Favorable economic trends are helping mortgage rates continue the downward trend they’ve been on for the past few months.
HousingWire‘s Mortgage Rates Center showed that the average 30-year conforming loan rate was 7.06% on Tuesday, down from 7.11% a week earlier. The 15-year conforming loan rate showed an even larger pullback, declining from 6.90% to 6.79% during the week.
That data comes on the heels of cooling inflation numbers. Last week, the Consumer Price Index (CPI) showed that prices for goods and services declined by 0.1% from May to June. They rose 3% on an annualized basis, the slowest rate of growth in more than three years.
More good news for the housing and mortgage industries arrived Monday through remarks delivered by Federal Reserve Chair Jerome Powell. At an event in Washington, D.C., Powell indicated that policymakers would not wait for inflation to reach 2% before making cuts to benchmark rates. The federal funds rate has been in a target range of 5.25% to 5.5% since July 2023.
“The implication of that is that if you wait until inflation gets all the way down to 2%, you’ve probably waited too long, because the tightening that you’re doing, or the level of tightness that you have, is still having effects which will probably drive inflation below 2%,” Powell said, according to reporting by CNBC.
According to the CME Group‘s FedWatch tool, analysts believe there is a 93% chance that rates will remain unchanged after the Fed’s meeting at the end of July. But 100% of analysts have penciled in a cut in September.
HousingWire Lead Analyst Logan Mohtashami believes that mortgage rates could fall to 6% if the 10-year Treasury yield continues to recede. The spread between the 10-year yield and the 30-year rate narrowed to 2.62% last week, down from a recent peak of 3.1% in June 2023.
Mohtashami said that mortgage rates would be 0.48% higher today if the highest levels of spreads from last year were incorporated today. The shrinking spreads are correlating with a rise in purchase mortgage applications.
“The last time we saw 12 weeks of positive trending purchase app growth was when mortgage rates reached 6%,“ Mohtashami wrote Saturday. “Purchase apps have been positive for four out of the last five weeks and mortgage rates aren’t even near 6%. Now, context is critical because we are working from the lowest bar ever, so it doesn’t take much to move the needle higher with purchase apps, as the last five weeks have shown.“
With mortgage rates stubbornly remaining above 7% for all of 2024, home-price growth has cooled and supply has increased in many areas of the country.
According to data released Tuesday by First American, U.S. home prices grew by 5.6% year over year in June. It marked the sixth straight month that the annualized appreciation rate has slowed.
Anaheim, California, led the way among the metro areas analyzed by First American with 10.2% price growth compared to June 2023. Miami (8.9%), Pittsburgh (6.5%), Las Vegas (6.4%) and San Diego (6.2%) each exceeded the national average rate of appreciation.
“Elevated mortgage rates continue to keep homeowners rate locked-in, while reducing affordability for potential first-time home buyers,” Mark Fleming, chief economist for First American, said in a statement. “The resulting pullback in demand coincided with an uptick in supply, which is cooling price growth. However, housing remains fundamentally undersupplied nationally, which will keep a floor on how low house price appreciation can fall.”
Data from Altos Research shows that the supply of single-family homes for sale shrank slightly last week to 651,000. That figure is up 38.5% year over year but is still 32% below the pre-pandemic figure of July 2019. Altos also noted that the share of listings with a price cut has grown to 38.3%.
“If we get lucky and mortgage rates ease from here on out for the rest of the year, then one place we’ll measure a rebound in demand will be fewer price cuts,“ Mike Simonsen, president of Altos Research, wrote on Monday. “When you list your home, if you don’t get the offers, you cut your price. But when a few more offers are made by newly affordably mortgages for buyers, then this stat will plateau and even tick down.“
If we took the worst levels of the spreads from 2023 and incorporated those today, mortgage rates would be 0.48% higher right now. While we are far from being average with the spreads, the fact that we have seen this improvement is a plus this year.
10-year yield and mortgage rates
Last week, inflation data and testimony from Federal Reserve President Jerome Powell were a plus for mortgage rates as the 10-year yield fell to the critical level of 4.20%. This has been a stubborn place to break lower, so the key for this week is to get follow-through bond buying after we close below 4.20%. If this doesn’t happen soon, we will need to wait for more economic data or a Fed talking point to push the 10-year yield lower.
Purchase application data
The last time we saw 12 weeks of positive trending purchase app growth was when mortgage rates reached 6%. Purchase apps have been positive for four out of the last five weeks and mortgage rates aren’t even near 6%. Now, context is critical because we are working from the lowest bar ever, so it doesn’t take much to move the needle higher with purchase apps, as the last five weeks have shown.
However, let’s keep an eye out on this story over the next six months because of what late 2022 and 2023 data has shown us: if the mortgage rates fall and we can get at least two to three months’ worth of positive data, it will show up in the future existing home sales report. Remember, purchase apps look out 30-90 days, so that data will hit the sales report later on.
Since mortgage rates started to fall in November 2023, we’ve seen 16 positive prints, 14 negative prints and two flat prints in the week-to-week data. However, as mortgage rates began to rise earlier this year, we observed a decline in demand. The year-to-date data for 2024 is still unfavorable, with 10 positive prints,14 negative prints and twoflat prints.
Weekly housing inventory data
This week’s data was hit with the July 4th bug. Especially if July 4th is on a Thursday or Friday, people tend to take a more extended vacation. So, I will not make any statements about the decline in inventory week to week, except that it’s been affected by the holiday and we should get back on trend next week.
Weekly inventory change (July 5-12): Inventory fell from 652,573 to 651,453
The same week last year (July 7-14): Inventory rose from 466,534 to 471,603
The all-time inventory bottom was in 2022 at 240,497
The yearly inventory peak for 2024 was 652,573
For some context, active listings for this week in 2015 were 1,197,439
New listings data
New listings data saw a much sharper decline than I had anticipated this week, but it was July 4th weekend so that I won’t make anything of it. However, I will keep an eye out here in the future weeks. The seasonal decline period is starting soon, so we should get accustomed to seeing a decline in new listing data as the year heads toward its end.
It is a bit shocking to me that new listings this week are lower than even last year: This is the lowest new listing week ever recorded. Here are the new listings for last week over the last several years:
2024: 56,638
2023: 57,304
2022: 71,790
Price-cut percentage
In an average year, one-third of all homes take a price cut — this is standard housing activity. As rates have stayed elevated, the price-cut percentage is higher than in the last two years, and certain pockets of the U.S. have higher inventory data than the national data.
A few weeks ago, on the HousingWire Daily podcast, I discussed that the price-growth data will cool down in the year’s second half. Here are the price-cut percentages for last week over the previous few years:
2024: 38%
2023: 33%
2022: 33%
Pending sales
Below is the Altos Research weekly pending contract data year-over-year to show real-time demand. With more sellers who are buyers, we have a tad more demand this year. These are live weekly contracts, compared to the purchase application data, which looks out to 30-90 days. And our weekly pending sales data accounts for contracts.
2024: 419,576
2023: 377,650
2022: 419,524
The week ahead: Powell talks again, plus retail sales and housing starts
Powell will speak again on Monday and a few Fed presidents will speak this week as well. I want to see if we get more dovish statements from other Fed presidents this week. Retail sales are on Tuesday and housing starts are on Wednesday. The big focus for housing starts data is if single-family permits keep falling, which isn’t bullish for construction labor going out. Also, we have the all-important jobless claims data on Thursday.
Mortgage rates have been in a narrow range for more than a month now with the average top tier 30yr fixed rate staying within striking distance of the 7.0% mark for the entirety. The number was 7.01 yesterday and it’s down to 6.99 today. This matches the level last seen on June 14th and you’d have to go back to March to see anything much lower.
Despite the incredibly uneventful performance of the past month, rates face another opportunity for (or “threat of”) a much bigger change tomorrow. The direction of the move will depend entirely on the results of the Consumer Price Index (CPI).
CPI is the most important economic report as far as rates are concerned because it’s the first major look at inflation data on any given month and inflation is the biggest problem for rates at the moment.
Looked at another way, the Fed has repeatedly communicated that rate cuts will happen when CPI suggests inflation is decidedly heading back to 2.0% in year over year terms. The last CPI was a step in the right direction. If tomorrow’s follows suit, the conversation about rate cuts would get serious.
The Fed doesn’t directly dictate mortgage rates, but the entire rate market tends to react to the same things the Fed says it will react to.
As always, keep in mind that data can go both ways. If CPI shows higher inflation than expected, rates could move higher just as quickly as they could drop. Last but not least, there’s always a chance that the data and the market’s reaction to it can be balanced enough to “thread the needle” (i.e. another day without much change in rates).
Bottom line: in terms of POTENTIAL volatility, tomorrow is about as high stakes as it gets.
Welcome to NerdWallet’s Smart Money podcast, where we answer your real-world money questions. In this episode:
Discover career growth strategies to boost your income, including negotiating raises and navigating promotions and mentorship.
What are some of the best ways to increase your income?
