JPG-Blog-Featured-Image-1024-x-396-new-construction

You’ve got several options to choose from when buying your next home. With existing homes, it’s in sellers’ best interest to spruce up their properties, so they’ll usually complete some kind of upgrades, curb appeal projects, and remodeling before hitting the market. A new construction home, however, has no previous owner; it comes brand new. Learning about the new construction buying process will help you understand how it differs from other types of housing, such as existing single-family homes, townhouses, condominiums, etc.

What is a new construction home?

New construction homes are kick-started from two primary sources: the homeowners themselves and developers. When a homeowner is having a home custom built, they work with contractors to build it to their desired specifications on a lot they’ve purchased. This tailored approach comes at a price; building a custom home generally costs more than purchasing a new build from a developer.

When going the developer route, buyers have options to choose from, namely tract homes and spec homes.

Tract homes make up new neighborhoods on land bought by the builder. They bear a strong resemblance to each other but may offer customizable floor plan and design options to tailor the home to the buyer’s liking.

Spec homes are finished, move-in-ready new builds. Though they offer little to no customization, they may be the right option for you if you’re looking to move right away.

There are four component parts of building a new construction home: land, labor, materials, and regulation. Builders combine those costs to determine what price they need to sell the home to make a profit, accounting for local real estate market trends. However, if the market is driving up those costs, builders are less likely to continue building. As a buyer, keeping tabs on the housing market will help you understand the landscape of available new construction homes.

Pros of a New Construction Home

New materials, appliances, and fixtures
Customization without having to remodel
Less maintenance than an older home

Cons of a New Construction Home

Custom home costs can be high
Move-in date dictated by builder’s timeline
Market conditions can drive up prices/halt production

Buying a New Construction Home

The financial preparations you’d take for purchasing an existing home apply to buying a new construction home. You’ll get pre-approved for a mortgage early on and form a saving strategy for how to make a down payment.

There’s less room for negotiation in new construction home transactions, so you and your agent should thoroughly discuss what kind of offer you’re able to make. Your agent is your greatest asset during this part of the process; lean on them to understand how to make an offer. You’ll also want to know whether a home warranty comes with the purchase of the new construction home and its cost structure.

Even though these homes are brand new, it’s still worth it to get a home inspection to discover any outstanding repairs that need to be made and begin a dialogue with the builder about fixing them before you move in.

Going into the buying process, it helps to know which new construction homes you’re able to afford. This allows you and your agent to work together to find the best candidate properties. 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.

Featured Image Source: Getty Images – Image Credit: Kirk Fisher

A row of tract new construction homes in a newly developed suburban neighborhood. The home in the foreground is finished, the rest in the row are framed but without siding.

Image Source: Getty Images – Image Credit: jhorrocks

Pros of a New Construction Home

New materials, appliances, and fixtures
Customization without having to remodel
Less maintenance than an older home

Cons of a New Construction Home

Custom home costs can be high
Move-in date dictated by builder’s timeline
Market conditions can drive up prices/halt production

Buying a New Construction Home

Featured Image Source: Getty Images – Image Credit: Kirk Fisher

This post originally published by Sandy Dodge

This video shows Windermere Chief Economist Matthew Gardner’s Top 10 Predictions for 2023. 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.

Matthew Gardner’s Top 10 Predictions for 2023

1. There Is No Housing Bubble

Mortgage rates rose steeply in 2022 which, when coupled with the massive run-up in home prices, has some suggesting that we are recreating the housing bubble of 2007. But that could not be further from the truth.

Over the past couple of years, home prices got ahead of themselves due to a perfect storm of massive pandemic-induced demand and historically low mortgage rates. While I expect year-over-year price declines in 2023, I don’t believe there will be a systemic drop in home values. Furthermore, as financing costs start to pull back in 2023, I expect that will allow prices to resume their long-term average pace of growth.

2. Mortgage Rates Will Drop

Mortgage rates started to skyrocket at the start of 2022 as the Federal Reserve announced their intent to address inflation. While the Fed doesn’t control mortgage rates, they can influence them, which we saw with the 30-year rate rising from 3.2% in early 2022 to over 7% by October.

Their efforts so far have yet to significantly reduce inflation, but they have increased the likelihood of a recession in 2023. Therefore, early in the year I expect the Fed to start pulling back from their aggressive policy stance, and this will allow rates to begin slowly stabilizing. Rates will remain above 6% until the fall of 2023 when they should dip into the high 5% range. While this is higher than we have become used to, it’s still more than 2% lower than the historic average.

3. Don’t Expect Inventory to Grow Significantly

Although inventory levels rose in 2022, they are still well below their long-term average. In 2023 I don’t expect a significant increase in the number of homes for sale, as many homeowners do not want to lose their low mortgage rate. In fact, I estimate that 25-30 million homeowners have mortgage rates around 3% or lower. Of course, homes will be listed for sale for the usual reasons of career changes, death, and divorce, but the 2023 market will not have the normal turnover in housing that we have seen in recent years.

