[Note from the editor: Originally published on Thomvest’s Blog]
Today we’re pleased to release an updated version of the real estate technology market map we originally published in 2018. A high-resolution version of the map can be accessed here, and the full list of companies is available here.
This market map includes 180 real estate technology companies operating across every phase of the home purchase value chain. These companies have collectively raised more than $20B in venture capital, and range from seed stage businesses to public companies. If you’d like to suggest a company to be added to this market map, please submit them using this form.
You’ll notice that several companies are included in more than one section — this is due to the fact that many of these businesses have expanded their product areas to capture multiple phases of the transaction process. For instance, while Blend’s original product focused specifically on the mortgage point-of-sale, the company has since expanded to offer home insurance and digital closings. As such, we’ve included the Blend logo in those areas.
At Thomvest, we’ve been actively studying how technology is being utilized in real estate. We view technology as both a means of lowering transaction costs and an enabler of new transactions by better matching demand and supply. Software is also being adopted across some of the more labor-intensive areas of real estate — for instance, in property management and home improvement — as a means of improving efficiency and productivity.
Personally, I’ve been impressed by the quality of entrepreneurs building technology companies in residential real estate. Founders here are passionate about creating better experiences for consumers. Many have experienced their own frustrations when buying or selling a property, and aspire to rebuild the experience from the ground up. Others are seasoned operators within real estate and see technology as a competitive advantage in an otherwise analog asset class.
Impacts of COVID-19 on technology adoption
Every constituency within the real estate sector — including agents, lenders, title companies, and attorneys — are scrambling to adjust to life under lockdown. In my last post on the housing market, I touched on the dramatic impact COVID-19 has had on transaction volume and home showings. In many ways, the pandemic has accelerated existing trends around digitization of the home buying process. There are a few areas in particular where technology is being utilized:
1. Deepened reliance on “home shopping” apps Shelter-in-place is created new behaviors around the home shopping experience. Rather than spending a half day touring open homes, prospective buyers are relying on apps like Zillow and Realtor.com to “tour” properties in lieu of an in-person visit. Zillow created 525% more 3D home tours in April compared to February, and CEO Rich Barton recently remarked that “the virtual tools home shoppers need for safety today will become their expectations for convenience tomorrow.”
2. Rapid adoption of digital tools for real estate transactions Many of the processes associated with closing a real estate transaction are traditionally completed in-person. These include appraisals, inspections, notarizations and local government filings. Fortunately, startups are here to help. Companies like Blend, Modus, Side and Snapdocs offer products that enable digital closings. 46 states now let notaries do their jobs using a combination of video and online document sharing, up from 23 prior to the pandemic. Additionally, large mortgage buyers like Fannie Mae and Freddie Mac are increasingly relying on automated home valuations in lieu of in-person appraisals. We believe these new methods are here to stay, which will be a strong tailwind for startups building digital home buying experiences.
3. More tools for homeowners to manage their largest asset Startups in the real estate vertical must take advantage of their agility relative to incumbent banks, and design products and services that reflect today’s changing consumer needs. This can take the form of better credit products (for example, smart loans powered by LoanSnap or HELOCs offered by Figure), or novel home equity products like Unison. We’re also seeing a number of interesting businesses that help homeowners maintain and improve their property, including Pro.com and Made Renovation. These startups help automate much of home renovation process, including design, planning & construction.
Homeowners with a mortgage rate above 5% are nearly twice as likely to say that they plan to sell their home than those paying a rate below 5%, according to Zillow’s quarterly survey report.
Additionally, the survey found that about 80% of mortgage holders reported having a rate of less than 5%, while 90% reported having a rate of less than 6%. Almost one-third reported having a rate of less than 3%.
Mortgage rates, by first being historically low during the pandemic and then jumping into the 7% range, have incentivized homeowners to stick around instead of moving. As a result, total existing home sales slipped 3.3% in June from the prior month to a seasonally adjusted annual rate of 4.16 million.
“We expect mortgage rates may notch down slightly as inflation comes under control, but they are unlikely to return to 5% in the near future,” said Orphe Divounguy, a senior economist at Zillow Home Loans. “That means many homeowners will move only for major life events, like a new baby or retirement. Over time, homeowners will likely accept higher rates as the new normal, but until then, the market could remain challenging for home shoppers, who will see fewer options and higher prices.”
Nearly one-quarter of homeowners are considering selling their home in the next three years or currently have their home listed for sale (23%), per Zillow. It is significantly higher than the 15% of homeowners who said the same one year ago. In fact, the share is even greater among mortgage holders who have a mortgage rate above 5%. Nearly 40% of those homeowners say they would consider selling their home in the next three years.
