Mortgage applications decreased for the fifth straight week – this time down 5.1%, according to the latest report from the Mortgage Bankers Association.
As has been the case for several weeks now, rising mortgage rates and low inventory are contributing to the slowdown in mortgage applications, said Joel Kan, MBA’s associate vice president of economic and industry forecasting.
“The rapidly recovering economy and improving job market is generating sizeable home-buying demand, but activity in recent weeks is constrained by quicker home-price growth and extremely low inventory,” Kan said.
Refinance mortgage applications declined for the fifth straight week. The refinance index decreased 5% from the previous week and was 20% lower than the same week one year ago. Kan said refinancing volume over the past 10 weeks is down by more than 30%.
For purchase mortgage applications, bidding wars and appraisal gaps are discouraging some buyers from looking at existing homes, while high costs for lumber and building materials are pushing up the price of new homes.
The 30-year fixed rate moved up to 3.6% after registering at 3.33% last week. And even though the unadjusted purchase index dropped 4% from the past week, it’s still sitting 51% higher than the same week last year.
The FHA share of total mortgage applications decreased to 10.2% from 11.3% from the week prior. However, the VA share of total mortgage applications increased to 13.38% from 10.3% the week prior.
Here is a more detailed breakdown of this week’s mortgage application data:
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.36% from 3.33%
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $548,250) increased to 3.41% from 3.34%
The average contract interest rate for 30-year fixed-rate mortgages increased to 3.36% from 3.29%
The average contract interest rate for 15-year fixed-rate mortgages increased to 2.74% from 2.71%
The average contract interest rate for 5/1 ARMs increased to 2.92% from 2.85%
The average U.S. mortgage rate dropped five basis points last week to 3.13%, according to Freddie Mac’s Primary Mortgage Market Survey. It’s the first decline in mortgage rates in two months.
Sam Khater, Freddie Mac’s chief economist, pointed to a modest decline in treasury yields as the leading factor behind last week’s drop. Traders were hesitant in the market ahead of the Fed releasing its March FOMC minutes as many monitored talks of inflation. However, once again, the Fed showed no signs of policy changes despite forward economic recovery.
Fed purchases have helped to drive mortgage rates and other loan interest rates to the lowest level on record by boosting competition for bonds, which compresses yields.
But a slight dip in rates is advantageous for borrowers who missed the “forever rates” period and didn’t refinance when they had the chance. A 40-plus basis point rise in mortgage rates over the past month resulted in approximately 7 million high-quality refi candidates who are no longer able to lock historically low rates, according to a recent report from Black Knight.
According to the Mortgage Bankers Association, refinance mortgage applications declined for the fifth straight week. The refinance index was down 5% from the previous week and 20% lower than the same week one year ago. Overall, refinancing volume over the past 10 weeks is down more than 30%.
Increasing Lending and Servicing Capacity – Regardless of Rates
The low-rate environment won’t last forever, and both lenders and servicers need to be able to keep their costs down while managing volume fluctuations once things start to normalize.
Presented by: Sutherland
Borrowers need to act fast though, as treasury yields are already recovering. Recent comments by the Fed could potentially push rates back up by next week’s time. As mortgage rates rise, purchase demand will also rise, though homebuilders are fighting an uphill battle due to historic lumber prices and supply chain and labor issues.
“There might even more intensity this year, since 2020’s spring homebuying season was limited by virus-related lockdowns,” said Fannie Mae Senior Vice President and Chief Economist Doug Duncan. “Home-selling sentiment experienced positive momentum across most consumer segments, nearly reaching pre-pandemic levels and generally indicative of a strong home seller’s market.”
Many predicted that COVID-19 would cause real estate markets to crash. But now, after one full year of economic uncertainty, U.S. housing markets seem hotter than ever. What gives? On today’s State of the Market podcast, Aaron and Matt Amuchastegui discuss what’s driving rapidly rising property values. Tune in and get their thoughts on whether or not we’re in a bubble. Plus, you’ll hear about the insane cost of lumber right now, the political implications of population shifts, and more.
Listen to today’s show and learn:
The insane cost of lumber right now [2:29]
Americans willing to pay more for existing homes than new builds [3:50]
Manhattanites opt for Brooklyn over Florida [6:54]
The political implications of population shifts [8:51]
Forbearance rates continue to drop [12:15]
Businesses report major labor shortages [15:20]
A potential fix for the unemployment problem [20:20]
Blockchain’s place in the real estate industry [23:22]
Matt’s advice for today’s homebuyers [25:36]
Final thoughts [27:10]
Matt Amuchastegui
Matt Amuchastegui has had the pleasure of working in many different industries and positions throughout his career. He has learned the trades of residential home building carpentry, construction management, commercialized construction such as building highway bridges and steel buildings, has worked in inside sales, worked as a purchasing manager, mortgage loan originator, held his real estate license in both California and Arizona, and finally he is currently working as a Real Estate Broker in the great state of Oregon.