4. No Buyer’s Market But a More Balanced One

With supply levels expected to remain well below normal, it’s unlikely that we will see a buyer’s market in 2023. A buyer’s market is usually defined as having more than six months of available inventory, and the last time we reached that level was in 2012 when we were recovering from the housing bubble. To get to six months of inventory, we would have to reach two million listings, which hasn’t happened since 2015. In addition, monthly sales would have to drop below 325,000, a number we haven’t seen in over a decade. While a buyer’s market in 2023 is unlikely, I do expect a return to a far more balanced one.

5. Sellers Will Have to Become More Realistic

We all know that home sellers have had the upper hand for several years, but those days are behind us. That said, while the market has slowed, there are still buyers out there. The difference now is that higher mortgage rates and lower affordability are limiting how much buyers can pay for a home. Because of this, I expect listing prices to pull back further in the coming year, which will make accurate pricing more important than ever when selling a home.

6. Workers Return to Work (Sort of)

The pandemic’s impact on where many people could work was profound, as it allowed buyers to look further away from their workplaces and into more affordable markets. Many businesses are still determining their long-term work-from-home policies, but in the coming year I expect there will be more clarity for workers. This could be the catalyst for those who have been waiting to buy until they know how often they’re expected to work at the office.

7. New Construction Activity Is Unlikely to Increase

Permits for new home construction are down by over 17% year over year, as are new home starts. I predict that builders will pull back further in 2023, with new starts coming in at a level we haven’t seen since before the pandemic.

Builders will start seeing some easing in the supply chain issues that hit them hard over the past two years, but development costs will still be high. Trying to balance homebuilding costs with what a consumer can pay (given higher mortgage rates) will likely lead builders to slow activity. This will actually support the resale market, as fewer new homes will increase the demand for existing homes.

8. Not All Markets Are Created Equal

Markets where home price growth rose the fastest in recent years are expected to experience a disproportionate swing to the downside. For example, markets in areas that had an influx of remote workers, who flocked to cheaper housing during the pandemic, will likely see prices fall by a greater percentage than other parts of the country. That said, even those markets will start to see prices stabilize by the end of 2023 and resume a more reasonable pace of price growth.

9. Affordability Will Continue to Be a Major Issue

In most markets, home prices will not increase in 2023, but any price drop will not be enough to make housing more affordable. And with mortgage rates remaining higher than they’ve been in over a decade, affordability will continue to be a problem in the coming year, which is a concerning outlook for first-time buyers.

Over the past two years, many renters have had aspirations of buying but the timing wasn’t quite right for them. With both prices and mortgage rates spiraling upward in 2022, it’s likely that many renters are now in a situation where the dream of homeownership has gone. That’s not to say they will never be able to buy a home, just that they may have to wait a lot longer than they had hoped.

10. Government Needs to Take Housing More Seriously

Over the past two years, the market has risen to such an extent that it has priced out millions of potential home buyers. With a wave of demand coming from Millennials and Gen Z, the pace of housing production must increase significantly, but many markets simply don’t have enough land to build on. This is why I expect more cities, counties, and states to start adjusting their land use policies to free up more land for housing.

But it’s not just land supply that can help. Elected officials can assist housing developers by utilizing Tax Increment Financing tools, whereby the government reimburses a private developer as incremental taxes are generated from housing development. There are many tools like this at the government’s disposal to help boost housing supply, and I sincerely hope that they start to take this critical issue more seriously.

About Matthew Gardner

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

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

This post originally published by Sandy Dodge

In the process of buying or selling a home, you’ll frequently come across the term “MLS.” The Multiple Listing Service (MLS) is a group of regional databases of homes for sale accessible only to real estate agents and brokers. Their ability to access the MLS makes it easier for buyers to find the right home and for sellers to market their listings.

What is the Multiple Listing Service (MLS)?

The purpose of an MLS is to facilitate real estate transactions by connecting real estate agents and making it easy for them to share information about active listings and sold home data. For buyers and sellers, your agent’s access to the MLS means you’ll be connected to the largest network of homes and listing information on the market.

Each MLS shows the homes for sale in a particular geographic area. Listing agents add their clients’ listings to the database—providing photos and detailed information about the property—so buyer’s agents can show them to their clients. The MLS allows for customizable searches, which agents use to easily identify the homes that match their clients’ criteria. The vast amount of historical data available on the MLS is what your agent will use to conduct their Comparative Market Analysis (CMA) to competitively price your home. The listing data in the MLS is fed to real estate brokerage websites, such as Windermere.com, so that buyers can search for homes on their own as well.

In a small office, a real estate agent hands the keys to a new home to their clients. The real estate contract is on the table in front of them.

Image Source: Getty Images – Image Credit: fizkes

Benefits of the Multiple Listing Service (MLS)

Selling a home is a numbers game. The more potential buyers you can reach, the more likely you are to find the right buyer in a timely manner. After your agent conducts their CMA to determine the value of your home, they’ll upload the listing to the MLS. Here they can add additional information beyond what you would find in a typical listing description, such as showing times, contact information, and more. The MLS provides maximum visibility for sellers by connecting them to buyer’s agents who are actively searching for listings. The MLS has also helped to make the industry more equitable. Small real estate brokerages have access to the same MLS info as large companies, putting everyone on a level playing field.

What is an MLS number?