What are strategies for negotiating a higher salary and excelling in your current role?
Hosts Sean Pyles and Alana Benson discuss career growth techniques and salary negotiation strategies to help you understand how to maximize your earnings and achieve financial stability. They begin with a discussion of the importance of increasing your income rather than solely focusing on cutting expenses, breaking down the long-term financial difference that seemingly small increases in your income can make over the course of your career.
Then, “The Job Doctor” Tessa White joins Alana to discuss how to excel in your current role and position yourself for promotions and raises within an organization. They discuss the necessity of understanding the true expectations of your role, measuring your contributions through tangible metrics and effectively communicating your value to your organization. Additionally, they explore the importance of informal mentorship and how to enhance your skills by observing and learning from those who excel in specific areas.
Check out this episode on your favorite podcast platform, including:
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Episode transcript
This transcript was generated from podcast audio by an AI tool.
Sean Pyles:
You’ve heard it one million times, “Just cut out the daily Starbucks run and you’ll be rich.” But more often than not, your financial situation is going to be better aided by fixing what’s coming into your budget versus what’s going out.
Tessa White:
If you’re, say, 35 years old and you negotiate an extra $5,000 for your job, it’s not just $5,000 because in lifetime earnings, that’s several hundred thousand dollars in lifetime earnings. And if you invested that difference, it’s even more.
Sean Pyles:
Welcome to NerdWallet’s Smart Money Podcast. I’m Sean Pyles.
Alana Benson:
And I’m Alana Benson.
Sean Pyles:
This episode kicks off our Nerdy deep dive into what we are calling investing in your income. Another way to say that is investing in yourself by seeking out more ways to make more money.
Alana Benson:
Yeah, Sean, you alluded to this at the beginning, but there’s just so much advice out there giving people flack for spending on straight-up normal stuff like going to Starbucks, or getting some tacos at a food truck instead of making them in your kitchen. And yes, technically all of these things can have a negative impact on your bottom line, but like, you have to live.
Sean Pyles:
Absolutely. And I mean, we’ve had a foot in this camp on the show advising people to take a hard look at their expenses and see what they can pare back in an effort to get themselves to a better financial situation. We haven’t told people to forego a morning latte, but there certainly is a time and place for examining your spending habits. That said, there is another way to affect that bottom line.
Alana Benson:
Exactly, and that is to just make more money.
Sean Pyles:
Yes. Okay. So Alana, you pitched this series to us. What prompted you to start thinking about this?
Alana Benson:
I’ve talked about this on here before, but before I started working at NerdWallet, I worked at a small company where I was making less than $30,000 a year with no benefits. So I actually tried to negotiate to $32,500 and I was told that I was “greedy and selfish.”
Sean Pyles:
Wow. The gall you must have had-
Alana Benson:
I know. How dare I?
Sean Pyles:
… to ask for that much more money, yeah.
Alana Benson:
But it messed me up for a long time. And to any listeners who have been told something similar, I want to tell you right now that you are not any of those things. I had to check my bank account every time before I went grocery shopping at that job, and I felt stressed about money all the time. And then when I finally started working at NerdWallet, overnight I went from that stressed out lifestyle to being able to save for retirement and a down payment on a house, which was just like a fever dream before then, and then it was a reality.
Sean Pyles:
Right. Well, we wish everyone could work for NerdWallet, but for those who are looking for other ways to have that kind of income jump, let’s talk about what they need to be considering.
Alana Benson:
Yeah, Sean. And this is not to say that this is easy. These are a little more difficult, they may not happen overnight, but there are some really critical factors that make increasing your income almost imperative if you want to meet particular financial goals. If that’s buying a house, if you’re making a college fund, investing for retirement, these are all the things that you usually do after you fill out your emergency fund, or you pay down high-interest debt and cover your day-to-day expenses. And by those metrics, it just makes it really hard for a lot of people to ever get to the point where they can afford to save and invest for those long-term goals. And for a lot of folks, increasing their income is literally the only way they’re going to be able to afford to invest for retirement.
Sean Pyles:
Right. And increasing your income can also be far more effective than reducing expenses, particularly for those who don’t have many expenses left to cut.
Alana Benson:
Yeah, exactly. So here’s an example. If you’re making $50,000 a year, the money you actually get on your paycheck after taxes, and generally this is without state taxes and everyone’s tax situation is different, but that would come to about $42,000 a year or $3,495 per month. The average monthly mortgage payment in the U.S. is $1,768. Now factor in groceries, bills, car payments, and other necessities, and the truth becomes something that we already know, which is just that life is really expensive and most of us are not making enough to cut it, let alone save for the future, or just make enough to enjoy life and take a vacation every now and then.
Sean Pyles:
Yeah. And the average millennial owes about $6,500 in credit card debt and those in Gen Z owe more than $3,000. Cutting your daily coffee habit and getting rid of streaming services simply cannot make up the differences here. And these numbers aren’t new, but they’re sometimes presented with little information about what we can do about them. Increasing your income is one of the biggest ways you can make a dent in those numbers.
Alana Benson:
Exactly. So over this three-part series, we’re going to talk about how you can get started increasing your income, some concrete steps you can take regardless of whether you want to change jobs or not, and what you can start to do once your income does increase. We’ll be talking about everything from sprucing up your LinkedIn profile to working with a career coach, negotiating, and whether that’s for a raise at your current job or a salary bump at a new one.
Sean Pyles:
All right, well we want to hear what you think too, listeners. To share your thoughts around ways to boost your income, leave us a voicemail or text the Nerd hotline at 901-730-6373. That’s 901-730-N-E-R-D, or email a voice memo to [email protected].
So Alana, who are we hearing from today?
Alana Benson:
We are going to the doctor for a checkup, Sean.
Sean Pyles:
Oh, no. What’s the copay going to be?
Alana Benson:
Well, hopefully nothing, because today we are talking with The Job Doctor, also known as Tessa White, who spent a good chunk of her career heading up HR departments, mostly for tech companies. She’s now founder and CEO of The Job Doctor and author of The Unspoken Truths for Career Success.
Sean Pyles:
That’s coming up in a moment. Stay with us.
Alana Benson:
Tessa White, welcome to Smart Money.
Tessa White:
Hello. Thank you for having me.
Alana Benson:
In this series, we are really focusing on ways to increase your income in kind of any form. So what would you say is the easiest way that people can increase their income?
Tessa White:
Well, I think they need to be very mindful that they are their best advocate for making money. The company’s not going to magically go in and decide that they need to pay them more money, because a company’s always going to err on the side of they’ll take as much as you’ll give. So making sure that you’re advocating for yourself is probably the greatest way that you make money.
Alana Benson:
Tessa White:
Yeah, salary negotiation, asking for money, which is uncomfortable for people to do sometimes. Understanding what the value of your role is or the position that you’re applying for versus just kind of going with the first thing that people ask. I mean a little bit of discomfort on the front end of negotiating on behalf of yourself really has a massive impact on the back end.
If you’re, say, 35 years old and you negotiate an extra $5,000 for your job, it’s not just $5,000 because in lifetime earnings, that’s several hundred thousand dollars in lifetime earnings. And if you invested that difference, it’s even more. So you need to look at it a little bit differently and say, “Every penny that I can negotiate on behalf of myself is the new basis for which other offers come in and other raises is based off of.” And it really does have a cumulative effect that’s significant.
Alana Benson:
I want to go back to something that you said about increasing the value where you’re at. Some people may have tried to negotiate or they’ve hit a financial ceiling for some ways, but how can you get extra experience at your existing job? For example, if you want a role in management in the future, maybe take on some mentoring to work towards that. For people who negotiating isn’t really on the table right now, how can people get some of that extra experience?
Tessa White:
First you have to know what to ask for. One of my recommendations is that you mimic a top-performer plan. Companies typically put people in this nine box, and they have these top performers and nobody knows who they are except the top performers. They get all these extra things. Some of those extra things are exposure to experiences which are very valuable to you. That might be sitting in on an executive meeting and just seeing how things operate.
And the thing about corporate America is your manager needs help. There’s always more to do than people to do it. And so if you ask for your own top-performer plan, you can actually ask for and be very direct with your manager to say, “Can I give part of a presentation in this executive team meeting? Can I run this little piece of a project that is holding us back that we need to get over the finish line? Can I sit in and listen to how a meeting operates? Can I help develop a dashboard for our departments so that we can show progression in some of the key objectives?”
So there’s lots of different ways you can do it, but the key is you have to ask because most managers are not really great at putting together growth plans for people. They’ve got a lot of people and it gets very murky what they need. But if you actually go to your manager, and direct it and say, “Can I do this one thing? Can you help make this one thing happen or these two things happen,” then your odds go way up and your credibility goes up in the organization, your visibility goes up. And therefore, your promotability goes up.
Alana Benson:
I love what you said about visibility because I think that is so, so important, especially a lot of people are now working in remote environments and so you don’t really get that face-to-face time. And so what are some ways that people can kind of increase their visibility? Kind of like you said, talking about a presentation, but just ways to get exposure and then how does that value come back to them?
