Mortgage Rates Just Hit a 4-Month Low, but Do Homebuyers Even Notice—or Care?

a brick home with a for sale sign in front

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Mortgage rates are down again this week, which means things are looking up for homebuyers.

The average rate for a 30-year fixed-rate mortgage ticked down 2 basis points to 6.13%, according to Freddie Mac, continuing a pattern of rates seesawing lower since topping 7% in the fall. In fact, mortgage rates are at their lowest levels since mid-September 2022.

Yet, while lower borrowing costs are a boon for homebuyers, few seem to be pouncing on this opportunity as they might have a year or two earlier.

“As we move into the new year, housing market data continues to suggest that buyers are relatively sluggish as the total number of homes for sale climbs higher and homes spend more days on market,” noted Realtor.com® Chief Economist Danielle Hale in her analysis for the week ending Jan. 21. “After unprecedented urgency to find and close on a home in 2021 and 2022, buyers in today’s housing market are clearly operating under a different set of expectations and a much greater measure of patience.”

We’ll look at why homebuyers aren’t moving on this mortgage rate reprieve with more gusto—and what it might mean for homebuying this year—in this installment of “How’s the Housing Market This Week?

Why mortgage rates are falling

The further mortgage rates dip, the less of a fluke these lower rates appear to be. And for this, we can thank easing inflation.

“This is the first time after nearly two years that the inflation rate is finally lower than it was the previous year,” explains Nadia Evangelou, senior economist and director of real estate research at the National Association of Realtors®.

As a result, she predicts, “Mortgage rates may fall even further in the following weeks as investors expect the Federal Reserve to take a smaller rate hike in February.”

Lower inflation rates might spell good news not just for mortgage rates, but also for home prices (more on that next).

An era of more ‘normal’ price gains?

For the week ending Jan. 21, listing prices were 7.3% higher than this same week last year. While still up, this would be considered a more “normal” price gain than the frothiness of the COVID-19 pandemic period, when prices were expanding week after week by double digits.

In fact, December 2022, with its median listing price of $400,000, marked a noteworthy milestone: It’s the first month in a year when year-over-year prices were higher by only single digits.

Homes are taking longer to sell

While today’s slower price gains is good news for homebuyers, so far, they aren’t feeling all that inspired to snap up the goods.

For the week ending Jan. 21, homes lingered on the market 14 days longer than this same time last year, marking six full months of properties taking longer to sell than a year earlier.

This calmer tempo of market activity is a relief to house hunters, who now have more time to make decisions without the pressure to beat out competitors amid the bidding wars that dominated a year back. This is especially true for first-timers, Hale notes, who “are navigating what can be a daunting process even for experienced shoppers.”

On the flip side, Hale adds, “homeowners looking to sell in 2023 will want to be mindful of the slower market pace to set their expectations accordingly.”

Your home might not sell in the first hour it hits the market, in other words—and that’s OK.

Home sellers are being cautious

As for prospective home sellers who might be thinking about listing their homes? They, too, seem to be biding their time.

For the week ending Jan. 21, 5% fewer homes were listed for sale than the same week a year earlier, marking the 29th straight week of declines. That said, homebuyers have plenty to shop for with active listings up 69%.

By February, Hale thinks, more owners might be inclined to sell their homes, which would be a welcome development for the market.

As for what to expect, Evangelou thinks this spring’s homebuying season will perk up, although not quite as much as the past couple of years when mortgage rates hit record lows right while people itching to move hit pandemic highs.

“Generally, home sales activity increases by 33% in March compared to February,” says Evangelou. “However, in the last couple of years, activity was even busier due to low mortgage rates. Even though rates were rising last March, many buyers were rushing to benefit from the 4% rates during that time.”

This March will be different.

“Given low affordability and inventory, activity may not ramp up so fast in the spring season this year, but it will definitely be busier than it currently is,” Evangelou says. “Meanwhile, a stronger housing market could help the U.S. economy to skirt a recession.”

In other words, a strong economy and a strong housing market appear to go hand in hand, and could very well be on the horizon.

The post Mortgage Rates Just Hit a 4-Month Low, but Do Homebuyers Even Notice—or Care? appeared first on Real Estate News & Insights | realtor.com®.

Vroom! $59M Miami Penthouse in Aston Martin Skyscraper Is the Week’s Most Popular Home

Vroom! $59M Miami Penthouse in Aston Martin Skyscraper Is the Week's Most Popular Home

Realtor.com

A lavish, $59 million penthouse in Aston Martin’s first residential building in Miami drives to the top of this week’s most popular home listings on Realtor.com®.

The sprawling, seven-bedroom, top unit will be located in the luxury automaker’s first residential high-rise, which is under construction with completion scheduled for later this year.

Other digs that drew your clicks include a colorful Colorado home with a hula-hoop room, an urban barndominium in South Carolina, and a contemporary masterpiece featured in the Season 3 premiere of HBO’s “Westworld.”

For a full look at this week’s 10 most popular homes, keep on scrolling.

10. 7534 Highway 8, Saginaw, MN

Price: $829,900
Why it’s here: 
This three-bedroom, modern build boasts a bright, open floor plan with walls of windows to let in an abundance of natural light.

The newly built, 2,936-square-foot home features lots of high-end finishes, from the custom built-ins and soaring ceilings with exposed beams, to the radiant-heat flooring and tiled dog shower.