Of the homeowners considering selling in the next three years, two-thirds (66%) cited a desire for an upgraded home with nicer features as the reason. Half said it was because they expect to get more money now than in the future, and 45% said a growing family would influence their decision to sell and find a new house.
All of this suggests inventory could meaningfully rise as mortgage rates tick down into the 5% range.
In the meantime, the shortage of for-sale homes is pushing up prices, adding to an already severe affordability crisis. A typical monthly mortgage payment is more than twice as much as it was in 2020 and 13% higher than a year ago.
However, demand remains strong. Buyers are persisting and getting creative to achieve homeownership. According to a recent survey from Zillow Home Loans, nearly half of them are buying points to lower their interest rate and reduce their monthly mortgage payment (45%). Mortgage points give buyers an option to pay an upfront fee to buy down the interest rate on a loan. Buyers are also forced to compromise on their initial wish, settling for smaller, more affordable homes.
After dropping slightly month over month in May, pending home sales ticked back up in June, rising 0.3%, according to data released Thursday by the National Association of Realtors (NAR). It contrasts with new home sales, which moderated in the same period (-2.5%).
Year over year, pending home sales were down 15.6%, a smaller decrease than the 22.2% annual drop recorded in May. Taking a step back, pending home sales remain at a relatively low level, and despite this month’s setback, new home sales have climbed convincingly (+22.5%) above last summer’s lows.
The NAR’s Pending Home Sales Index climbed to a reading of 76.8 in June. An index of 100 is equal to the level of contract activity in 2001.
“The recovery has not taken place, but the housing recession is over,” said NAR Chief Economist Lawrence Yun. “The presence of multiple offers implies that housing demand is not being satisfied due to lack of supply. Homebuilders are ramping up production and hiring workers.”
The trade association forecasts the 30-year fixed mortgage rate to close at 6.4% this year and then decline to 6.0% in 2024. Meanwhile, the unemployment rate will rise slightly to 3.7% in 2023 before increasing to 4.1% in 2024, according to NAR’s forecast.
“With consumer price inflation calming close to the Federal Reserve’s desired conditions, mortgage rates look to have topped out,” Yun added. “Given the ongoing job additions, any meaningful decline in mortgage rates could lead to a rush of buyers later in the year and into the next.”
NAR expects existing-home sales to decrease 12.9% in 2023, settling at 4.38 million, before ticking up 15.5%, to 5.06 million in 2024. In the meantime, national median existing-home prices will remain steady, according to NAR’s forecasts. Compared to last year, existing home-prices are poised to recede 0.4%, to $384,900, before rebounding by 2.6% next year, to $395,000.
“It is critical to expand supply as much as possible to widen access to homebuying for more Americans,” Yun said. “Home prices will be influenced by how much inventory is brought to market. Increased homebuilding will tame price growth, while limited construction will lead to home price appreciation outpacing income growth.”
On the flip side, newly constructed home sales are forecast to increase 12.3% in 2023, to 720,000. The trade group expects they will increase by another 13.9% in 2024, to 820,000. Hence, the national median new home price will decrease by 1.9% this year, to $449,100, and then improve by 4.2% next year, to $468,000.
Regionally, on a month-over-month basis, the Midwest (77.6) and the Northeast (67.1) pending home sales climbed while the South (93.3) and West (57.7) fell. All four U.S. regions saw year-over-year declines in transactions, with the Midwest (77.6) posting the largest annual drop at 17.1%.
According to NAR, prices in the West – the country’s most expensive region – are expected to falter while the more affordable Midwest region will likely see a small, positive increase. (Several of the country’s top emerging housing markets are in Indiana.)
Meanwhile, housing starts are forecast drop 5.3% from 2022 to 2023, to 1.47 million, before increasing to 1.55 million, or 5.4%, in 2024.
“Today’s data signal that although mortgage rates remained high in June, their relative steadiness in the month might have been a difference-maker for home shoppers trying to juggle high costs and stretched budgets. Nevertheless, inventory shortages and living alternatives are likely to keep a lid on existing home sales this year. We’re expecting the smallest annual sales tally in over a decade,” said Realtor.com Chief Economist Danielle Hale.
The Federal Reserve (Fed) raised the federal funds rate 25 basis points to the 5.25 to 5.5% range on Wednesday, its highest level in 22 years.
While the markets have already “priced in” this rate hike, which was widely expected, most investors are already wondering what it would take for the central bank to lift rates again later this year. For the housing market, that likely means a few more months with mortgage rates above 6%.
The Federal Open Markets Committee (FOMC) elected to resume its rate hikes in July in spite of recent positive inflation and labor market readings. Prices increased more slowly in June and hiring reverted back to a more gradual pace.
However, both inflation and unemployment are still running hotter than expected in an economy at full employment with stable price growth, prompting the Fed to tighten further.