Tessa White:
Well, let’s start with something that I think people might find interesting. I’ve sat in on hundreds of promotion meetings where they decide who gets the promotions that year. And almost without fail it’s like a broken record. The people that don’t get the promotions, people will say, “Well, they sound great, but I don’t know who they are. I haven’t worked with them.”
One of the big keys to getting the promotions is visibility across the organization and being able to collaborate well with other departments. And it’s really important that when people know you, you have a greater chance of getting the promotion, and when you intersect with them. So that’s the first thing is that having that exposure is really important.
One of the first practical things that I would do in a job is to go talk to the people that intersect with my role and say, “Tell me what do you expect out of this role? What are the problems that I am helping solve for you and where are your pain points?” And I would get very, very aligned with what those people and constituents need because the job on paper is not the real job. It never is. And this helps you determine what the real job is and how you win, more importantly, how you align yourself to win. So I would be having those conversations at least twice a year because that’s what’s going to point you towards how you actually work on the things that are going to get you promoted in a company, and how are you going to get visibility for you and what you do.
Alana Benson:
I think about that a lot where I work in terms of even just posting on Slack and making sure that I post regularly in the channels that my boss, and my boss’ boss, and even my boss’ boss’ boss are because that visibility is so important. So they say, “Oh, I know who this person is, I know what they’re working on. I know they’re doing X, Y, and Z.” So what are some other ways to make sure you’re getting that managerial attention that could potentially lead to a raise or a promotion?
Tessa White:
I’m a big believer in planting seeds in an organization with other managers and other places in the organization so that you know what’s coming. Managers are planning six months, eight months in advance, sometimes a year in advance of what they need and what’s coming. And you need to be talking with them about how are you going to be evolving, what are the big problems you’re trying to solve? What are big initiatives and things that are going to help you over the next couple of years move into the next level of efficiency? And when you understand those things, then you get a better idea of how you fit into the ecosystem and you also get a better idea of maybe where you want to go in the future. And then you can begin to craft the kind of experiences that you need so that you will be somebody that they can pay attention to.
I would absolutely treat your company like a big homework assignment. And I would be trying to listen to the quarterly reports, listen to the CEO. What are the big objectives that we’re trying to accomplish? And it helps you establish that narrative. Because I get mad when people come and say, “I interviewed but it didn’t work very good,” or, “I don’t think they understood my value.” And I say, “If you don’t understand your value proposition, I promise you the company won’t.” It really is your job to figure out what your value proposition is, and in order to do that you have to have information.
Alana Benson:
So when you go into those meetings, it’s so hard to kind of know what your value is or what people call your market value. So how do we figure that out? How do you essentially see if there’s space to grow in terms of pay in your existing role? How do you figure out what you should be getting paid?
Tessa White:
Well, that’s a lot of different questions. Let me start with value proposition, first of all. It’s kind of a big word, but how do you know what value you bring to an organization? This is a really hard thing for people. But if you think about leverage, that’s what you want to have as leverage to get what you want. Leverage at its core is “I have what you need.” And so if you can define what is it that I see the company needs, where are they going and what have I done so far that shows I have that skill, and you can then turn it into numbers.
“I was able to come into my department and move the needle on these particular criteria,” then you have more leverage. But what most people do is they say, “I’m really good at working with customers.” Well, that’s, in and of itself, doesn’t mean anything. But if you say, “My customer service scores are 20% higher than most of the other people in the department,” or, “I was able to decrease call time by X and increase customer satisfaction by X,” then you actually have something that the company understands and you’re speaking their language.
So part of your job in determining your value proposition is saying, “How am I solving problems for the company? And then how do I turn what I’ve done into metrics or numbers?” That’s why I tell people, “You should go to work every day and be measuring. If you don’t have a department metric that tells you am I doing good or am I not doing good, figure out what it is and start measuring things. Because those numbers become so critical to how you position yourself for a company.”
Alana Benson:
There’s two things, figuring out what the company kind of needs from you and what you can bring to it, and then obviously what can the company do for you?
Tessa White:
Well, your market value, it’s like a house. When we put a house up for sale, we don’t have some neat, perfect numbers to what its value is. What we know is that other houses sold at this amount that were similar, and the same is true with compensation. What other companies are willing to hire this role at is a pretty good indicator that you can bring that helps determine the value of a role.
But the other thing that you have quite a bit of control over is being able to tell the company, “Here’s how I solved the problems in my last company and here’s how I’ll solve them for you.” So for recruiting, for example, let’s just take a general example. If I said, “I’m a really good recruiter, and I was able to manage a recruiting team and fill 200 positions in a year,” that doesn’t, in and of itself, mean anything. But if I understand that a company has low resources and they don’t have a lot of money to put towards recruiters, I could say, “In the last company, I turned every employee into a recruiter in our company because we didn’t have a lot of funds. And we rolled out this employee referral program that made every employee a recruiter and it increased the number of applicants that we were bringing into the company month over month by 60%.”
Then all of a sudden the company goes, “Scrappy. I need scrappy. I’m a company that doesn’t have a lot of money. I need creativity. Look what that person was able to do.” And all of a sudden your leverage went up, which means your compensation probably goes up because you have what the company needs.
Alana Benson:
Yeah, I think it’s so important to think about what are the problems that need to get solved here? And sort of apply yourself to those, and be moldable, and be able to say, “Yeah, I can help you with that.” I feel like that goes so far and feeds into the visibility thing that we were talking about earlier because then you become known as someone who can fix problems.
Tessa White:
It’s everything because on resumes, again, one of my pet peeves is a resume will say, say you take an HR person and they say, “I’m a 25-year professional who has been able to manage talent management, training and employee relations.” Well, every single resume says that, but the minute that I can tap into how do I solve the problems and I say, “I’m the person that you’d hire if you need to go fast and put in place infrastructure so that you can go public or so that you can have a high merger acquisition strategy,” for example. If I say that, then I’ve just tapped into how to solve a problem that that particular small company needs.
Alana Benson:
So much of this is difficult to do and every company is different. And I think it’s so important to get help and support along the way as you’re trying to not only be better in your role but be making more money. So what can you tell me about how you can use mentorship to further your career and help you increase your income? What can mentorship look like and how do you find a mentor?
Tessa White:
I think every single person needs to have not just a mentor, they need to have a handful of mentors, and it’s available to everybody. What most people, the mistake they make is they think they need to go up to somebody and say, “Will you be my mentor?” When in fact, the best mentorships that I know of are where you identify people who have really good skill sets in an area.
For example, everybody should have a mentor that they can look to for how do you manage people, how do you get conflict over the finish line, and how do you do it in a way that’s productive rather than destructive? Everybody should have a mentor around data and data analytics or presentations and how to give a good presentation or run a meeting. You should identify people who do that well, watch them. You don’t even need to ask, “Will you be my mentor?” Watch them. Watch what they do in that area.
And then for example, before you go give a meeting, say, “I’ve been watching you. You give really good presentations and I’ve tried to use some of the principles I see that you utilize. Will you take a look at this presentation and tell me what you’d change? Can I just give it to you? Spend 10, 15 minutes to run over the high level?” That’s how you have mentors that make a difference for you is you find people that do good things, you watch them very closely, and then you ask them when the time is right to help you make sure you’ve done that thing right. And I think that’s available to everybody. You don’t have to have a company program to do it. You don’t have to have somebody necessarily saying they’ll be your mentor. Just pick people, watch them.
Alana Benson:
So it doesn’t need to be nearly as formal as what a lot of people think of when they think of entering a mentorship relationship? It can be as simple as, “I saw you do this. You’re great at it. Can you help me with this one presentation?”
Tessa White:
Exactly, or this one conflict. “I have a high conflict situation and this is how I was thinking of handling it. How would you do it?” Exactly. I think that’s far more productive.
Alana Benson:
To that point, obviously a mentorship and mentoring relationship is different than working with a career coach, but how can you find a career coach who can maybe help you and how do you navigate that search? There’s obviously a wide spread of what people charge for career coaching services. Are there any certifications that people should look for when it comes to working with a career coach to make sure they’re working with someone who knows their stuff?
Tessa White:
There are plenty of different certifications, but I don’t think that one is necessarily better than another. I think it’s a lot like finding a regular therapist. You need to find somebody that you vibe with. You need to find somebody who’s been around the block and has some experience.
Probably my biggest beef with career coaching as an industry is that a lot of people with five years of career experience are calling themselves a career coach. You need somebody who has seen lots of situations in lots of different circumstances and watched how those situations play out. And I think when you have somebody that has either been in your industry or has been around the block for a while, they’re going to be able to give you a much better idea of the different choices that you have, and more importantly, the likely different outcomes of those scenarios if you handle it different ways. But somebody with five years of experience simply doesn’t have enough experience or enough behind the scenes in really high-stakes situations to be able to give, I think, information that is really, really helpful or useful.