An MLS number is a unique code for each home listed on the market. It makes it easier for agents to communicate regarding a specific property. To learn more about the MLS, or for answers to your buying and selling questions, connect with a local, experienced Windermere agent today:

Featured Image Source: Getty Images – Image Credit: VioletaStoimenova

This post originally published by Sandy Dodge

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

Hello there, I’m Windermere’s Chief Economist Matthew Gardner and welcome to this month’s episode of Monday with Matthew. A little while ago, a housing analyst was being interviewed about the current state of the residential market and they suggested that the country is in a “housing recession.” Well, needless to say, this got a lot of attention from the media and the public at large—for obvious reasons.

Any time the word “recession” is mentioned we almost subliminally cast our minds back to 2007. And when the word “recession” is combined with the word “housing,” then panic starts to set in with flashbacks of headlines about burgeoning housing supply, plummeting home prices, and surging foreclosures.

As this is a topic being discussed by many across the country right now, I wanted to share with you my opinion as to whether the phrase “housing recession” is an appropriate one when describing today’s market.

So, what is a recession? To answer this, I will turn to my trusted Oxford English Dictionary, and this is how they describe that word.

Definition of a Recession

Image Source: Matthew Gardner

Recession:

a difficult time for the economy of a country, when there is less trade and industrial activity than usual, and more people are unemployed
the movement backward of something from a previous position

Well, how do we use these definitions when it comes to the ownership housing market?

I guess that “less trade” could mean lower sales and we have certainly seen sales pull back. “Movement backward” could be how someone might describe the fact that sale prices have been pulling back in many markets across the country.

But although some may say that we really are in a housing recession given the definition of the word, is it really accurate? Are we are inextricably headed down a road that leads to the bursting of some sort of bubble as we all remember from 2007? I don’t believe we are. To explain my thinking let’s start out by looking at housing supply.

Inventory of Homes for Sale

Image Source: Matthew Gardner

Yes, listing activity is up—can’t argue with that—with the number of resale homes for sale jumping by more than a third from the start of this year. But there’s more to it than that. You see, we have to look a little further back to better understand what’s really going on.

And to do this, let’s check out the number of homes for sale during the first seven months of this year and compare those numbers to the same periods in 2018 through 2021.

Active Listings By Month

Image Source: Matthew Gardner

I don’t know about you, but this doesn’t look like a chart showing a massively oversupplied market! The number of homes for sale in July of this year was almost exactly the same as we saw last July and is still well below the levels seen in 2018, 2019, or 2020.

Sure, listings are up. But are we at levels that will cause prices to tumble? Remember that it was a massive increase in the number of homes for sale that led to the housing bubble bursting back in 2007. Listings peaked at almost 3.9 million units in 2006; but today there are 2.6 million fewer units on the market than we saw back then. Now that we’ve seen that supply isn’t at concerning levels, let’s look at demand.

Existing Home Sales

Image Source: Matthew Gardner

This chart doesn’t look too good. On an annualized basis, sales have been pulling back since the start of the year but that’s not the full story. Let’s look at this in a slightly different way.

Year-to-Date Sales

Image Source: Matthew Gardner

The bars here show year-to-date sales through July—both adjusted and unadjusted for seasonality—and although unadjusted sales so far this year are lower than we saw during the first seven months of 2021, they are at about the same level as we saw in 2018 and are higher than in 2019 or 2020.

But when we adjust the monthly sales data for seasonality, year-to-date sales in 2022 were higher than all years shown here other than 2021.

So, although sales have fallen, it appears to me that we are heading back to a more realistic market rather than one that is hemorrhaging. Yet another indicator we need to consider when examining the market for evidence of some sort of recession are months of inventory , which shows how long it would take to sell every home for sale using the current monthly sales pace.

Months of Inventory

Image Source: Matthew Gardner

This graph shows that it would take three months to sell every home on the market given the sales we saw in July. That is quite a jump from the January pace but, again, perspective is everything.

Months of Inventory: Seller’s Market

Image Source: Matthew Gardner

At three months, it is still a seller’s market. It’s generally accepted that the definition of a seller’s market is any number below four months; a balanced market is four to six months of inventory, and a buyer’s market is when the month of inventory is above six.

And a simple bit of math shows us that, for the market to shift from favoring sellers to favoring buyers, the number of homes for sale must break above two million—which we haven’t seen since 2015—and monthly sales would have to drop to below 300,000. We’ve only seen that happen three times in history: November 2008, and again in July and August of 2010.

Yes, listings are up, and sales are down. There’s no denying it. But, again, does the data justify the term recession? My answer would be no. But, if you’re still not convinced, let’s turn our attention to sale prices. I think that might help make things even clearer.

Median U.S. Existing Home Price

Image Source: Matthew Gardner

The solid line represents the median sale prices of homes over time and the dotted line shows the trend. You can clearly see that we started breaking away from the trend line in early 2021 and that’s not at all surprising as it started the month after mortgage rates hit their historic all-time low.

But today’s financing costs are significantly higher, and prices have started to slide. Although I certainly expect that we will see sale prices fall further, it appears to me as if they are simply moving back to the long-term trend, and not collapsing.