“The Committee will continue to assess additional information and its implications for monetary policy,” the FOMC said in a statement. “In determining the extent of additional policy firming that may be appropriate to return inflation to 2% over time, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments.”
The FOMC also said it would continue to reduce its holdings of Treasury securities and agency debt and agency mortgage-backed securities.
During a press conference with reporters on Wednesday, Fed Chair Jerome Powell said another rate hike in September is “certainly possible,” but so is a pause. He noted that the financial policymakers have two inflation reports, two job reports and other economic data before a decision has to be made.They want to remain data dependent.
“As I have stated for a long time, the Fed wants to attack the labor market and thinks job openings are too high and jobless claims too low,” said HousingWire’s Lead Analyst Logan Mohtashami. “Certain Fed members don’t believe we have made progress on inflation. I wonder what’s in their coffee each morning. And some Fed members are saying progress is being made. Also, the Fed doesn’t know why people won’t list their homes. I am assuming that the Fed believed when mortgage rates stabilized that inventory channels would look normal, but they forgot that educated working people don’t sell their homes to the homeless. The majority sell to buy another one, so this concept I am hoping is finally hitting home with them.”
Inflation fell to 3% in June, down significantly from where it was a year ago but still higher than the 2% threshold. Core inflation—which excludes food and energy costs—rose 4.8% in June. Raising interest rates is designed to tackle those still-high prices outside of the volatile food and energy sectors.
The problem is that housing costs, which account for a large share of the inflation picture, are not coming down meaningfully in the CPI. In June, the index for shelter accounted for 70% of the increase in the CPI. Rents were up 8.3% in June, while owner costs rose 7.8%.
Unfortunately, the Fed does not have the right tools to tackle high housing costs in the U.S., Bright MLS Chief Economist Lisa Sturtevant noted two weeks ago. Initially, higher rates did cool housing demand. But because rates had been pushed so low by the Fed during the pandemic and then increased so quickly, the Federal Reserve’s rate increases not only reduced housing demand—as intended—but also severely limited supply by locking homeowners into homes they would have otherwise listed for sale. Few Americans can or want to move when there’s such limited inventory, home prices remain near record highs, and mortgage rates are touching 7%.
The recent slowdown in inflation makes it hard for central bank officials to firm up plans for any additional rate increase. Officials didn’t release quarterly interest-rate and economic projections after their two-day meeting this week.
What’s next?
Most Fed officials in June had penciled in two more rate rises this year – in July and once more in the fall. As a result, investors were listening carefully to Powell’s press conference on Wednesday to decipher whether a rate increase will be likely at the September 19-20 meeting.
But Powell wasn’t showing his cards much. While he noted that a soft June inflation report was “welcome,” it was only one month of data and the Fed needs to see more from the “whole collection of data” before making a determination in September. He wouldn’t entertain a timeline for cutting rates, either, but said it was very unlikely to happen this year.
“We’ll be comfortable cutting rates when we’re comfortable cutting rates,” he told reporters.
Powell also sidestepped questions from reporters about what would prompt them to raise rates again in September or hold them steady.
“We’ve seen so far the beginnings of desinflation without any real cost in the labor market, that’s a really good thing. Historical records suggest that it’s very likely to see some softening in the labor market conditions, which is consistent with a soft landing,” said Powell. However, he refused to use the term “optimism.” Instead he said “there’s a pathway” to talk about the future of the American economy.
“We’re going to be going meeting by meeting, and as we go into each meeting, we’ll be asking ourselves the same question. We haven’t made any decision about any future meeting, including the pace at which we’d consider hiking. We’re going to be assessing the need for further tightening that may be appropriate,” said Powell.
After one reporter asked about a timeline for the housing market to balance itself out, Powell responded by saying that we are still living in the aftermath of the pandemic, which has left us with an asymmetrical market.
“I think we have ways to go to get back to balance. With existing homes, many people who have low rate mortgages don’t want to sell their home because they have so much value in their mortgage. It means that supply of existing homes is really really tight, which is keeping prices up. On the other hand, there is a lot of supply coming on right now. A lot of the buyers are first time buyers who have accepted the relatively elevated mortgage rates. Overall, it will take some time before it balances out.”
Powell warned last month that he wouldn’t shy away from raising rates at consecutive policy meetings. He also said moving rates up at a slower, quarterly pace could be expected to continue if the economy evolves in line with current expectations.
The CME FedWatch Tool showed a 98.9% chance the Fed would raise rates to the 5.25 to 5.5% range on Wednesday morning, according to interest rate traders. However, 79.2% of these investors bet officials will freeze the rate hike at the September 20 meeting.
Ahead of the Fed meeting, mortgage applications fell last week, recording the lowest index of purchase applications in over a month.