Alana Benson:
And so aside from a lack of experience, is there anything else to kind of look out for in this industry?
Tessa White:
I would find people that know my industry. For instance, tech is a different flavor than blue collar. If I took advice from a career coach that’s a high-tech career coach and I’m in a blue collar environment, that advice is not going to play as well because there’s just different flavors to different industries. So you try and find somebody that’s the best match to the environment that you are working in, I think, and then you make sure that that person has a lot of experience as well.
Alana Benson:
Is there anything that I didn’t ask you about that seems particularly important for people to think about if they’re trying to increase their income in a role that they’re already in?
Tessa White:
I will tell you that there is a trend that I’m seeing that I think is really valuable to understand. There’s a lot of change happening right now, a lot of layoffs and a lot of people leaving companies. But those people who stay through, I call it a red zone of a company, usually have tremendous opportunities that come their way because of the people that leave and the gaps that that creates. And even though it may be an uncomfortable period of time to try and do more with less, learning how to work through red zones of companies is really teaching you to innovate and is teaching resilience. And that skill set is extraordinarily valuable.
People who stay in companies often end up with the increases and the promotions that they want because of the vacancies that are left. And so I would tell people don’t think that the grass is greener just by leaving a company through a red zone. A red zone can be a tremendous gift to you, and particularly people who are okay with taking promotions that are lateral and they learn the ecosystem of a company, that has delayed value. While it may seem like you’re going backwards or standing still if you’re not getting big raises, if you understand the ecosystem of a company by working in different departments, over time that makes you incredibly valuable to a company. And I’m seeing people use that as a career strategy that ends up paying dividends. If you look at it in a long-term, like a four-year horizon, is huge. Even when they leave that company, the ability to understand the different departments and how they work together is something that’s very, very valuable.
So don’t discount the red zone of a company and think, your brain’s going to tell you this is the wrong company, the wrong time, it’s terrible, it feels uncomfortable. But discomfort doesn’t mean you’re in the wrong company, it simply means you have to learn to do things differently. And it really is the trigger for innovation. And if you can stay through that red zone, it can be incredibly valuable to you.
Alana Benson:
Well, Tessa White, aka The Job Doctor, thank you so much for talking with us today and we really appreciate your time.
Tessa White:
Yeah, thank you so much for having me.
Sean Pyles:
Alana, I so love how you and Tessa talked about what I sometimes think of as the theater of the workplace or narrative building around your job. And I don’t mean to be flip or diminish the real work that goes into building any career, but if you aren’t good at presenting the story of your work, building a compelling cast of characters through your colleagues and advocates who support your work, and getting people excited about what you are doing, it’s going to be a lot harder to get those big opportunities in your career. Tessa described it as “planting seeds,” and I kind of think about it as foreshadowing, set building, and fleshing out your narrative arc.
Alana Benson:
Totally. And there’s so much that goes into what we do at work, and how we can grow and eventually make more money. And if you’re looking for inspiration on where exactly to figure out what type of experience you should be getting, try looking at job listings for jobs you’ll eventually want but maybe aren’t qualified for now. That will clue you into where you should start looking. For example, if you’re in a job that doesn’t currently give you management experience but you’re looking to work as a manager in the future, you could give informal mentoring a try.
Sean Pyles:
So try thinking from your future resume’s perspective. Try to think from your future resume’s perspective. What experience do you need to have to check a box on a job openings list and how can you get it now?
Alana Benson:
Yeah. And once you identify what areas you want to get more experience in, there are thousands of online courses you can take for free or for just a small amount of money to exercise those skills. You can learn how to code, you can learn about AI, how to use spreadsheets, and pretty much anything else you can think of. So think about what courses could help you out in your current role or help make the case to give you a promotion.
Sean Pyles:
And this is a great time to look at other roles again and see what particular skills they’re looking for. If you’re looking for jobs in IT support, for example, you can take a Google certification course for that. Some companies even offer financial compensation for furthering your education. So be sure to ask your manager if there are any funds available to help you pay for the education costs.
Alana Benson:
That’s a great call.
Sean Pyles:
So Alana, tell us what’s coming up in episode two of the series.
Alana Benson:
Next up, we are going to hear from an expert from LinkedIn about how to best optimize your profile so you can make the most out of a job search.
Andrew McCaskill:
I think that the number one thing that I would say to folks if you’re trying to make your profile more visible and more searchable is over 40% of recruiters say that they are searching for talent based on skills. And so you really have to put your skills in your summary, and use skills and skills language.
Sean Pyles:
For now, that’s all we have for this episode. Do you have a money question of your own? Turn to the Nerds and call or text us your questions at 901-730-6373. That’s 901-730-N-E-R-D. You can also email us at [email protected]. And remember, you can follow the show on your favorite podcast app, including Spotify, Apple Podcasts, and iHeartRadio to automatically download new episodes.
Alana Benson:
This episode was produced by Tess Vigeland. Sean helped with editing. Kevin Berry helped with fact checking. Sara Brink mixed our audio. And a big thank you to NerdWallet’s editors for all their help.
Sean Pyles:
Here’s our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances.
Alana Benson:
And with that said, until next time, turn to the Nerd
Inside: The decision on where you live is a big life choice. Learn how an HCOL vs LCOL area will impact you financially. Plus find the cost of living city that fits for you.
HCOL. LOCL. MCOL. What do these acronyms mean and why should I care?
Back when I was trying to decide where to live, there wasn’t a big discussion about the high cost of living or low cost of living areas.
You just picked a city close to family or branched out to a new area. Were you drawn to the big city or not? Plain and simple.
Today, there are many tools at our disposal to try and figure out what is the best city to live in based on income, expenses, and the lifestyle that you desire.
In this post, you will see how to analyze what type of city you want to live in and see if it makes financial sense for you.
Why such the price difference between HCOL and LCOL?
In a low cost of living city, you can buy a house for $50,000. In contrast, a median home price in a high cost of living city can cost $1.5 million. This is a correlation between supply and demand in the market.
The more people who want to live in a certain area that has less available space will naturally drive up prices. Whereas most low cost of living areas, the supply is abundant since there is plenty of space to spread out and find your own neck of the woods for much less.
Here’s a quick comparison of HCOL vs LCOL vs MCOL.
New York City has the highest cost of living at 100, followed by Los Angeles and San Francisco. This graph highlights the difference in cost of living in these example cities.
HCOL Seattle, WA
MCOL Las Vegas, NV
LCOL Knoxville, TN
Cost of Living Index
85.57
69.33
63.26
2 Bed Apartment Rent
$2,724
$1,176
$788
Median Home Price
$826,200
$441,771
$256,188
Median Income
$92,263
$56,354
$33,229
Data from Nerdwallet, Census.Gov, and Numbeo
What is HCOL area Mean?
Simply put, HCOL means a high cost of living.
This type of acronym is to describe certain areas or cities where expenses that impact your budget the most, such as housing, food, and transportation, are more expensive than other areas.
When defining an HCOL area, it is a comparison of the cost of living based on other areas around other cities, states, and countries.
There is no hard line to define high cost of living since it is compared to the other cities.
Is it possible to live in a high cost of living area? Absolutely, it all depends on how you choose to live, the income you make, your lifestyle choices, and your savings percentage.
VHCOL are VERY high cost of living areas, such as Manhattan, Honolulu, San Francisco, Singapore, or Hong Kong.
This post may contain affiliate links, which helps us to continue providing relevant content and we receive a small commission at no cost to you. As an Amazon Associate, I earn from qualifying purchases. Please read the full disclosure here.
Pros and Cons of HCOL
Just because an area is labeled HCOL does not mean that you shouldn’t call the city home and stay away from these areas.
There are plenty of advantages and disadvantages of living in a high cost city.
There are always drawbacks to living in a high cost of living area and you have to decide whether or not what works for you.
In order to make a solid decision on where the best place is for you to live, you need to know this information.
Advantages of HCOL City
Job Market is Solid
First of all, in HCOL cities, the job market is stronger, there are more jobs available, and typically those jobs have a higher paying threshold than other areas.
That is why many companies are attracted to these areas because they know the talent pool of potential employees is much stronger in high cost of living area versus other areas where there are not as many skilled workers.
Income is Higher
Since companies know they must pay their employees a fair wage living in a high cost of living area, incomes are higher to support the increased expenses.
This helps those municipalities collect more taxes, which feed back into the system to provide more for their residents.
More Opportunities
More opportunities abound in a high cost of living cities.
Not only in the job market but there is access to public amenities and conveniences. Some examples include museums, sporting events, transit, best medical services, endless entertainment options, quality restaurants, high-end shopping, and quick access to international airports.
Even better, you can find free entertainment each and every day that does not cost a penny. Here is a list of 101 things to do with no money.
There are many benefits of living in a high cost of living area just because their opportunities are endless. You will always find something to do and there is always stuff going on.