Mortgage Rate Forecasts

Image Source: Matthew Gardner

With mortgage rates doubling from their 2021 lows, downward pressure on sale price was to be expected. But will they—as some think—rise to a level that will cause home prices to plummet? To answer that, here are the forecasts of several associations. You’ll see that all, bar the National Association of Realtors and Freddie Mac, see rates pulling back—albeit modestly—in 2023.

Of course, all these are annual averages and today’s rates are higher with the latest Freddie Mac data showing the average 30-year fixed rate above 6%—a level we haven’t seen since 2008.

However, economists including myself find it unlikely that rates will continue rising significantly from where they are today. The mortgage market is certainly in a bit of disarray right now with the yield curve inverting, but that should correct itself by early next year and that’s why we generally expect rates to start pulling back from their current levels by the start of 2023.

But if rising rates are triggering memories of 2008, you wouldn’t be alone. There are some expecting that the spike in rates will trigger a surge in foreclosures and that will doom the market. But as you see here, although foreclosure filings have certainly risen, they are still remarkably low compared to historic standards.

U.S. Foreclosure Filings

Image Source: Matthew Gardner

In the second quarter, newly delinquent mortgages represented just 1.9% of all mortgages outstanding¹ and that’s the lowest share the market has seen since 2006. Although I do expect the number of homes being foreclosed on will rise as we move into 2023, I just don’t see it getting to the levels necessary to materially impact the market. And a big part of the reasoning behind my thinking is this:

Equity Rich Households (Q2 2022)

Image Source: Matthew Gardner

In the second quarter of 2022, over 48% of homeowners with a mortgage were sitting on more than 50% equity.

Simply put, for enough homeowners to be put in a negative equity situation that would lead them to enter foreclosure and materially damage the market, home prices across the country would have to fall by a percentage greater than we saw during the market crash. And I just don’t see this happening.

The word “recession” has many connotations, and when it’s used to describe the housing market, it can engender a significant level of panic. So, I will ask you all. Given the data I have showed you today, do you think that we are in a housing recession?

Yes, supply levels have risen. But they are still relatively low when compared to historic averages and with builders slowing construction activity to a crawl, it’s unlikely that housing supply will grow much organically. Over the longer term, I believe that the supply of resale homes for sale will remain below historic averages. I say this for one simple reason: mortgage rates.

In 2020, a record number of households refinanced their homes to take advantage of the mortgage rates that had been plummeting. And in 2021, over six million home buyers got mortgages with rates averaging below 3%.

I would suggest to you that we will not see the number of homes for sale even get back to normalized levels in the mid-term, as many potential sellers will decide not to sell, because if they did, they would lose the never seen before and likely never to be seen again mortgage rate that they currently have.

Of course, there will be sellers who have to move because of factors such as job relocation, death, or divorce, but I would contend that listing activity may well be tight for a long time. And if supply remains below the level of demand, the market is further protected.

And as far as demand goes, let’s not forget that the age makeup of the country suggests that we will see a lot more potential buyers as Millennials and Generation Z mature, with current numbers suggesting significant buyer demand for the next two decades.

As for sale prices, I still believe (as do almost all economists) that the median home price next year will be higher than we will see this year, but a very significant drop in the pace of sales growth is likely as we trend down to historic averages.

Of course, all real estate is local and there are markets across the country that will see prices drop in absolute terms. But even in the most highly susceptible markets, it will be a temporary phenomenon. By 2024, homeowners in these markets will see the value of their homes start to rise again.

I’m going to leave you with my quote to describe today’s market today and it’s that we are in a “housing reversion,” NOT a housing recession.

As always, I’d love to hear your comments on my thoughts so feel free to reach out. In the meantime, stay safe out there and I’ll see you all again next month.

1: New York Fed Quarterly Report on Household Debt and Credit

About Matthew Gardner

This post originally published by Matthew Gardner

An integral part of the formula to successfully buying a home is securing the correct amount of financing. Once you’ve found the home you’d like to pursue, one of your primary tasks is exploring different loan products to see which best fits your situation. Eventually, you’ll come to a fork in the road where you’ll need to decide between a fixed-rate mortgage and an adjustable-rate mortgage (ARM). The following information will help you gain a better understanding of ARMs to help you decide whether they’re right for you.

What Is an Adjustable-Rate Mortgage (ARM)?

After your down payment, your mortgage will finance the remainder of your home purchase. Whereas fixed-rate mortgages allow you to lock in a specific interest rate and payment for the life of your loan, adjustable-rate mortgages’ interest rates will fluctuate over time, thus changing your loan payment. It’s typical for ARMs to begin with a low introductory interest rate, but once that first stage of the loan has passed, they will begin to shift up and down. ARMs generally have a cap that specifies the maximum rate that can occur for that loan.

Let’s say you secure an adjustable-rate mortgage with 30-year terms, the first five of which are at a fixed rate. When the variable interest portion of the loan kicks in, your mortgage’s fluctuations will be measured against an index. If the index is higher than when you secured the loan, your rate and loan payment will go up—and vice versa. How often your ARM rates change depends on your agreement with your lender. Talk to your mortgage broker to learn more about the characteristics of adjustable-rate mortgages.

Different Types of Adjustable-Rate Mortgages (ARMs)

Payment-Option ARM: You’ll have flexibility to choose your monthly payments with a payment-option ARM, including interest-only payments and minimum payments that don’t cover interest. These loan products can get home buyers into hot water quickly when rates increase.