Matt has been able to apply many skills from all of his past jobs, as well as his education from the University of Oregon to what he is currently doing. Matt prides himself in customer service and strives to make sure everyone that he works with, upon the completion of their transaction, feels as though he provided them with the utmost care, attention and customer service. It is also imperative that when he was involved with management and scheduling, that he built solid relationships with the employees and other contractors to help keep them on schedule and within their budget. Business, at any level, in Matt’s opinion is about respect and relationships.
Matt has enjoyed helping people find their dream homes and has also really enjoyed the business side of negotiating sales contracts. Learning to value homes and determine how much they were currently worth and would possibly be worth in the future was also something that served to be an asset for him. Having the opportunity to work in all fields related to home acquisition, sales and management has helped Matt to be versatile in his ability to take on any task!
Related Links and Resources:
Thank You Rockstars! It might go without saying, but I’m going to say it anyway: We really value listeners like you. We’re constantly working to improve the show, so why not leave us a review? If you love the content and can’t stand the thought of missing the nuggets our Rockstar guests share every week, please subscribe; it’ll get you instant access to our latest episodes and is the best way to support your favorite real estate podcast. Have questions? Suggestions? Want to say hi? Shoot me a message via Twitter, Instagram, Facebook, or Email. -Aaron Amuchastegui
For the third consecutive week, mortgage rates pushed past 3% – with the average mortgage rate for a 30-year fixed loan up four basis points last week to 3.09%, according to Freddie Mac’s Primary Mortgage Market Survey.
Rising mortgage rates typically signify a recovering economy, and despite applications for mortgages dropping week-over-week, Freddie Mac’s chief economist Sam Khater expects a 3% rate to sustain market interest for many potential buyers.
A number of economists say rising rates may just be what the industry needs to cool the insane housing demand the market has been struggling to maintain for months. Increased inventory was the initial hope. However, due to consistent materials supply shortages and lumber prices that are up about 200% since April 2020, builders’ confidence index dropped in March. Single-family housing starts declined last month.
“The elevated price of lumber is adding approximately $24,000 to the price of a new home,” said NAHB Chairman Chuck Fowke. “Though builders continue to see strong buyer traffic, recent increases for material costs and delivery times, particularly for softwood lumber, have depressed builder sentiment this month. Policymakers must address building material supply chain issues to help the economy sustain solid growth in 2021.”
Now, economists are keeping a watchful eye on the speed in which interest rates have risen, said Doug Duncan, Fannie Mae’s senior vice president and chief economist.
“Underlying Treasury rates have risen, though lenders have absorbed some of the rise by shrinking spreads, as confirmed by our recent Mortgage Lender Sentiment Survey results,” said Duncan. “While the rate rise will curtail refinances to some degree, 2021 is poised to be a good year overall for housing activity and housing finance, as the economy continues to recover and COVID-19 restrictions ease.”
Duncan said Fannie Mae is watching for risks around monetary and fiscal policy on interest rates moving forward, though none are an immediate threat as the Federal Reserve has not changed its FOMC statement for several months.
Nevertheless, mortgage rates remain near historic lows (they are still 0.8 percentage points below the 2019 average), but if the price of housing can’t cool in time, many first-time homebuyers may miss the chance to take out a record low rate. Despite this risk, Fannie Mae’s baseline view is that the recent rapid rise will not continue but that rates will drift only modestly higher over the remainder of this year.
“Essentially, we believe the Fed will keep policy accommodative for longer, not tightening until inflation clearly exceeds its 2.0-percent target for a substantial period,” Fannie Mae said. “This view is consistent with current market measures, such as Fed Funds futures, not anticipating any rate hikes until 2023 and, even then, at a slow pace.”
Mortgage applications decreased for the fourth straight week – this time down 2.2%, according to the latest report from the Mortgage Bankers Association.
The 30-year fixed rate also dropped, reported at 3.33% after seven weeks of increases – but it’s still almost half a percentage point higher than the beginning of 2021. Purchase activity is up 6% year-over-year, with the unadjusted purchase index 39% higher than the same week one year ago.
But rising mortgage rates — and home prices that have remained high for months — are making a dent in mortgage applications, according to Joel Kan, MBA’s associate vice president of economic and industry forecasting.