Better Schools
Typically, in your high cost of living cities, that is where you will find the better schools. This is in direct correlation to the job market and skilled workers.
These skilled workers tend to have a higher instance of college graduates and they tend to want the best for their children. As a result, the schools tend to be much better than you would find in other areas.
Higher Chance of Home Equity
Another advantage of big cities is the variety of neighborhoods you can find in a bigger city. You can find the type of house you want to live in and the diversity you crave.
While home costs are much higher, there is also a greater chance of income increasing your home equity much faster than other areas.
For example, in Michigan, you could pay $100,000 for the exact same house in 5-10 years since appreciation will not happen at the same rate as other cities. Whereas, if you look at some of the hot markets, like Denver, Phoenix, or Austin, the home prices have been skyrocketing.
Thus, if you live in those quickly appreciating housing areas, there is a higher chance to increase the value of your house.
Disadvantages Of HCOL Cities
Higher Basic Cost of Living – Specifically Housing
First, housing costs can break the bank. It is the biggest expense for any household.
If you were unable to secure a salary to justify the housing cost, it makes it nearly impossible to be able to afford to live in a high cost of living area.
This is where you would have to get creative and look for housing subsidies or other means to stretch your housing budget.
Harder to Find Houses
Another con of a high cost of living areas is it is much harder to find housing! House and rent prices are higher, jobs are tougher to find where there’s opportunities abound, and you may feel like you are searching for a needle in a haystack.
You need to have the right opportunity to find the proper house for you. If you are looking at buying, you need things to line up properly and in your favor.
Stretch Yourself Too Far Financially
Since incomes tend to be much higher, many people find the urge to spend more discretionary income.
In many cases, this means that the average household may stretch themselves a little bit further by keeping up with the Joneses. They tend to spend more frivolously and not live as frugal.
This is a trap to be aware of if you are in a high cost of living area. You can be savvy with your money and save, but you have to be cognizant of how you spend your hard-earned salary.
HCOL Cities…
These are the HCOL areas. Do you need to avoid them? No, but going into those areas, you must realize the cost of living will be higher.
Here’s a list of all of the cities that are the top 20 cities that are high cost of living areas according to Kiplinger:
1.
Manhattan, New York
(145.7% above U.S. average)
2.
San Francisco, California
(94.7% above U.S. average)
3.
Honolulu, Hawaii
(97.6% above U.S. average)
4.
Brooklyn, New York
(80.5% above U.S. average)
5.
Washington, D.C.
(60.7% above U.S. average)
6.
Seattle, Washington
(56.7% above U.S. average)
7.
Oakland, California
(53.9% above U.S. average)
8.
Arlington, Virginia
(50.5% above U.S. average)
9.
Orange County, California
(50.2% above U.S. average)
10.
Boston, Massachusetts
(48.8% above U.S. average)
11.
Queens, New York
(47.8% above U.S. average)
12.
Los Angeles, California
(46.6% above U.S. average)
13.
Bethesda, Maryland
(45.5% above U.S. average)
14.
San Diego, California
(41.4% above U.S. average)
15.
Alexandria, Virginia
(40.0% above U.S. average)
16.
Stamford, Connecticut
(36.4% above U.S. average)
17.
Portland, Oregon
(34.3% above U.S. average)
18.
Fairbanks, Alaska
(27.9% above U.S. average)
19.
Bergen County & Passaic County, NJ
(26.6% above U.S. average)
20.
Anchorage, Alaska
(24.4% above U.S. average)
Source: Kiplinger
What Is LCOL Area Mean?
LCOL stands for lower cost of living.
These cities have a lower average cost of living versus the average.
Simply put…your ability to stretch your income goes much further in a low cost area compared to a high cost of living area. This is where you can get a bigger bang for your buck.
Pros and Cons of LCOL
The differences in the area where you can live can be vastly different. Thus, providing benefits or drawbacks of choosing to live there.
The cons are typically the reasons that most people want to stay away from these cities.
This is where personal preference tends to play the biggest reason for choosing one location over another.
Just like with a high cost of living area, you need to weigh the pros and cons of living somewhere where expenses are not quite as high.
Advantages of LCOL –
Slower Pace of Life
One of the biggest benefits is a slower pace of living in low cost of living area.
Life doesn’t move as fast.
There is more time to breathe, there is more time to step back and take a bigger picture. It is not go, go, go, go 24/7. Time to enjoy the fresh air and slower pace.
Cheaper Housing
This is why people choose to live in a low cost of living area. Period.
You are able to afford much more house for much less.
That right there, over the long term can make or break somebody financially.
Lower Taxes
Many of the lower cost of living cities also benefit from lower taxes as well. They have lower income taxes, and even possibly, lower property taxes. So, this is something to take into consideration when looking at a low cost of living area.
Check what the difference would be from where you’re currently at to where you are considering moving.
Remote Work
This is the bread and butter spot! When you can take in a higher pay and still live in a LCOL city.
After 2020, remote work is becoming more and more popular. In addition, it is an added benefit companies are including to attract skilled employees.
This is one scenario where you can get the best of both worlds.
Disadvantages Of LCOL Cities
Less Opportunities
First of all, there are fewer opportunities. There are fewer things to do, there are less things going on. The airport is a further drive away.
In a big city, you can always find events happening. It may not be the same in other cities. However, some cities have created programs to draw in residents with the big city feel like Bellefontaine, Ohio.
Income Potential is Lower
The job market doesn’t have the high-paying jobs that you would find in the bigger cities. The income potential in one of these cities does not compare.
Let’s face it… a good majority of your working years are about built around making an income. With a lower cost of living city, the income limitations can be cumbersome and it takes longer to be able to reach your financial goals.
LCOL States and Countries with LCOL
Geographic arbitrage can give you great value for your money.
Arbitrage is the spread of differing prices for the same thing like rent, food, or transportation.
This means you can save more money by living in LCOL state or spend less of your nest egg by living in a LCOL countries.
These are the areas you can find the lower cost of living. There are many LCOL cities to be found as well.
LCOL States:
1.
Mississippi
(84.10% of U.S. average)
2.
Kansas
(86.67% of U.S. average)
3.
Oklahoma
(88.09% of U.S. average)
4.
Alabama
(88.80% of U.S. average)
5.
Arkansas
(89.16% of U.S.average)
6.
Georgia
(89.30% of U.S. average)
7.
Tennessee
(89.49% of U.S. average)
8.
Missouri
(89.75% of U.S. average)
9.
Michigan
(90.54% of U.S. average)
10.
Indiana
(90.57% of U.S. average)
Source: US News
LCOL Countries:
Listed in alphabetical order because there are many to chose from based on your personal preferences.
The definition of MCOL is any area that just has an medium cost of living.
There is not one extreme or another. These cities are just plain average. Maybe slightly above or below the median cost of living.
This can be a sweet spot of reaching your financial goals while enjoying a higher quality of life.
Benefits of MCOL Area
As you can read on Reddit personal finance threads, there are plenty of reasons to live in an MCOL area.
Mostly because these types of cities you can get the best bang for your buck, and still have the pros of living in a high cost of living area, as well as the pros of living in a low cost of living area.
This is where the job market may be very stable with good wages but the cost of living is not going to cost you a fortune.
Also, you can find tons of cities that meet the criteria of a MCOL city.
Cost of Living Varies within Cities
Regardless of whether you choose, HCOL, LCOL, or MCOL areas, the cost of living will be dramatically different between these cities.
Whether you are looking at the downtown area, the outlying suburbs, or maybe even the cities that have popped up around near the main city.
Just because the city is HCOL or LCOL, there will be neighborhoods that will be the outliers to the main part of the city.
So, when you are looking at cost of living, you must know the things that are most important to you and what type of neighborhood that you would want to live in because they can be found.
That is what I call hidden gems.
It is possible to find a cheaper house in a low cost of living or high cost of living area, you just have to do your homework and know what you’re looking for.
Vice versa, it is very possible to find a neighborhood in a low cost of living area that is much higher than the surrounding areas.
How can I buy a house in a high cost of living?
It is possible to be a homeowner in a in a high cost of living area. You just have to be able to afford the down payment on the house to make being a homeowner justifiable, if possible.
Before you decide to buy a house, here are some factors you need to take into consideration..
1. Does it make sense?
First, you have to make sure that it makes logical sense to buy a house. Especially in a high cost of living area because the house prices may not match up to what the income that you are bringing in.
Will you still be able to reach your money goals by purchasing a house? Or will you be house poor?
2. Compare rent to potential mortgage
Will it be cheaper to rent? Or cheaper to have a mortgage?
To figure this out, take what the average rent is in your neighborhood. Then, use a mortgage calculator to figure out the maximum amount you can afford.
Since those calculators will leave you house poor. Decide what you are able to justify in spending on a mortgage and figure out what the mortgage payment is.
Is the mortgage payment less than average rent in the area?
For example, it may cost in a high cost of living area, like San Diego, it may cost $3,000 a month to rent a house. Whereas you might be able to buy a similar home in the same neighborhood and have your mortgage payment of $2,259.