Interest-Only ARM: With an interest-only ARM, you pay just the interest on the loan for a specified introductory period, then the principal payments kick in on top. The longer the introductory period, the higher your payments will be when the delayed principal payments enter the equation.

Hybrid ARM: As outlined above, a hybrid ARM begins with a fixed-rate introductory period followed by an adjustable-rate period. Typically, a hybrid ARM’s fixed-rate period lasts anywhere between three to 10 years, and its rates adjust at an agreed-upon frequency during the adjustable-rate period, such as once every six months or once a year.

Pros and Cons of an Adjustable-Rate Mortgage (ARM)

The low introductory rate allows you to save money and plan for when the adjustable-rate period kicks in.

If you plan to live in the home for a long time, a fixed-rate mortgage may be a better option.

If you plan on selling in a few years, you can use the proceeds to pay back your mortgage before the fixed-rate period ends.

Without knowing what will happen to interest rates, your monthly payments could become unaffordable.

The low introductory rate allows you to save money and plan for when the adjustable-rate period kicks in.

If you plan to live in the home for a long time, a fixed-rate mortgage may be a better option.

If you plan on selling in a few years, you can use the proceeds to pay back your mortgage before the fixed-rate period ends.

Without knowing what will happen to interest rates, your monthly payments could become unaffordable.

If the index decreases over time, you could end up with a lower interest rate and monthly payments.

Financial planning is more difficult with an ARM, since there’s no telling what your monthly payments will be one year to the next.

Home Monthly Payment Calculator

To get an idea of how your mortgage payment will fit into your budget, 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.

For more information on financing your next home purchase, connect with an experienced, local Windermere agent.

Featured Image Source: Getty Images – Image Credit: Pekic

This post originally published by Sandy Dodge

Although there are certain fundamental principles to contemporary design, it is constantly evolving. While other interior design styles are often rooted in a specific period, contemporary design is set in the present. What’s popular now is what’s popular in contemporary design. Its ability to remain timeless is what gives contemporary design its greatest quality—it never goes out of style. Learn a bit more about contemporary design to find ways to incorporate it into your home.

What is contemporary interior design?

Contemporary style is characterized by clean lines, state-of-the-art materials, and a preference for openness over ornamentation. These tenets go hand in hand with the philosophies of modernism and minimalism, but contemporary design simply dips its toes in these other design styles without relying on them too heavily.

The aesthetic of modern construction lends itself well to contemporary design. Industrial spaces and open rooms with high ceilings and large windows help to deliver a magazine-quality contemporary look. But even if your home isn’t tailor-made for contemporary design, you can still curate it.

Image Source: Getty Images – Image Credit: vicnt

Contemporary Design in Your Home

The simplest way to incorporate contemporary design philosophy into your home is to let the natural architectural elements show. Let your exposed wooden beams and brick walls shine, decluttering the spaces around them to make them the focal point. This can make your spaces feel empty at first but remember; contemporary design is all about opening things up to effectively apply decorative details.

Choose modern furniture with clean lines and solid-colored fabrics. In the kitchen and bathroom, chrome and metallic surfaces will reinforce a contemporary aesthetic. When decorating, start with a neutral foundation (white, grey, and black) and add bold accent colors on top. The timeless appeal of a hardwood floor makes it a fitting choice for achieving contemporary style, while textured textiles in natural fabrics will help to liven up your spaces.

Stone, metal, and glass mix well in contemporary design, often combined in the selection of living room sets, decorative centerpieces, and kitchen/bathroom design. Large pieces of art, accent walls, and bold decorations help to broaden the color palette of contemporary spaces. You are free to choose bold, impactful hues from across the color spectrum in your decoration.

Image Source: Getty Images – Image Credit: AleksandraZlatkovic

The Differences Between Contemporary and Modern Design

Whereas contemporary design is centered on what is popular during the present, modern design is rooted in a specific time period. Modern design dates back to at least the early twentieth century, which evolved into mid-century modern during the 1950s.

Modern design typically has earthier colors and a general preference for wood, whereas saturated colors and metals/glass are more at home in contemporary design. Choosing modern design means you’re choosing to make decorative variations on a theme, whereas the theme of contemporary design is always changing, so you never know where it might lead.

Visit our Design Styles page to learn more about common interior design styles and how you can incorporate them into your home:

Windermere – Interior Design Styles

This post originally published by Sandy Dodge

Hello there, I’m Windermere’s Chief Economist Matthew Gardner and welcome to this month’s episode of Monday with Matthew. Today we are going to take a look at the new home market where headwinds are certainly growing. And the reason this particular subject piqued my interest was that the National Association of Home Builders just released their Housing Market Index for August, and the numbers were certainly eye-opening.

Now, for those of you who may not be particularly familiar with this index, it is based on a survey of home builders which asks them to give their opinions on the single-family home market and asks them to rate current market conditions for the sale of homes today as well as in six months’ time. It also asks their opinion regarding foot traffic of prospective buyers to their new home communities.