On Tuesday afternoon, mortgage rates for 30-year fixed-rate mortgages were at 6.87%, according to HousingWire‘s Mortgage Rates Center. However, at Mortgage News Daily, mortgage rates were higher, at 7.04%.
The mortgage market, which will likely see another uptick in interest rates, may continue to be slow, predicts Michele Raneri, vice president and head of U.S. research and consulting at TransUnion.
“Many consumers could still hold off on making a home purchase in hopes that interest rates stabilize and eventually come down,” said Raneri.
One concern that lives among economists is that the Federal Reserve won’t be able to bring down home prices and rents by raising rates further, at least not without doing significant damage to the economy. More supply seems to be the only solution, several housing economists said.
“The Fed is now stuck in a place where they are committed to 2% inflation and where the only tool they have will not be able to move the needle because it cannot address the housing supply-demand imbalance without seriously hurting consumers,” said Bright MLS’s Sturtevant.
“But they can’t back down because they have consistently and loudly said they will not stop until they reach 2% and backing down would make it harder for investors, businesses, and consumers to believe it when they lay down the law next time.”
Some economists talk about a “pause mindset,” which should help shrink the spread between the 10-year treasury and 30-Year fixed-rate mortgage, providing relief after a spring of skyrocketing rates.
“However, we will still see tension in the short term,” said Dan Burnett, Head of Investor Strategy at Hometap Equity Partners.
Meanwhile, borrowing costs will likely remain elevated through the remainder of 2023.
“Buyers can expect to continue seeing mortgage rates above 6%, although, with 11 months of rates in that range, many home shoppers have adjusted their budgets to the new reality. The silver lining for many buyers wondering about the trajectory of housing markets is that seasonality is returning, pointing to expectations of better values during the fall and winter months,” said George Ratiu, chief economist at Keeping Current Matters.
Editor’s note: This story was updated at 3:56 p.m. EST to include comments from Powell.
US mortgage rates jumped up this week as recent economic data showed inflation remains sticky and the job market is still red hot.
The 30-year fixed-rate mortgage averaged 6.81% in the week ending July 6, up from 6.71% the week before, according to data from Freddie Mac released Thursday. A year ago, the 30-year fixed-rate was 5.30%.
“Mortgage rates continued their upward trajectory again this week, rising to the highest rate this year so far,” said Sam Khater, Freddie Mac’s chief economist. “This upward trend is being driven by a resilient economy, persistent inflation and a more hawkish tone from the Federal Reserve. These high rates combined with low inventory continue to price many potential homebuyers out of the market.”
The average mortgage rate is based on mortgage applications that Freddie Mac receives from thousands of lenders across the country. The survey includes only borrowers who put 20% down and have excellent credit.
Rates ticked up last week, mirroring the trend of the yield on 10-year Treasuries, which are reacting to economic data that suggests stubborn inflation may be stuck at an elevated level.
The latest Personal Consumption Expenditures price index, a crucial indicator monitored by the Federal Reserve for monetary policy decisions, suggests that inflation isn’t retreating as quickly as hoped, said Jiayi Xu, economist at Realtor.com.
“Although the headline PCE decreased from 4.3% in April to 3.8% in May, the core PCE, which excludes volatile food and energy prices, only retreated slightly on a year-over-year basis, down from 4.7% in April to 4.6% in May,” she said. “Meanwhile, the newly released Fed minutes reaffirms officials’ determination to bring inflation back to the target 2% range.”
While this may put near-term upward pressure on interest rates, she said, including mortgage rates, she anticipates a gradual decrease that could bring rates close to 6% by the year’s end.
Housing market headwinds
With the average rate for a 30-year fixed-rate mortgage above 6.6% every week in June, the summer market has been challenging, both for home sellers and buyers.
“For sellers, these high mortgage rates have been compelling existing homeowners to delay their selling and moving plans, despite the fact that home prices are still high and consumers generally agree that it’s a good time to sell,” said Xu.
Nearly 82% of home shoppers reported feeling “locked in” by their existing low-rate mortgage, according to Realtor.com, while around 1 in 7 homeowners without a selling plan cited their current low rate as their reason for remaining on the sidelines.
“As a result, the number of homes for sale remained lower than last year’s levels, with year-to-date new listings lagging 20% behind last year’s pace,” said Xu.
“In addition to the limited inventory for buyers, the rising interest rates also pose a significant concern for those intending to purchase a home within the next year,” she said, citing Realtor.com data. “About 78% of home shoppers planning to buy in the near future anticipate being priced out of the market if home prices and mortgage rates both continue to rise.”
Mortgage applications fell to their lowest level in a month last week as rates for most loan types increased, according to the Mortgage Bankers Association.