Thus, making buying makes more financial sense than continuing to rent.
3. Expand your horizons
Another tip to afford your dream house – do not be set on that one specific neighborhood in a high cost of living area.
Many times you can find an up-and-coming neighborhood that is much less than the trendier and hip current neighborhoods that you want to live in.
Thus, you can typically save a good chunk of money. Plus in the long run, you greatly increase the potential for home equity.
4. New Homebuyer Programs
If this is the first time you are buying a house, then look into first-time homebuyer programs and grants. (Hint… this is like free money!)
There are many out there because cities want their residents to buy in their neighborhood and their cities because that means they are going to be there for a longer-term.
Also, there are programs for the military, teachers, nurses, single moms, minorities, graduate students. You just have to look.
5. Save for Down Payment
When you are looking at buying a house, this is the time to become serious about saving for a down payment.
You may have to find ways to save more money each month.
This could include things like downsizing your lifestyle to make it possible. Living with friends or family while you save up more money. Or just spending less for a certain period of time until you reach your downpayment goal.
6. House Hacking
The last step is one of the best ways to reach financial independence in a high cost of living city. Plus the concept works well in any city… house hack.
Find a multi-family housing property that you were able to buy. For example, plan to live on one side of the duplex and rent out the other. This will help you pay for your mortgage, by using the rent collected from your renters.
Thus, lowing your overall housing cost, which is your biggest expense.
Where Does Your Income Go the Furthest?
This is a comparison that you may be surprised by the outcome. Thus, proving why you need to do cost comparisons to see what financially makes the most sense when deciding to move from one to the other area.
comparison of income, expenses, taxes, and potential savings!!!!!!!!!!!
Once again, this is personal to your situation. So, take a moment and use the cost of living calculator yourself.
Paying taxes is one option to increase what you take home in each paycheck.
No Income States
These are the states that don’t pay state income taxes on wages:
Alaska
Florida
Nevada
New Hampshire
South Dakota
Tennessee
Texas
Washington
Wyoming
For most people, that is an instant decrease in overall taxes!
Higher Taxed States
Also, if you live in one of the higher taxed states, then you may want to reconsider moving to a lower cost of living area.
The higher taxes income tax states include:
California
Hawaii
New Jersey
Oregon
Minnesota
The District of Columbia
New York
Vermont
Iowa
Wisconsin
These states tax income somewhere between 7.65% – 13.3%.
Property Taxes
Property taxes vary from state to state.
In some states with large property taxes, it may even out with no income taxes. While other states, like Illinois, where property taxes are high and income taxes are above the national average as well.
Moving From HCOL to LCOL
The reason that most people move from HCOL to LCOL area is to save money. They want to decrease their expenses – that is the primary driver. Other times, it may be that they’re looking for a different type of lifestyle.
But as you can read on Reddit, everybody has a different personal experience.
It may have been beneficial and may have been bad timing. It may have been the best choice. It may have been the worst decision.
Make sure to factor in the costs associated with the move. Also, any ongoing expenses like travel if you are moving away from family.
How to Choose HCOL or LCOL?
Deciding where you live is one of the most personal decisions that you can make. Nobody can make it for you. You know what you want in life, how you want to live, and where you would feel more comfortable.
So, let’s look primarily at the financial side of making this decision of what is best.
1. Lifestyle You Desire
There are massive differences between HCOL and LCOL cities!! In big cities, life moves at a faster pace. While most cheaper cities areas move at a slower pace, so you have to make the decision of what type of lifestyle.
Do you want you want the big city? Do you want suburbia? Or do you prefer more of a country lifestyle?
When looking at this first factor, your answer should not include money. This is where your heart is. This is where your home. This is the life that you plan on living. This doesn’t include the financial sense.
This includes what makes your heart happy.
2. Your Money Goals
One of the things that discussed the most on this site is the 10 Money Bliss Steps to Financial Freedom. That is where most of our readers find their current money goal. And for good reason, you must build a strong foundation with money one step at a time.
In order to achieve long term financial success, the decision on housing is critical as it is the biggest expense in any budget. And that is can have the greatest impact on your budget!
On the flip side, the amount of income you are capable of making can also make the biggest impact on what you can afford to spend.
You must decide on your current money goal as well as the longer term money vision. Maybe you are looking at wanting to retire early? Love to live a slower life in the future?
It is possible to live in HCOL area where you are able to live extremely frugally and save more money. This is what my friend did over at Tuppennys FIREplace. For them, it was a smarter decision. On the flip side, maybe you are happier living a slower pace of life. Income is not the primary driver and you just want to enjoy life more.
At the end of the day, you must prioritize what you want, how your budget and your expenses correlate, and how your saving rate is impacted in various cities.
3. Season of Life
For those in their younger years may not understand this as much, but as you go through seasons of life, you will realize that you have different goals, objectives, and desires along the way.
When deciding where to live, your current season of life will probably have a very high impact on what you are looking for.
If you have young kids, you probably want to find a neighborhood where you have other families nearby that your kids can interact with.
If you are close to retirement, you may look decide to move out of the good school district because you do not need to pay the premium of living here. You may choose to move to a lower cost of living area, so you have the freedom to travel and help my kids and grandkids.
4. Potential Income & Career Opportunities
The greatest benefit of a high cost of living area is the income potential and the career opportunities. Both are much greater in the bigger cities than you would find in the smaller cities.
If your primary goal is increasing your income and advancing your career, then looking at high cost of living areas an absolute must. Plus you might be able to find something on the outskirts of expensive neighborhoods, that would make the most financial sense.
Then, living in HCOL is justified and necessary and the income can justify the higher costs associated.
On the flip side, there is plenty of income potential as a small business owner in a low cost of living area. You just have to know the market, what your skills are in, and what the needs are in your area.
4. Fixed Expenses
Fixed expenses can be dramatically different in each area.
Write out a list of your top fixed expenses and make sure to compare those as well.
For example, child care costs and tuition are going to be much more expensive in a big city than in the suburbs. Maybe in certain neighborhoods, a car would not be needed; thus, eliminating another big cost and associated maintenance.
While some fixed expenses seem meniscal, over time, they can add up significantly. Thus, helping or hurting your financial picture.
Unspoken Price Tag to Live Somewhere
As we covered in this post, there is a lot to consider when deciding between HCOL, LCOL, or MCOL areas.
It is a highly personal decision that you must take the time to make the best decision for you!
Not someone else, but for you.
One thing to watch out for when looking at where to live is what I call the “price tag” of a beautiful city.
Many times, employers know that the city that people want to live in their city for whatever reason. Thus, you will experience what I like to call the “income hit” to living there.
For example, Fort Collins, Boulder, and Austin are highly desirable areas for postgraduates to live in because they fall in love with the town and they want to stay here for the long term. Thus, employers know that this!
As a result, income for jobs maybe 10 to 15% less than they could make in any other type of market or city. So, that is something just to be aware of when wanting to stay in the city that they have grown to love.
In conclusion, when you’re looking at a high cost of living area versus a low cost of living area, there are two sides to the coin.
One – what makes financial sense. Two – your home is where your heart is.
Consequently, you have to make the decision on what makes sense for you.
While it makes financial sense to move to a lower cost city, at the same time, it may move you away from your family and your support system, and everything that you enjoy, and you may not be as happy in the long run.
Enjoy weighing the alternatives between all of the options available.
Know someone else that needs this, too? Then, please share!!
Did the post resonate with you?
More importantly, did I answer the questions you have about this topic? Let me know in the comments if I can help in some other way!
Your comments are not just welcomed; they’re an integral part of our community. Let’s continue the conversation and explore how these ideas align with your journey towards Money Bliss.
After the intense jobs week data, we ran straight into CPI and PPI inflation week, with a Fed meeting thrown in! I got one good crumb from the Fed meeting that made me smile: Powell finally admitted that the labor market isn’t tight anymore, which is a beneficial statement for rates down the line if the labor data gets weaker. I discuss this in this episode of the HousingWire Daily podcast.
Last week had softer inflation data, but I am much more focus needs to be put on the weekly jobless claims data and jobs week data.
The 10-year yield closed last week at 4.22%.
Mortgage spreads
The spread between the 30-year mortgage rate and the 10-year yield has been an issue since 2022 and things got worse after the March 2023 banking crisis. However, this year, spreads have improved despite being far from ordinary.
If we took the worst levels of the spreads from 2023 and incorporated those today, mortgage rates would be 0.52% higher. While we are far from being average with the spreads, the fact that we have seen this improvement is a plus this year.
Purchase application data
Last week, we had the second-best week-to-week purchase application data percentage print as mortgage rates have fallen recently. Now, I caution everyone that we are working from a shallow bar, so moving the needle doesn’t take much. However, you have something if we can string out a few weeks like this.