“Record-low inventory is pushing home-price growth at double the rate from a year ago, and even above the 10% growth rates seen in 2005,” Kan said. “The housing market is in desperate need of more inventory to cool price growth and preserve affordability. Higher mortgage rates continue to shut down refinance activity, as the pool of borrowers who can benefit from a refinance further shrinks.”
The refinance index decreased 3% from the previous week and was 32% lower than the same week one year ago.
Should lenders look to non-QM when the refi boom slows?
HousingWire recently sat down with Tom Hutchens, Angel Oak EVP of production, who shared how non-QM lending could be an effective way for lenders to replace lost business in the event of a refi boom slowdown.
Presented by: Angel Oak
Builders are waiting for lumber mills to reopen following the continued COVID-19 vaccine rollout, a move that should lower the price of building materials. Until enough mills have reopened, though, low inventory and sky-high prices are the norm, and mortgage applications for new homes could continue to suffer.
The FHA share of total mortgage applications decreased to 11.3% from 11.7% from the week prior. The VA share of total mortgage applications increased to 10.3% from 9.8% the week prior.
Here is a more detailed breakdown of this week’s mortgage application data:
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) decreased to 3.33% from 3.36%
The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $548,250) decreased to 3.34% from 3.4%
The average contract interest rate for 30-year fixed-rate mortgages decreased to 3.29% from 3.35% — the first decrease in three weeks
The average contract interest rate for 15-year fixed-rate mortgages decreased to 2.71% from 2.72%
The average contract interest rate for 5/1 ARMs increased to 2.85% from 2.79%
Since August, I’ve been on a quest to reduce the clutter in my life. Back when I was a spendthrift, I bought a lot of Stuff. Stuff comforted me. When I was buying things (even on credit), I felt wealthy.
Stuff doesn’t make me feel wealthy anymore — it makes me feel cramped. With time, Stuff simply becomes clutter. Slowly but surely, I’m banishing excess belongings from my household. I still sometimes buy more than I ought, but mostly I’ve been guarding the borders of my life against the invasion of Stuff. Here are some of the defenses I’ve been employing:
I ignore the proverbial Joneses. One of the most dangerous paths to clutter (and to overspending) is the urge to own the same things your friends do. Peer pressure can be powerful. I’ve come to realize that lifestyles are not a competition. What does it matter what others buy? I’m content with what I have — more Stuff is not going to make me more happy.
If I don’t need it, I don’t buy it. As I’ve purged my Stuff over the past year, I’ve been shocked by how many things I bought but never used. I would see something in a store — a voice recorder, for example — and convince myself that I needed it. Or I would tell myself, “I might as well buy a jig saw — we’ll need one in the new house.” But I used the jig saw only once in four years (on the day we moved in). I never used the voice recorder at all! These items are clutter, and were a waste of money. I’ve learned not to buy something unless I know I’ll use it.
I try to value experiences instead of things. Make no mistake — experiences still cost money. But a trip to England or the entrance fee to a marathon or a nice dinner with friends all share a common characteristic: they don’t take up space in my home. I get value for my money, and there’s no residual Stuff.
I’m trying to practice the one-in, one-out rule. I’ll admit up front that I’m not good at this, but Kris is trying to teach me. I’m attempting to keep a steady state of Stuff. If I have, for example, twelve pairs of socks, and then buy another, I must get rid of one pair. Practicing this rule prevents a build-up of Stuff.
I focus on quality. It’s been difficult for me to realize that sometimes it makes sense to pay more for the things I buy. My instinct is to buy whatever’s cheapest. (And sometimes that is the best choice.) But I’m learning to base my purchase decisions on the value an item will give me. Often it makes more sense to have one excellent expensive item than to have several lousy cheap ones. The lousy items just become clutter.
I borrow and lend. Shakespeare might have advised against it, but I’ve found that by borrowing and lending things among friends, there’s less we each need to own. I’ve loaned out a drill, a rototiller, some golf clubs. I’ve borrowed books, a video camera, a lamp. By sharing these items, we’re each able to have less Stuff in our lives.
I’ve reduced my exposure to advertising. Since I stopped watching television a few years ago, I buy much less Stuff. But it’s not just television. I used to enjoy reading the ads in magazines. Now I try to ignore them. The less I pay attention to advertising, the less I buy.
I don’t want to pretend like I have Stuff licked. I don’t. I’m still especially susceptible to free and cheap things. In the past year, for example, I’ve dragged home:
A carload of scrap lumber I picked up for free. (Admittedly, this did get used as a border to our garden.)
Several pieces of free exercise equipment that have remained unused in our garage.
A box of free books — books that I now realize I will never read.