“Purchase applications decreased for the first time in a month, as homebuyers remained sensitive to rate changes,” said Joel Kan, MBA’s vice president and deputy chief economist. “Rates are still over a percentage point higher than a year ago, and housing affordability is still a challenge in many parts of the country.”
He added, however, that the average loan size for a purchase application declined to $423,500 — its lowest level since January 2023.
“This was likely driven by reduced purchase activity in some high-price markets and more activity in some of the lower price tiers as buyers searched for more affordable options.”
In these languid—and, for much of the country, excruciatingly, unbelievably hot—days of summer, the timeless allure of a large, cool body of water beckons. And while heading to the lake is, for some, an occasional destination, for others it’s a way of life.
Sure, some of America’s more famous lake towns are pricey. But there are others that are surprisingly affordable, offering lakeside living for bargain-basement prices. The data team at Realtor.com® dug into the data to find some of the cheapest lake town real estate in the nation.
It helps that there are a lot of lakes in America. According to the U.S. Geological Survey, there are just shy of 7 million bodies of water in the U.S. and in adjacent areas along the borders. Of those, 5.76 million are classified as a lake or pond, and 134,000 have official names.
Each of the lake towns we found has a unique charm, blending natural beauty and local culture. All of them are nestled in the most affordable regions of the country, especially the Upper Midwest to the Deep South—areas known for their low cost of living. As it turns out, they’re also ideal places for lake house shoppers not looking to stretch their budget.
As famously avid lake admirer Henry David Thoreau once wrote, “A lake is a landscape’s most beautiful and expressive feature. It is Earth’s eye; looking into which the beholder measures the depth of his own nature.”
To find the most affordable lake towns, we looked at all the home listings for the past year within a half-mile (roughly a 10-minute walk) of a named lake or pond. (Named bodies of water exclude reservoirs and lakes that folks can’t swim or boat on.) Then we calculated the median prices from July 2022 through June 2023 for homes in those areas to pinpoint the most affordable lake towns in 2023. Only towns with at least 50 home listings over that period were included.
We excluded big cities, because we’re looking for places where the lake plays a large part in the local culture. And we didn’t include extremely small towns, because you’ve got to have at least a few shops and restaurants to keep you busy when you’re not on the water. And we included only the single most affordable lake town in any state, to ensure geographic diversity.
So let’s set sail to the most affordable lakeside real estate in 2023.
Median list price: $154,900 Median list price per square foot: $76 Population: 29,534
Danville, a relatively small town in east central Illinois along the Indiana border, is home to Lake Vermilion. The human-made reservoir provides drinking water for the city, but it has also become a popular fishing and boating location. Cabins and docks line its forested edge.
The town was an industrial hot spot for the region from the mid-19th century to the mid-20th century, as a major coal mining town and a rail hub. Abraham Lincoln was known to visit the town and once delivered a speech from the balcony of the home of a prominent Danville resident.
The median home listing within a half-mile of Lake Vermilion over the past year had a price tag 65% below the national median list price of $445,000 in June. A three-bedroom home within walking distance of Lake Vermilion, with hardwood floors, a garage, and a big yard, goes for $120,000. And for just over $100,000, home shoppers can find a two-bedroom condo about as close to the lake.
Median list price: $140,000 Median list price per square foot: $79 Population: 2,838
Rogers City is the smallest of any of the spots on our list of affordable lake towns, just shy of 3,000 residents.
Situated on the banks of Lake Huron, about 45 minutes from Cheboygan, Rogers City residents have quick access to multiple parks along the lakeshore. They include Harbor View Park on the southern corner, Seagull Point Park on the northern tip of the town, and several in between, including the Rogers City Yacht Harbor and Lakeside Park.
Rogers City has been host to multiple salmon fishing tournaments in the summer, including the vividly named Fat Hogs Fishing Frenzy and the more straightforward Rogers City Salmon Tournament.
It’s also home to the Great Lakes Lore Maritime Museum and the Presque Isle County Historical.
A large three-bedroom home with a garage and a brick fire pit in the backyard can be found for $165,000, a short walk from Rogers City’s North Shore Park and beach.
Median list price: $122,750 Median list price per square foot: $83 Population: 12,651
The western tip of northern New York state, in the Chautauqua-Allegheny region, is known for its lakeside getaway culture. And although some of the area’s real estate is quite pricey, the lowest home prices within a half-mile of a lake can be found in Dunkirk at the edge of Lake Erie.
The area was first occupied by the Indigenous Erie and Seneca tribes, then colonized by the French, who erected the Dunkirk Lighthouse at Point Gratiot in 1826. This helped the town become a significant regional port for coal and lumber shipping. It’s now listed on the National Register of Historic Places.
Dunkirk has multiple beach parks, and it hosts several summertime events, including an annual strawberry festival, arts and music festivals, and a “Fly-In Breakfast,” which welcomes pilots from all over to the small lakeside town.
