “open” the space by eliminating enclosed rooms. A common design method is to open the kitchen and dining room into an open living space, allowing the spaces to flow into one another.

6. Minimalism

With open and connected modernist spaces, careful curation of furniture, décor, and household objects is paramount to incorporating the modernist aesthetic. Generally, modernist homes have art and furniture that reflects the clean geometric lines and the natural materials of the architecture, leaving less space for clutter. Minimalist philosophies encourage few household items that serve both form and function, which work well within this design and architectural style.

 

The interior of a modern home open-concept living room/dining room area with minimalist decorations and features: neutral-colored carpet, hardwood floors, beige couch and chairs, and a fireplace in the dining room.

Image Source: Getty Images – Image Credit: alvarez

 

Contemporary vs. Modern Architecture & Design 

The terms “contemporary” and “modern” are thrown around interchangeably. They do possess a certain degree of overlapping qualities, but specifically in the design world, “modern” refers to styles influenced by the early to mid-twentieth century movement, while contemporary design is what is popular in the present. Whatever interior design trends are at the forefront can be said to be contemporary, while modern interior design is still influenced by a specific period in the past.