Just because something is free or cheap doesn’t mean it’s a bargain. If I don’t need it, I shouldn’t bring it home. Despite this weakness in my defenses, the tide of the battle has turned. I’m winning the war against Stuff.
There’s nothing wrong with owning Stuff that you use and value. But when you accumulate Stuff that you never use, that’s a problem. Guard your borders. In his excellent The Joy of Simple Living, Jeff Davidson writes, “By keeping watch over what enters your personal kingdom, you end having to initiate possession-purging exercises.” The best way to cope with Stuff is to never let it into your house.
Today the CensusBureau reported that in March 2021, new home sales were at a seasonally adjusted annual rate of 1,021,000. This number beats estimates.
Additionally, major positive revisions were made to the sales number of the previous months. I expect this month’s headline to be revised lower a tad next month, but even considering that, this report was the best new home sales report in over a decade. The headline number was solid, the revisions were all positive, and the monthly supply on a three-month average is below 4.3 months.
New home sales get impacted much more than existing home sales by movements in mortgage rates. Mortgage rates from 4.75% to 5% created a supply spike in 2018. At that time, we worked from the weakest new home sales and housing starts recovery ever, and sales were not high, historically speaking. My forecast for the bond market was that it would fall in 2019, and if world growth slowed down, the 10-year yield would get below 2%. This would drive mortgage rates much lower than the 5% levels of 2018.
As you can see below, today’s monthly supply looks much different from what it did at the start of 2020. Demand is better now than any time from 2008-2019. During that period, we never had a monthly supply below 4.3 months with rising sales.
The most critical housing data line to follow in this housing market is the trend in monthly supply for the new home sales market. When the monthly supply is 4.3 months, and below, builder confidence is high. When supply is between 4.4 to 6.4 months, builder confidence is just meh for new construction. As long as new home sales can grow, construction can happen.
When supply is 6.5 months and over, builders will pull back from construction because demand no longer warrants more construction. The baseline supply I use to gauge conditions is a three-month average. We are currently at 3.86 months. For the last three months, supply has been 3.6,4.4, and 3.6 months. When demand for new homes is really good, the monthly supply should be this low; we didn’t have this from 2008-2019, hence why housing starts grew slowly like how my tortoise moves from room to room.
Remember that new home sales and housing starts can vary widely month to month, and those numbers are highly susceptible to revisions, both positive and negative. We are likely to get some negative revisions to the numbers in this report, so it is more helpful to focus on the trend. The trend is your friend.
As long as the monthly supply stays below 4.3 months, like what we had for a good portion of 1996 to 2005, builder confidence will remain high, and they will continue to build. I don’t consider the housing data from before 1996 because too much has changed for those numbers to be relevant to our current economic models. The U.S. economy is more mature and developed than it was from 1960 to the 1990s.
In 2020 to 2024, the biggest tug of war in housing will be between good demographics driving demand and home-price increases suppressing demand when mortgage rates rise. The COVID-19 pandemic has caused the bond market and mortgage rates to be lower than they should be considering current economic conditions. The resulting low mortgage rates have been a blessing for the builders, especially considering the other challenges they face, like skyrocketing lumber prices.
In the current market, low rates are beating lumber prices in that particular paper-rock-scissors game that we are playing. New home sales aren’t working from the low levels we had from 2008 to 2019. New home sales in the years 2020-2024 are an entirely different ball game. Monthly supply levels will be your best guide to where the market is going.
I believe the hostile impact lumber prices will have on-demand in 2021 are overstated, as we can see in the data in the past few months. Lumber prices are a big issue for the entire housing market — not just for the builders but also rehabbers and flippers. Out of all of these, builders are the most capable of handling the high prices.
Homebuilding may be suitable for the public, but it is not a public service. Those who are in the business of rehabilitating homes for sale or rent are in the industry to make money — and won’t take on these projects if the cost of materials eats all the profits.
It will be a great blessing for lumber prices to come down, but we don’t see hints of that happening just yet. When mortgage rates rise, and lumber prices remain high, builders’ confidence will drop, and we can expect a slowdown in new construction. If we do get a big infrastructure plan, labor costs for construction will also increase, eating even more into the builders’ profits. These are things to look out for in the future because we always want to be mindful of the future but not lose focus in the current moment.
The new home sales sector is much different than the existing home sales sector. New homes have all the bells and whistles and are more costly, so the average new home buyer tends to be older and better off financially than the average existing home buyer. This new home sector can’t compete with the existing home sales market in terms of price, so when mortgage rates increase, it’s more of a significant disadvantage to the new home sales market.