Duke McLachlan, a real estate agent with Howard Hanna Hold Real Estate in neighboring Jamestown, says that from June through August, life in this area is all about the lake, for residents and visitors alike.
“It’s the whole Chautauqua area,” McLachlan says. “The local economy really picks up.”
Buyers will find the most listings just before and after prime lake season. Sellers know they can find buyers looking forward to the summer in April and May. Meanwhile, other sellers will list in September and October after they used their homes for the summer.
Median list price: $129,900 Median list price per square foot: $86 Population: 10,465
Minnesota is called the “Land of 10,000 Lakes” for a reason: The state has 11,842 of them.
So don’t drop your oar in the water when you hear that Fairmont, a small town in southern Minnesota near the Iowa border, sits on a string of five small lakes. These include George Lake, in the northern part of Fairmont, and Budd Lake, near the center of town.
All five offer boating and fishing—and there is very affordable real estate near two of these bodies of water.
The median home that was listed over the past year near both Lake George and Budd Lake is less than half the national list price. The real estate near Budd Lake is a little pricier, due to its proximity to the center of Fairmont, and a couple of developed parks along its edge.
For those who want to live and work near the water year-round in the “City of Lakes,” Fairmont’s local economy is driven by the local Mayo Health System hospital, two small colleges, and a couple of modern industrial companies.
Median list price: $126,900 Median list price per square foot: $91 Population: 4,977
Cherokee Village, a small town in central northern Arkansas about 20 miles south of the Missouri border, boasts seven lakes in total.
Lake Cherokee, the smaller of the two lakes where we found low-priced homes, has a park and private docks. Meanwhile, Lake Thunderbird, the town’s largest lake, has a public marina and the town’s public recreation center, which has two swimming pools and a minigolf course.
For just under $290,000, a homebuyer can get a 1,200 square-foot, two-bedroom house with a backyard dock on Lake Thunderbird. For those looking for homes costing less, just across the street from Lake Cherokee, a two-bedroom townhome can be found for as little as $120,000.
Median list price: $169,900 Median list price per square foot: $95 Population: 9,305
Pickwick Lake, a popular boating and fishing destination, was created by the Pickwick Landing Dam on the Tennessee River near where Alabama, Tennessee, and Mississippi meet.
The lake is known for record-size smallmouth bass and catfish. Local fishing guides say 2- or 3-pound smallmouth bass are the norm—and catches of 5 to 6 pounds are not uncommon.
History lovers will also appreciate the small town of Sheffield. It became a major wartime aluminum smelting location in the 1940s, boosting the nation’s aircraft production. It’s also the hometown of Senate Majority Leader Mitch McConnell.
And it’s where you’ll find the famous Muscle Shoals Sound Studio, where a litany of modern musical icons came to record, including The Rolling Stones, Aretha Franklin, Cher, and Wham! The studio faded and was repurposed for several years, before a documentary reignited interest and a restoration brought it back to life. It’s now a museum during the day and a working studio at night.
Median list price: $135,000 Median list price per square foot: $96 Population: 65,440
Lorain is a small city on Lake Erie, in the far western corner of the Cleveland metro area. Like the other Great Lakes locations on our list, Lorain was once an industrial production mecca, dominated by steel.
Now, says Bill Swanzer, a real estate broker at The Swanzer Agency Realtors in neighboring Amherst, Lorain mixes a classic lake culture with good access to the city.
“You’re only 20 or 30 minutes from the Cleveland Browns‘ stadium,” Swanzer says. “So you can get to all the big-city things—live sports, live music, shows.”
But for Lorain residents, Lake Erie’s offerings are right in the backyard.
“The lake’s always been a big draw for us,” Swanzer says. “You’ve got kayaking, boating, fishing, swimming—you’ll see Jet-Skis on the water and parasailing.”
Median list price: $139,900 Median list price per square foot: $97 Population: 11,276
Two Rivers is uniquely situated on Lake Michigan, such that it remains cooler than nearby areas on hot summer days—earning the town its nickname “Cool City.” It became a summertime destination for folks looking for a reprieve from the heat.
The moniker is memorialized just about everywhere, from the annual Cool City Car Show & Cruise, the Cool City Brewing Co., and Cool City Coffee Shop to the Cool City Charters and Cool City Cleaners.
Summer activities include swimming and sunbathing at Neshotah Park & Beach, and hiking and camping in Point Beach State Forest, just north of town. There’s also boating and fishing on Lake Michigan and the town’s—you guessed it—two rivers. It’s also only about 30 miles southeast of Green Bay, offering relatively quick access to a big city nearby.
But what’s especially cool about Two Rivers for us is the low price of homes near Lake Michigan. Take this recently listed two-bedroom home with an updated bathroom and floors about a block from Lake Michigan, priced at just $134,000.