Since November 2023, when mortgage rates started to fall, we have had 13 positive prints versus 13 negative prints and two flat prints week-to-week. Once mortgage rates began rising in 2024, some demand was removed. As shown below, the year-to-date data isn’t even positive for 2024: we’ve had seven positive prints, 13 negative prints, and two flat prints. We aren’t getting any real mortgage demand growth with rates this high and the bounces we see in the data are coming from depressed levels.
Weekly housing inventory data
As we head into the summer, I still can’t express enough gratitude for the growth in inventory this year. If mortgage rates keep falling and demand picks up, we will have a much better buffer with active inventory than in 2022 and 2023.
My rule of thumb has been that inventory should have some weekly prints between 11,000 -17,000 as long as rates are above 7.25%. We have hit that three times this year; last year was a whopping zero. Even though the weekly inventory growth rate didn’t hit that level, rates fell on Friday and inventory grew at a healthy clip of 8,943.
Weekly inventory change (June 7-June 14): Inventory rose from 611,596 to 620,539
The same week last year (June 9-June 16): Inventory rose from 443,749 to 451,808
The all-time inventory bottom was in 2022 at 240,194
This week is the inventory peak for 2024 at 620,539
For some context, active listings for this week in 2015 were 1,174 446
New listings data
Another positive story for 2024 has been that new listings data is growing from the record-low levels we saw in 2023. As most sellers are buyers, seeing more sellers listing their homes has been good. The only thing about 2024 was that I was 100% sure we would see a seasonal peak print at a minimum of 80,000 and it’s starting to look more and more like it won’t happen this year as the seasonal decline in new listings isn’t far away.
Here are the new listings for last week over the last several years:
2024 71,457
2023: 62,187
2022: 87,996
Price-cut percentage
In an average year, one-third of all homes take a price cut — this is standard housing activity. When mortgage rates increase, demand falls and the price-cut percentage grows. When rates drop and demand improves, the price-cut percentage can fall. This data line is seasonal, and we have seen consistent year-over-year price-cut percentage growth since the end of March.
As the old stale data trickles in, we should see a cooling down in year-over-year price growth. I recently discussed this in the HousingWire Daily podcast and explained why I believe this is the case. Here are the price-cut percentages for last week over the previous few years:
2024: 36%
2023: 31%
2022: 27%
Pending sales
Below is our weekly pending contract data on a year-over-year basis to show demand in real time. With more sellers who are buyers, we have a tad more demand this year. If mortgage rates head lower and stay lower, this contract data will grow, but we don’t see that growth in mortgage demand yet.
2024: 395,960
2023: 386,052
2022: 452,003
Week ahead: Existing home sales, housing starts, retail sales and Fed speeches
This week, we will get some economic data; retail sales will be the essential data line for the Fed. We will also get housing starts and it will be interesting to see if we continue the down trend in single-family and multifamily permits. Existing home sales will be out on Friday and should still trend near recent lows. However, this week, the Fed speeches will engage with all the data we have gathered recently, so we’ll keep an eye on that.
Before the Fed held its press conference, we got a softer-than-anticipated CPI report, which sent the 10-year yield (and mortgage rates) lower at first. Then, the Fed announced its policy and bond yields headed higher as Powell spoke. However, the 10-year yield finished the day lower. We have had some wild moves on key data lines lately, but we have itchy fingers from crowded trades, as shown in the 10-year yield below.
The ten-year yield, vital for mortgage rates, closed at a critical technical level today. However, we must remain vigilant, as we need to see softer economic data or a much softer PPI inflation print tomorrow morning to confirm this trend.
The PPI inflation report is critical because it filters more into the PCE inflation report later in the month, and that is the Fed’s preferred inflation data to track. As you can see below, we are again at this crucial level for the 10-year yield, so we shall see if this breaks lower.
We discuss Fed day in more detail on the HousingWire Daily podcast that drops tomorrow morning, but let’s first look at today’s inflation report because the CPI inflation report was a big surprise today.
From BLS: The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in May on a seasonally adjusted basis after rising 0.3 percent in April, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.3 percent before seasonal adjustment.
The month-to-month inflation data shocked bond traders, hence the big waterfall dive with the 10-year yield right after the report. It wasn’t like rent inflation drove this lower either — the shelter inflation grew monthly, but other inflation data came in lower than anticipated. As you can see in the chart below, we have made some good progress on the year-over-year inflation data heading lower.
However, going out for the second half of the year, the base effects of the CPI data means it will be harder for these year-over-year gains to show progress. This is one thing Jay Powell discussed, which is a huge deal. This means the Fed will be more focused on the month-to-month data reports, as they should be, going out for the rest of the year.
The big takeaway from the Fed meeting is that although they talked about the inflation data being good, the key talking point wasn’t about inflation at all — it was about the labor market.
The Fed believes the labor market data is back to balance enough to publicly say we are at levels we had before COVID-19. This is very big, as I feared Powell would wait for the job openings data to get back toward 7 million or the wage growth data to get back to 3% before he said this. The fact that he made this public is enormous.
So, what do we make of today’s double event? The inflation data was cooler than expected, but that won’t move the needle for Fed rate cuts. However, Powell’s labor talking points are a big deal. I recently talked about this on the podcast covering all the reports on jobs week.
The fact that the Fed is open to talking about labor supply data being balanced means they know that the labor market is softening. If we see labor data breaking, they will find the cover needed to cut rates without worrying so much about inflation because they will be back to a dual mandate Fed. On the mortgage rate side, this means mortgage rates can go lower and stay lower when the labor data gets weaker.
I see this as a sea change because one concern I had was the Fed would wait too long before admitting that the labor market is back to pre-COVID-19 trend data. It has been at that level for months now, so better late than never! As Powell said today: the best thing we can do for housing is get inflation lower so we can cut rates. My argument has been that the labor data will dictate this and today, we can finally see the path to a Fed pivot, but it does require the labor market getting weaker.
It’s day 6 of the increasingly famous 11-day weekend (1 normal weekend plus the 3 day Memorial Day weekend and the 5 days in between without any big ticket market movers on the calendar). There was no way to know for sure that this week would be as flat and uninspired as it has been, but here on Thursday morning, we have yet to see any other indication. This morning’s Jobless Claims data was one of the only scheduled reports this week. It typically doesn’t move the needle and today is no exception. Yields were mostly flat overnight with a bit of volatility in sympathy to European bond market volatility, but the domestic session is underway at almost perfectly unchanged levels.
Mortgage rates rose for the fifth consecutive week, but so far it has had limited influence on this year’s spring home purchase season, Freddie Mac commented.
The 30-year fixed rate mortgage increased by 5 basis points this week to 7.22%, tying a level last seen at the end of November, the Freddie Mac Primary Mortgage Market Survey found.
For April 25, the 30-year FRM was at 7.17%, while for the same week in 2023, it averaged 6.39%.
For the 15-year FRM, the average rose three basis points, to 6.47%, from 6.44% and a year ago at this time, the 15-year it averaged 5.76%.
“With two months left of this historically busy period, potential homebuyers will likely not see relief from rising rates anytime soon,” Sam Khater, Freddie Mac’s chief economist, said in a press release. “However, many seem to have acclimated to these higher rates, as demonstrated by the recently released pending home sales data coming in at the highest level in a year.”
According to LenderPrice data posted late morning on Thursday on the National Mortgage News website, the 30-year FRM was at 7.36%, nearly 10 basis points lower than it was at the same time last week, 7.457%.
One of the elements in pricing mortgages, the 10-year Treasury yield, has remained elevated, even though it was down from one week ago, when on April 25, it peaked at 4.74%. By April 29, it closed at 4.61%.
This reflects market conditions following the Federal Open Market Committee’s decision at its April/May meeting not to change short-term rates. Investors, who once thought a June cut was likely, have backed off that position.
Rates are likely to remain in the 7% range in the future, said Richard Martin, director, real estate lending solutions for analytics firm Curinos, which also tracks mortgage rate data. He added that while he expects rates to fall a bit by the end of the year, he is a little more bearish than Fannie Mae’s latest outlook.
In terms of the impact on mortgage rates, the Fed’s decision was anticipated and already priced in.
“I like to characterize it as no one predicted the level and pace of increases no one’s going to predict the level and paces of decreases,” Martin said. If the FOMC was to cut rates, it would likely be closer to the end of the year.
On April 30, the first day of the FOMC meeting, the yield moved higher again, by a little over 7 basis points to just shy of 4.68%. However, the next day, it went down to 4.60%.
As of mid-morning on Thursday, the 10-year yield was almost 4 basis points higher.
Where mortgage rates currently are makes the environment tough for mortgage originators and title underwriters, but is good for companies that are “servicing-heavy,” said Bose George in a commentary issued after the FOMC meeting.
“Despite the headwinds around mortgage volumes, stable home price appreciation should remain a positive for mortgage credit,” George said.
Martin expects rates to hold in the current range, as does Redfin’s economic research lead Chen Zhao.