NAHB Housing Market Index

And as you can see, the headline index level fell six points to 49. The drop in August marked the eighth consecutive monthly decline for the Housing Market Index. It was also notable because it was the first time since May of 2020 that the index has dropped below the key 50 breakeven level. This is significant, as it tells us that today more home builders currently rate sales conditions as poor than good.

Now, while the August number was certainly lower than some economists had forecast, I was actually not too surprised as builders have been reporting a spike in cancelled contracts recently. In fact, a report I just read that was put out by John Burns Consulting suggested that the cancellations have more than doubled since April with 17.6% of buyers pulling out of their purchases in July. That compares to 8% in April and 7 ½% a year ago.

Housing Market Index Components

This chart shows a breakdown of three components of the Housing Market Index which are all at their lowest levels since May of 2020, which was just before housing activity rebounded following the lockdown due to COVID-19.

The present sales index fell seven points to 57 but is still above the breakeven point
The future sales series fell two points to 47
Prospective buyer traffic fell five points to 32 which, if we exclude the pandemic, represents the lowest index level since April of 2014

I find this index has a very strong correlation with new home sales, but I also use it as a pretty reliable leading indicator when it comes to single-family housing starts. I’ll get to that shortly. The survey also stated that one in five builders had reduced prices in August. That might help to explain the 10-point spread between builders’ perception of current versus future sales. But there are limits on home builders’ ability to keep cutting prices in order to support sales. This has become a significant issue because many of them are currently holding a large stock of inventory.

New Homes for Sale

Here is what current inventory levels look like. Although you might think that it’s not that bad given that only 9% of available homes are finished are ready to move into, I would tell you that builders incur costs every day that a home is not sold, even if that home has yet to be built. And with inventory at a level not seen since 2008, I’m sure there are a lot of builders not sleeping too well right now.

I would add that by the time the above video is released, the July new home sales report will have been published. I can almost guarantee that the number of homes for sale will have grown further.

New Homes Sales

A bar graph titled "New Home Sales." When taken in context of the "New Homes for Sale" chart mentioned earlier in this month's episode, Matthew Gardner is showing a decline in the pace of sales activity. Sales fell by over 8% month over month in June 2022, and are 17.4% lower than a year ago. On an adjusted basis, monthly sales were the lowest seen since before the pandemic.

Higher inventory levels are due to slower sales activity, which is continuing to decline. Sales are 17% lower than a year ago. With more homes for sale and lower transactions, it would now take more than nine months to absorb all available homes using the current sales pace. I would also tell you that the last time months of supply broke above nine was all the way back in 2010.

It’s my forecast that sales in July will have dropped from the annualized rate of 590,000 shown in the chart above to somewhere between 570,000 and 580,000.

U.S. Single-Family Housing Starts

A chart titled "U.S. Single Family Housing Starts." It shows the number of new home starts from January 2019 to July 2022. The most recent figures show starts have fallen 18.5% year over year. As Matthew Gardner explains, "With fewer buyers and rising inventory levels, builders have pulled back significantly. The number of building permits issues is 11.7% lower than a year ago."

With high supply levels and lower sales, it’s not at all surprising to see builders hitting the brakes, with new home starts falling by 10.1% between June and July of this year. Starts are down by 18 ½% from a year ago. Starts have dropped on a sequential basis for five consecutive months now, and I am afraid that they will drop further before finding a bottom.

So, what’s the bottom line here? Well, there are several issues I see, the first of which is affordability. Home prices have been spiraling upward since the start of the pandemic not only because mortgage rates dropped, but construction costs started jumping and builders had to charge more for a home.

Builders saw prices rise by almost 18% last year. This had already taken a significant toll on affordability even before the mortgage rates spike we saw earlier this year. The upshot, as I see it, is that tighter monetary policy from the Fed, in concert with construction costs that remain well above normal levels, has hit builders and hit them hard. Of course, they are doing their best to address the situation by slowing construction activity significantly, but I think that they are going to have a pretty rough time for the next several months.

Ultimately, I see little option for home builders other than lowering prices further, especially now that they are competing with rising inventories in the resale market. I also believe that there are buyers out there waiting patiently on the sidelines for prices to drop in the coming months as they know that builders at some point have to solve the current supply demand imbalance and lowering prices is the easiest way of doing this. Last month the average price drop was 5%, but this is very likely to increase as we move toward the fall.

Will builders get through the situation they find themselves in? I believe that they will. And there are some glimmers of light out there with inflation appearing to be peaking, interest rates are, if not dropping, then certainly stabilizing, and this will help.

Builders also understand that the country has a significant housing shortage. In fact, a recent report published by “Up For Growth” suggested that we have a housing shortage today of around 3.8 million homes. Although this includes rental and ownership housing, some basic math tells me that there is a need today for around 2.5 million new owner-occupied homes. So, light is definitely at the end of the tunnel, but there is a way to go before they get out of it.

And there you have it. I hope that you’ve found my thoughts on this topic of interest. As always, if you have any questions or comments about the current new home environment, please do reach out to me. In the meantime, stay safe out there and I look forward to visiting with you all again next month.

Bye now.

About Matthew Gardner

This post originally published by Matthew Gardner

Once you and your agent work through the process of selling your home, there comes a point when it’s time to switch gears and get ready to move. It can be difficult to juggle the various steps of the moving process, especially if you’re Buying and Selling a Home at the Same Time. Using a moving checklist will help you stay organized and on schedule throughout your moving timeline.