Median list price: $185,000 Median list price per square foot: $106 Population: 9,299
About 30 miles east of Wichita is Augusta and its 190-acre human-made lake on the north end. Augusta Lake, lined with parks, grassy embankments, and walking trails, is a community center of sorts. There are Little League tournaments, concerts, disc golf, and the town’s Fourth of July celebration, in addition to the standard lake activities like fishing, boating, and kayaking.
The town is known for its historic buildings, many of which have been added to the National or State Register of Historic Places.
Of course, we’re interested in the home prices, which are inexpensive, even for a relatively affordable state like Kansas. A three-bedroom, ranch-style home six doors away from Augusta Lake can be found for just $150,000.
Median list price: $285,000 Median list price per square foot: $125 Population: 7,565
Homes within a half-mile of Prestwood Lake are the most expensive of any place on our list of affordable lake towns—but they’re still about 35% less expensive than the national median list price.
Lauri McLeland, a Realtor with Better Homes and Gardens Real Estate Segars Realty in Hartsville, says it’s not uncommon to see small speed boats and jon boats on Prestwood Lake, and even some kayakers on Black Creek, which leads into the lake.
But although there’s a decent amount of housing within that half-mile of the lake, it can be a tight market for buyers looking for something right on the water.
The small South Carolina town, about an hour northeast of the state capital of Columbia, is a tight-knit community, says McLeland. Word of someone selling their home can lead quickly to an offer from another local looking to get closer to the water.
“Prestwood is a really pretty lake,” McLeland says. “There’s not a lot of housing right on the lake, and some of those sell before they even hit the market.”
There’s so little housing stock that even as mortgage rates climb, homes are selling above their asking price, a report by Redfin says.
New home listings are down 25% since last year, sinking beneath 2020 lows, according to the report. Total home listings are down 12%.
This supply slump made monthly homeowner payments skyrocket, but Redfin says, “despite the double dilemma of low inventory and high prices, early-stage homebuyer demand is picking up.”
The amount of home shoppers actually increased compared to last summer: the brokerage company’s seasonally adjusted homebuyer demand index, which measures home tours and other homebuying service requests, increased by 11% this year.
Mortgage applications were also on the rise in June but just dropped again.
The demand index remained below 2020 and 2021 levels, however, as both prices and rates have increased significantly over the past three years.
The average 30-year fixed mortgage rate hit an all time low of 2.65% in January 2021. Then it sprung back up, peaking at 7.08% last November. It’s remained high ever since — this week, the average rate was 6.81% according to Freddie Mac.
Home price trends follow a similar pattern: Redfin’s seasonally adjusted data shows a dip in the national median sale price during 2020, when it hit $292,000. Then, it steadily rose until last spring, reaching $415,000. The median price then dipped down slightly. Now, Redfin says, it’s $402,000.
The median asking price is up right now, too, but not by much. It hit $395,725 this month, an increase of only 1.1% from last year.
“Almost every home is getting multiple offers and selling over asking price,” Redfin agent Jeremy Lucas said in the report. “The lack of supply is making it feel almost like 2021 all over again, but higher rates mean bidding wars are happening more in the $500,000 range than the $700,000 range because people can afford less.”
Homebuyer payments, which Redfin calculates using the 4-week rolling average of the median asking price, are shockingly high. Using last week’s average interest rate of 6.71%, Redfin estimates that homebuyers will have to pay $2,622 each month, an increase of 13.6% from the same time last year.
There were only 770,210 homes for sale this month, and listings aren’t rising like they usually do in the summer. Instead, they’ve remained flat all year.
The average home has an average sale-to-list price ratio of 100.1%, meaning homes are selling for slightly more than their asking price. It’s the first time the ratio breached 100% this year.
The “lack of homes for sale is the main reason” for this, the report says, because homebuyers are battling it out in an unusually sparse market.
Zillow announced today that it will now offer rental listings to go along side the millions of homes for sale in its massive database.
Homeowners can now list their properties for rent or for sale, while prospective home buyers can search both rental homes and homes for sale.
Additionally, the company will offer the industry’s first “search by monthly payment” option, allowing home shoppers to specify a certain amount they wish to pay in rent or mortgage.
“In today’s volatile housing market, many would-be sellers are opting to rent for a few years and ride out the market, while many home shoppers are just trying to decide whether to buy or rent,” said Spencer Rascoff, Zillow Chief Operating Officer, in a press release.
“With the launch of rental listings and search, we are arming our more than 8 million monthly users with information, tools and options to make the right housing decisions for them today.”
Zillow compares the monthly cost of owning versus renting side-by-side so prospective buyers can determine more easily what’s best for their unique situation.