“The Fed meeting is unlikely to push mortgage rates down — but the good news is that it won’t push them up, either, which could have happened if the Fed took 2024 rate cuts off the table,” Zhao said in a press release. “Even though housing costs shouldn’t climb much more, they will remain elevated for the foreseeable future, which could push more buyers away.”
Martin is leaning towards a mild recession occurring in the future, noting the U.S. economy is not yet out of the woods.
The 10-year Treasury is just one influence on mortgage pricing; the other is the primary-secondary market spreads related to securitization activity.
Federal Reserve Chairman Jerome Powell noted that the Fed will reinvest any proceeds from mortgage-backed securities run-off over $35 billion into Treasuries. That translates into lower purchase activity
“While this is in line with market expectations, we think this will continue to be negative technical for agency MBS,” George said.
It is not just those spreads that could influence pricing, Martin said, noting the record per-loan production losses originators suffered last year.
Homebuyers are still suffering from interest rate shock, said Jeremy Sicklick, CEO of real estate firm HouseCanary. “With mortgage rates creeping over 7%, many buyers and sellers alike seem to be holding out for rate cuts in the months ahead before jumping into the housing market,” Sicklick said in a press release.
HouseCanary data found the median price of all single-family listings rose 3.2% over a year ago, while closed listings rose 8%.
“With high mortgage rates and surging home prices tamping down market activity, we expect to see a subdued spring buying season continue throughout May, despite inventory increases,” Sicklick declared.
But besides higher rates, the problems around inventory and affordability remain.
“I think we’ve got to solve for those in concert,” Martin said. “Lower rates will help but I don’t think it’s enough to really materially move that needle.”
The “Emerald City,” Seattle, WA, has picturesque mountain views, sparkling lakes, and iconic landmarks like the Space Needle and Pike Place Market. This Pacific Northwest city has so many hidden gems, vibrant neighborhoods, and stunning seasons that it’s no wonder about 734,000 residents live here.
In Seattle, you’ll find that the average rent for a one-bedroom apartment is $2,185. If you’re looking to rent an apartment in Seattle and are curious about the most expensive neighborhoods, then you’re in the right place. ApartmentGuide is here to help you explore the 11 most expensive Seattle neighborhoods to rent an apartment this year.
10 Expensive Neighborhoods in Seattle, WA
From picturesque waterfront neighborhoods to areas near the city center, there are plenty of amazing Seattle neighborhoods to rent in this year. Whether you’re looking for a luxury high-rise apartment or a place with views of Lake Union, you’ll find the right neighborhood on this list.
1. Lake Union 2. Westlake 3. First Hill 4. Downtown 5. Columbia City 6. Belltown 7. Northeast Seattle 8. Rainier Valley 9. North Seattle 10. West Seattle
Read on to find out what these neighborhoods have to offer.
1. Lake Union
Average 1-bedroom rent: $2,789 Apartments for rent in Lake Union
Lake Union is the most expensive neighborhood in Seattle, as the average rent for a one-bedroom unit is $2,789. There are plenty of reasons why this neighborhood draws residents. Lake Union is near attractions like the Museum of History & Industry and Gas Works Park, making it a prime location to explore the city. The area also has views of the cityscape and water, making apartment views gorgeous. If you’re looking for a taste of the neighborhood, there are a variety of local restaurants to explore, like Duke’s Seafood and Taco’s Chukis, showcasing Seattle’s food scene. For renters living in Seattle without a car, there are plenty of bus stops close to Lake Union.
2. Westlake
Average 1-bedroom rent: $2,673 Apartments for rent in Westlake
Westlake is a bustling area that’s northwest of Downtown Seattle. This beautiful neighborhood is near many attractions like Lake Union and Seattle Center, home to the Space Needle. Westlake is well-known for its green spaces, like Lake Union Park and the cafes along Westlake Avenue. The average rent for one-bedroom apartments is $2,673, about $500 above the city’s average, making it a pricier neighborhood. However, Westlake’s central location and amenities may be worth it. Westlake is also near some of the most expensive neighborhoods in Seattle to buy a home.
3. First Hill
Average 1-bedroom rent: $2,596 Apartments for rent in First Hill
With an average one-bedroom rent of $2,596, First Hill is the third most expensive neighborhood in Seattle. This neighborhood has plenty of historic homes in styles like Victorian and Craftsman, as well as properties with picturesque views of the cityscape. First Hill is also near I-5, making it a convenient location for commuters. And if you’re looking for a relaxing afternoon, you can find Freeway Park and the Frye Art Museum in the area. You can also explore Broadway, home to popular bars and restaurants like Stoup Brewing and Garage Billiards & Bowling. First Hill is also near some of the affordable neighborhoods to rent in Seattle.
Learn more about the First Hill neighborhood in Seattle.
4. Downtown
Average 1-bedroom rent: $2,552 Apartments for rent in Downtown
Downtown is the next most expensive neighborhood in Seattle with its central location near Pike Place Market and the Seattle Art Museum. Home to iconic attractions, like the Seattle Aquarium, Benaroya Hall, the Showbox, and the Seattle Great Wheel, it’s no wonder this area is popular. Downtown has a lot of shops and restaurants, reflecting Seattle’s vibe. You find spots like Pike Place Chowder, Beecher’s Handmade Cheese, and Ivar’s, alongside hidden gems and plenty of breweries.
Learn more about the Downtown neighborhood in Seattle.
5. Columbia City
Average 1-bedroom rent: $2,293 Apartments for rent in Columbia City
Just about 5 miles from Downtown, Columbia City is a stellar neighborhood if you want a more residential area. While more expensive, the perks of living in Columbia City may help offset the costs. For example, you can live in Seattle without a car as the Link Light Rail stops in Columbia City. You can also walk to attractions like the Beacon Cinema, Columbia Park, as well as the local restaurants along Rainier Avenue, like The Flour Box, Geraldine’s Counter, and Sam Choy’s Poke to the Max. Columbia City also has gorgeous historic homes and tree-lined streets.
Learn more about the Columbia City neighborhood in Seattle.
6. Belltown
Average 1-bedroom rent: $2,263 Apartments for rent in Belltown
Next up is Belltown, the sixth most expensive neighborhood in Seattle. Belltown is full of history and charm, with historic buildings and waterfront views. This area also has plenty of parks, restaurants, and attractions, so you’ll have lots to explore. Make sure to enjoy the outdoors at Olympic Sculpture Park, see a show at The Crocodile, or grab a meal at one of the neighborhood restaurants. It’s also the second most walkable neighborhood in Seattle, as you can easily get to Pike Place and the Seattle Center. It’s no wonder the rents are above Seattle’s average.
Learn more about the Belltown neighborhood in Seattle.
7. Northeast Seattle
Average 1-bedroom rent: $2,252 Apartments for rent in Northeast Seattle
Located north of Downtown, Northeast Seattle is the next neighborhood on our list. Northeast Seattle has a friendly atmosphere and community feeling, as it’s near the University of Washington campus. There are plenty of local cafes and restaurants along Roosevelt Way NE, University Avenue, and NE 65th Street, such as Araya’s Place and Portage Bay Cafe. You can also check out some of Northeast Seattle’s green spaces, like Ravenna Park and Magnuson Park. With its bustling atmosphere, location near Lake Washington, and public transit options, there are so many reasons people live here.
8. Rainier Valley
Average 1-bedroom rent: $2,251 Apartments for rent in Rainier Valley
Rainier Valley takes the eighth spot on our list of most expensive neighborhoods in Seattle. The average rent for a one-bedroom unit is roughly $100 more than the city’s average. Rainier Valley is a great option to consider if you’re looking to be near Lake Washington and have picturesque views. It’s about 5 miles from Downtown, which means you’ll have easy access to the city center, without living in the bustling atmosphere. Make sure to explore Rainier Avenue, which has plenty of restaurants and shops, or check out Pritchard Island Beach.
9. North Seattle
Average 1-bedroom rent: $2,224 Apartments for rent in North Seattle
A well-loved Seattle neighborhood, North Seattle is the next area. North Seattle is home to Thornton Creek Natural Area Park and Meadowbrook Playfield Park, meaning there’s plenty to do throughout the week. There are plenty of neighborhoods in the North Seattle area, so it’s a great area to explore the city. If you need to commute to work, there are lots of options, as the I-5 freeway and the Northgate Light Rail stop are nearby.
10. West Seattle
Average 1-bedroom rent: $2,194 Apartments for rent in West Seattle
The tenth most expensive neighborhood in Seattle is West Seattle. This area has a vibrant feeling with its popular restaurants and quirky shops along California Avenue, like Easy Street Records, Bakery Nouveau, and Raccolto. You can find parks like Lincoln Park and Alki Beach Park, which are perfect for enjoying a sunny day in Seattle. West Seattle also hosts the West Seattle Summer Fest each year, providing residents with lots of opportunities to enjoy their neighborhood.
Learn more about the West Seattle neighborhood in Seattle.
Methodology: Whether a neighborhood has an average 1-bedroom rent price over the city’s average. Average rental data from Rent.com in March 2024.