Moving Checklist: A Step-by-Step Guide to the Moving Process

We’ve included a comprehensive checklist below of all the steps you’ll need to complete to ensure a smooth, successful move. This list is also available as an interactive web page and downloadable PDF here: Moving Checklist

Twelve Weeks Before:

Get estimates from professional movers or truck rental companies if needed.
Once you’ve selected a mover, discuss insurance, packing, loading and delivery, and the claims procedure.

Six to Eight Weeks Before:

Use up things that may be difficult to move, such as frozen food.
Sort through your possessions. Decide what you want to keep, what you want to sell, and what you wish to donate to charity.
Record serial numbers on electronic equipment, take photos (or video) of all your belongings and create an inventory list.
If you are moving yourself, use your inventory list to determine how many boxes you will need. Stock up on the items you’ll need from our “Moving Essentials” list.
Obtain a change of address packet from the post office and send it to creditors, magazine subscription offices, and catalog vendors.
Discuss tax-deductible moving expenses with your accountant and begin keeping accurate records.
If you’re moving to a new community, contact the Chamber of Commerce and school district and request information about services.
Make reservations with airlines, hotels, and car rental agencies, if needed.
Begin packing nonessential items.

Two to Four Weeks Before:

Arrange for storage, if needed.
If you have items you don’t want to pack and move, hold a yard sale.
Update the address listed on your car registration, license, and insurance.
Transfer your bank accounts and safe-deposit box items to new branch locations if needed. Cancel or redirect any direct deposit or automatic payments from your accounts.
Make special arrangements to move your pets and consult your veterinarian about ways to make travel comfortable for them.
Have your car checked and serviced if you’ll need to drive it a long distance.
Change your utilities, including phone, power, and water, from your old address to your new address.

Week of Moving Day:

Defrost your refrigerator and freezer.
Have movers pack your belongings.
Label each box with the contents and the room where you want it to be delivered.
If you’re using a moving company, arrange to pay for their services in full, or the remainder of what you owe, upon delivery.
Set aside legal documents and valuables that you do not want packed.
Pack clothing and toiletries, along with extra clothes in case the moving company is delayed.
Give your travel itinerary to a close friend or relative so they can reach you as needed.
Pack a first-day box with items that you’ll want accessible before other boxes are unpacked. See our list of suggested items on the right and add any others you’ll want to include.

Moving Day:

Old Home

Pick up the truck as early as possible if you are moving yourself.
Make a list of every item and box loaded on the truck.
Let the mover know how to reach you.
Double-check your closets, cupboards, attic, basement, yard, and garage for any left-behind items.

New Home

Be on hand at the new home to answer questions and give instructions to the mover.
Check off boxes and items as they come off the truck.
Install new locks.
Confirm that the utilities have been turned on and are ready for use.
Unpack your first-day box.
Unpack your children’s toys and find a safe place for them to play.
Examine your goods for damage.

Our Moving Checklist page has all the information above, plus helpful lists for Moving Essentials and which items to pack in your First-Day Box available as a downloadable PDF.

For additional information on the selling process from start to finish, tips on working with an agent, and more, visit our Home Selling Guide:

Featured Image Source: Getty Images – Image Credit: JohnnyGreig

This post originally published by Sandy Dodge

Becoming a homeowner comes with many responsibilities, but if the home you’re purchasing requires you to be part of a Homeowners Association (HOA), you’ll have to follow additional guidelines and pay additional fees. As you’re looking for homes, talk to your agent about whether purchasing a home that’s part of an HOA is right for you.

What is a Homeowners Association (HOA)?

A Homeowners Association is an organization that governs a community of homes. Homeowners within the governed community must follow certain guidelines for property upkeep and maintenance and will face restrictions on their ability to make additions and/or changes to the property. These rules exist to maintain a standard level of quality amongst the community to maximize property value.

Different HOAs may have different stipulations based on the type of housing they govern. For example, an HOA may oversee a community of detached single-family homes, but they are commonly found in communities of condo or townhome housing styles where there is a shared, communal living style. Each HOA has a Board of Directors in charge of enforcing rules, collecting fees, and managing the funds, and certain associations may hire a third-party management company to help the Board of Directors carry out their operations. The members of an HOA are the residents who live in that community. Here are some examples of typical HOA property restrictions:

Exterior paint color choices must be submitted for approval
Grass must be mowed regularly
Flower beds must be kept weed-free
Noise regulations and/or noise curfew
Pet restrictions (type of animal and/or number of pets per household)

Homeowners Association (HOA) Pros and Cons

Living in an HOA community means your property will maintain its curb appeal and you can live with the knowledge that systems are in place to protect property values. However, the benefits come with additional restrictions on your freedoms as a homeowner while increasing your monthly payments.

Image Source: Getty Images - Image Credit: mphilips007

How much are HOA fees?

If you buy in a development governed by a Homeowners Association, you will be required to pay HOA fees on top of your monthly mortgage payment. Typically paid monthly, HOA fees go toward the neighborhood’s shared spaces, property maintenance, and amenities. Homeowners Association fees vary greatly depending on the particulars of that community’s agreement. These fees often cover landscaping costs, parking, community security, garbage pickup, maintenance and repair, insurance, and other amenities, such as a shared pool or gym. If the home is your primary residence, your HOA fees are not tax-deductible.