The monthly mortgage payment is calculated using that day’s local mortgage rate for a 30-year fixed rate mortgage, assuming a 20 percent down payment.
The company cited a recent survey, which found that 25 percent of respondents who plan to move in the next three years intend to search for both homes for rent and homes for sale.
A sign advertising home mortgage services at a Bank of America branch in Manhattan Beach, Calif.
Patrick T. Fallon | Bloomberg | Getty Images
The average rate on the popular 30-year fixed mortgage hit 7.22% on Thursday, according to Mortgage News Daily. That’s the highest point since early November.
Mortgage rates follow loosely the yield on the 10-year Treasury, which leapt higher following a much stronger-than-expected employment report from ADP.
Rates had already begun rising last week, following signals from Federal Reserve Chairman Jerome Powell that the central bank may continue raising interest rates following a pause in June.
In remarks to Congress just after the June Fed meeting, Powell said the central bank has “a long way to go” to bring inflation back to the 2% goal. The next interest rate decision is on July 26.
The 30-year fixed mortgage rate has now risen 31 basis points in just the past week. For a homebuyer taking out a $400,000 mortgage, the monthly payment of principal and interest rose to $2,720 from $2,637 in just one week.
For sellers, higher mortgage rates have created a so-called golden handcuff effect. The vast majority of homeowners today have mortgages with interest rates below 4% or even below 3%, as rates hit record lows in the first year of the Covid pandemic. They now don’t want to move and have to give up that low rate to buy at a higher rate.
“Recent data indicated that nearly 82% of home shoppers reported feeling locked-in by their existing low-rate mortgage, while around 1 in 7 homeowners without a selling plan cited their current low rate as their reason for remaining on the sidelines,” Jiayi Xu, an economist at Realtor.com, said in a release.
Because of that, there is a currently a critical shortage of homes for sale, with year-to-date new listings now 20% behind last year’s pace.
Mortgage rates jumped this week as investors grapple with persistent positive economic data and a hawkish Fed.
The Freddie Mac’s Primary Mortgage Market Survey, which focuses on conventional and conforming loans with a 20% down payment, shows the 30-year fixed rate averaged 6.81% as of July 6, up significantly from last week’s 6.71%. By contrast, the 30-year was at 5.30% a year ago at this time.
Other mortgage indexes also show rates rising.
The 30-year fixed rate for conventional loans was 7.08% at Mortgage News Daily on Thursday morning, up 17 basis points from the previous week. HousingWire’s Mortgage Rates Center showed Optimal Blue’s 30-year fixed rate for conventional loans at 6.92% on Wednesday, compared to 6.69% the previous week.
“Mortgage rates continued their upward trajectory again this week, rising to the highest rate this year so far,” said Sam Khater, Freddie Mac’s chief economist in a statement. “This upward trend is being driven by a resilient economy, persistent inflation and a more hawkish tone from the Federal Reserve.”
High rates combined with low inventory continue to price many potential homebuyers out of the market, added Khater.
Markets are still digesting the Federal Reserve’s most recent FOMC meeting, during which Federal Reserve Chair Jerome Powell hinted at additional rate hikes before the end of the year. The 10-year Treasury yield was north of 4.0% on Thursday, a threshold not seen since March of this year.
Economic resilience is taking investors aback. Consumer spending keeps growing, as do auto sales, which were expected to soften. Real estate markets also speak to resilient conditions, as buyers have accepted mortgage rates in the new normal of 6% – 7% range and kept a steady pace of sales over the past few months. In addition, builders are recognizing the demand and the opportunity it presents, and they are pushing construction activity higher – about one-third of homes on the market are new construction, more than double normal levels.
The U.S. jobs market remains strong with U.S. companies adding almost half a million jobs last month, as reported by Bloomberg. Capital markets are looking for further clues and a hint about the outlook for the second half of the year in the next payroll employment report.
“The challenge for housing markets is the unfolding dynamic between supply, demand, and borrowing costs,” said George Ratiu, chief economist of Keeping Current Matters in a statement. “The number of homes for sale has been growing, and properties are sitting longer on the market, giving buyers more options and time to decide. At the same time, homeowners have held back from listing, keeping the supply of existing homes in check and driving prices higher. There are also clear signs of seasonality in this year’s housing markets, a good development on the road back toward health. However, we have a way to go to regain balance.”
Lisa Sturtevant, Chief Economist of Bright MLS, said economic conditions will cool in the second half and mortgage rates will come down.
“However, there will be no return to the 3% rates we had during the pandemic,” she said. “Homebuyers have had to accept the ‘new normal’ of rates around 6.5% or even a little higher. With affordability at near-record lows and inventory still very limited, buyers will continue to find the market challenging in the second half of 2023. Home shoppers will have to compromise on the features they want in a home or the neighborhood they are looking in.”