However, as we can see, this is not the case today or in the past year. This is one aspect that doesn’t get spoken about too often. We did come from the weakest housing recovery ever, so the production of homes and new home sales weren’t working from an overheated speculative market. The demand for new homes and housing starts from 2018-2021 looks nothing like what we saw from 2002-2005. This is also similar to what we see in the existing home sales market, but we have home price gains as if mortgage demand was as hot as 2002-2005. I did talk about that issue on Bloomberg Financial today and wrote about it yesterday on HousingWire.
We just need to be mindful that we are enjoying some real solid economic data without the consequences of higher mortgage rates and bond yields. At some point in the future, this won’t be the case. Until then, let the monthly supply data guide you as it has guided me for many years.
For the third consecutive week, mortgage rates managed to remain under 3%, dropping three basis points last week to an average of 2.96%, according to Freddie Mac‘s PMMS.
Despite consistent forecasts of a market with rising rates, the 30-year fixed rate mirrored more closely numbers borrowers saw back in February. Sam Khater, Freddie Mac’s chief economist, pointed to a golden opportunity for homebuyers given the recent economic resurgence.
“Consumer income and spending are picking up, which is leading to an acceleration in economic growth,” Khater said. “The combination of low and stable rates, coupled with an improving economy, is good for homebuyers. It’s also good for homeowners who may have missed prior opportunities to refinance and increase their monthly cash flow.”
But borrowers flush with cash are struggling to find a home to spend it on. Heightened demand continued to push mortgage applications down last week in what Mortgage Bankers Association vice president of economic forecasting, Joel Kan, called a “mixed bag of factors” — mortgage rates being one of them.
Even though inventory is grappling with the power that record low rates hold, borrowers are still racing to the end of the bidding line, as March housing starts jumped nearly 20% month over month to the highest level since 2006, per the latest report from Redfin.
Increasing Lending and Servicing Capacity – Regardless of Mortgage Rates
The low-rate environment won’t last forever, and both lenders and servicers need to be able to keep their costs down while managing volume fluctuations once things start to normalize.
Presented by: Sutherland
Although housing starts are rising, lumber prices have skyrocketed in the past 12 months, causing the average price of a new single-family home to increase by $35,872, according to the National Association of Home Builders.
Low inventory is still a thorny issue as April turns to May, but more new builds appear to be in the pipeline, according to Doug Duncan, Fannie Mae chief economist.
“The supply of existing homes for sale and an elevated level of new homes sold — but not yet constructed — should help bolster a strong construction pace of new housing starts moving into the spring buying season,” Duncan said.
“The economic slowdown has resumed – whether the end result is a modest recession or simply a soft landing remains unanswered – although we continue to expect the former, as we have since April of last year, when we first made our 2023 recession call,” Doug Duncan, senior vice president and chief economist at Fannie Mae, said.
“The greater-than-expected resilience of the housing sector to the affordability pressures of higher home prices and mortgage rates is central to our expectation that the recession will be modest,” he added.
However, the ongoing lack of existing homes for sale will continue to support demand for new homes, the group noted.
New home construction is expected to pull back later in 2023 – consistent with Fannie Mae’s forecasted recession – which is due, at least in part, to tighter credit availability for construction lending. Still, Fannie Mae expects new home sales to hold up comparatively well relative to existing homes.
“Homebuilders continue to show a willingness to offer rate buy-downs and other incentives to move their inventories. The past year’s pullback in the price of lumber and other materials also helps builders to maintain margins even with discounting, and we would expect them to continue to do so,” Fannie Mae’s ESR group said.
No additional bank failures have occurred since mid-March, and high frequency data from the Federal Reserve show that aggregate banking deposits have stabilized in the most recent weeks. This includes deposits at small banks, which were roughly flat — and even rose somewhat over the past two weeks.
Still, the prior bank failures and ongoing fallout took place during a period in which credit conditions were already tightening, so any additional marginal tightening may end up contributing to an eventual expected recession, the group explained.
Fannie Mae noted the continued pullback in longer-term interest rates relative to pre-banking turmoil, combined with a lack of accelerating inflation expectations, suggests that financial markets still anticipate that the recent banking crisis will be a drag — at least modestly — on economic activity.
With upgrades to both home sales and home price forecasts, Fannie Mae adjusted its forecast for mortgage origination upward. Total originations for 2023 are now expected to post $1.66 trillion, up compared to its previous forecast of $1.55 trillion. For 2024, Fannie Mae anticipates volumes of $2.02 trillion, an increase from its prior forecast of $1.89 trillion.
House prices, measured by Fannie Mae’s home price index, are projected to decline by 1.2% in 2023 on a Q4/Q4 basis from a previously expected 4.2% decline. In 2024, home prices will decline by a further drop of 2.2% compared to previous expectations.
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.”