HOA fees are an additional expense you’ll have to budget for when buying a home. To get an idea of what 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, accounting for any HOA fees you may incur.

Featured Image Source: Getty Images – Image Credit: RichVintage

This post originally published by Sandy Dodge

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 most recent employment data (from May) showed that all but 2,800 of the jobs lost during the pandemic have been recovered. More than eight of the counties contained in this report show employment levels higher than they were before COVID-19 hit. The regional unemployment rate fell to 4.5% from 5.2% in March, with total unemployment back to pre-pandemic levels. For the time being, the local economy appears to be in pretty good shape. Though some are suggesting we are about to enter a recession, I am not seeing it in the numbers given rising employment and solid income growth.

Western Washington Home Sales

❱ In the second quarter of 2022, 23,005 homes sold, representing a drop of 11% from the same period a year ago, but up by a significant 52% from the first quarter of this year.

❱ Sales rose in Grays Harbor County compared to a year ago but fell across the balance of the region. The spring market, however, was very robust, likely due to growing inventory levels and buyers trying to get ahead of rising mortgage rates.

❱ Second quarter growth in listing activity was palpable: 175% more homes were listed than during the first quarter and 61.98% more than a year ago.

❱ Pending sales outpaced listings by a factor of 3:1. This is down from the prior year but only because of the additional supply that came to market.

Western Washington Home Prices

❱ Even in the face of rising mortgage rates, home prices continue to rise at a well-above-average pace, with average prices up 13.3% year over year to $830,941.

❱ I have been watching list prices as they are a leading indicator of the health of the housing market. Thus far, despite rising mortgage rates and inventory levels, sellers remain confident. This is reflected in rising median list prices in all but three counties compared to the previous quarter. They were lower in San Juan, Island, and Jefferson counties.

❱ Prices rose by double digits in all but four counties. Snohomish, Grays Harbor, Mason, and Thurston counties saw significant growth.

❱ List prices and supply are both trending higher, but this has yet to slow price growth significantly. I believe we will see the pace of appreciation start to slow, but not yet.

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. San Juan County is the only county with a percentage change in the 5% to 7.9% range, Skagit, Lewis, and Cowlitz counties are in the 8% to 10.9% change range, Clallam, Jefferson, Kitsap, and Pierce are in the 11% to 13.9 % change range, King and Whatcom counties are in the 14% to 16.9% change range, and Grays Harbor, Mason, Thurston, and Snohomish counties are in the 17% + range.

Mortgage Rates

Although mortgage rates did drop in June, the quarterly trend was still moving higher. Inflation—the bane of bonds and, therefore, mortgage rates—has yet to slow, which is putting upward pressure on financing costs.

That said, there are some signs that inflation is starting to soften and if this starts to show in upcoming Consumer Price Index numbers then rates will likely find a ceiling. I am hopeful this will be the case at some point in the third quarter, which is reflected in my forecast.

A bar graph showing the mortgage rates from 2020 to the present, as well as Matthew Gardner's forecasted mortgage rates through Q2 2023. He forecasts mortgage rates continuing to climb to 5.9% in Q4 2022, then tapering off to 5.58% in Q1 2023 and 5.53% in Q2 2023.

Western Washington Days on Market

❱ It took an average of 16 days for a home to go pending in the second quarter of the year. This was 2 fewer days than in the same quarter of 2021, and 9 fewer days than in the first quarter.

❱ Snohomish, King, and Pierce counties were, again, the tightest markets in Western Washington, with homes taking an average of between 8 and 10 days to sell. Compared to a year ago, average market time dropped the most in San Juan County, where it took 26 fewer days for a seller to find a buyer.

❱ All but six counties saw average time on market drop from the same period a year ago. The markets where it took longer to sell a home saw the length of time increase only marginally.

❱ Compared to the first quarter of this year, average market time fell across the board. Demand remains very strong.

A bar graph showing the average days on market for homes in various counties in Western Washington for Q2 2022. Snohomish and King counties have the lowest DOM at 8, followed by Thurston and Kitsap at 9, Pierce at 10, Island and Skagit at 12, Whatcom at 14, Mason at 16, Cowlitz at 17, Lewis at 20, Jefferson at 21, Clallam at 24, Grays Harbor at 25, and San Juan at 35.

Conclusions

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

The economy remains buoyant, which is an important factor when it comes to the regional housing market, particularly as it affects buyers. Even though the number of homes that came to market has jumped significantly, which should favor those looking for a new home, demand is still robust, and the market remains competitive.

A speedometer graph indicating a strong seller's market in Western Washington for Q2 2022.

Much to the disappointment of buyers, rising listing prices suggest that sellers are clearly still confident even as financing costs continue to increase. While the pace of price growth is slowing, sellers are still generally in control. As such, I have moved the needle a little more in the direction of sellers. Until we see list-price growth and home sales slow significantly, we will not reach a balanced market.

About Matthew Gardner

Matthew Gardner - Chief Economist for Windermere Real Estate

This post originally published by Matthew Gardner

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