The bedrooms are all on the first floor, and the primary suite has a fireplace, an enormous walk-in closet, and doors that open to a spacious patio.

The home sits on 12.5 acres and comes with a covered outdoor patio with a wood-burning fireplace and a nearby hot tub.

Saginaw, MN

Realtor.com

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9. 6150 Turret Dr, Colorado Springs, CO

Price: $560,000
Why it’s here:
You won’t believe your eyes when you peek inside this four-bedroom home. Make sure not to miss the two-story, hula-hoop room.

From the exterior, this house seems traditional. But a step inside the groovy space reveals an eye-popping, colorful wonderland. Every inch of the 2,856 square feet of space has been brightly decorated to the max, with features like a stuffed animal wall, fur-covered ceiling, and superball countertop.

Located in Erindale Heights, the unique home could make for a fun rental property.

Colorado Springs, CO

Realtor.com

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8. 930 Loring Mill Rd, Sumter, SC 

Price: $450,000
Why it’s here: 
This four-bedroom barndominium is located in the heart of the city, yet it offers a true escape.

Accessed by a gated, dirt road, the 2,187-square-foot home offers an open floor plan with high ceilings and lots of windows. The one-level living space features a primary suite with a spacious bathroom and walk-in closet.

The private, 4-acre lot is surrounded by trees and includes an in-ground swimming pool with a multilevel deck. The property already has a contingent offer.

Sumter, SC

Realtor.com

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7. 529 W 42nd St Apt 2G, New York, NY

Price: $950,000
Why it’s here: 
This industrial-style studio loft sits between Midtown West and Hell’s Kitchen in Manhattan. The rad pad belongs to the owner of the bar Cubbyhole.

The contemporary space features a 13-foot ceiling lined with custom storage and shelves. The bright, 1,100-square-foot residence also boasts concrete floors and oversized windows. A chef’s kitchen has stone countertops, European glass cabinets, and a custom wine vault.

The solid wood, floating staircase leads to a loft area, which could be used as a bedroom or home office.

New York, NY

Realtor.com

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6. 736 Swanson Ave, Charleston, SC

Price: $1,175,000
Why it’s here: 
This brick abode features 2,946 square feet of Southern charm.

The spacious, five-bedroom house located in the Eastwood Subdivision boasts double French doors, hardwood floors, and a first-floor primary suite. A cozy living room has a fireplace and custom built-ins.

The screened porch offers views of the fenced backyard, which is filled with hydrangeas, camellias, and azaleas.

Charleston, SC

Realtor.com

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5. 4745 Grosvenor Ave., Bronx, NY

Price: $2,200,000
Why it’s here:
Get a little bit of country without leaving the Bronx. This Tudor in the Fieldston neighborhood, which borders Riverdale, dates to 1929.

Designed by architect Robert Siering, and abiding by the strict design guidelines of the new neighborhood at the time, the four-bedroom, picturesque property maintains an old-world elegance but with modern conveniences.

The elegant, stone-and-brick manor features a pitched roof, arched front door, and hardwood floors throughout the 4,288-square-foot layout. Out back, there’s a stone deck, a grassy lawn, and a pond.

After 133 days on the market, the property is pending sale.

Bronx, NY

Realtor.com

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4. 532 Neptune Ave, Encinitas, CA

Price: $19,995,000
Why it’s here: 
Featured in the Season 3 premiere of HBO’s “Westworld,” this oceanfront masterpiece was created by designer Wallace E. Cunningham.

“Crescent House” sits atop a 74-foot promontory and offers “explosive panoramic ocean views,” the listing states.

The five-bedroom mansion in San Diego County boasts an ultramodern interior filled with concrete, titanium, and floor-to-ceiling glass. From the tiered design and curved walls to the floating, curved staircase and infinity pool shaped like a crescent moon, the spectacular, 6,329-square-foot mansion is a work of art.

This megamansion sits on a double, oceanfront lot.

Encinitas, CA

Realtor.com

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3. 101 Mellon Ave, Patton, PA

Price: $200,000
Why it’s here: 
This historic, brick mansion is offered at an affordable price, as it needs a complete restoration.

Built in 1921, the 4,403-square-foot home is brimming with potential. There are six bedrooms, five bathrooms, and four fireplaces.

The landscaping on the 15-acre property also needs lots of attention.

Patton, PA

Realtor.com

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2. 1662 Fairmont Ave, Fairmont, WV

Price: $325,000
Why it’s here:
From the stained-glass windows to the exposed stone walls, this four-bedroom abode was built with lava rock.

Built in 1978 and known as the Lava Rock House, this eclectic, 4,400-square-foot home features an open floor plan and one level of living space. Highlights include a sunken living room with a vaulted ceiling, a floor-to-ceiling rock fireplace, and a bedroom with a soaking tub made of lava rock.

The 1.4-acre property comes with an in-ground pool, an outdoor entertainment area, two ponds, and double driveways.

Fairmont, WV

Realtor.com

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1. 300 Biscayne Blvd Way Ph 6301, Miami, FL

Price: $59,000,000
Why it’s here: 
This jaw-dropping, seven-bedroom penthouse will be located in British carmaker Aston Martin’s first residential high-rise.

Located in downtown Miami and offering beautiful views overlooking Miami River, the residential tower is slated for completion later this year. The top spot in the 391-unit tower will be located in what the listing claims is the “tallest condominium tower south of New York City.”

The 19,686-square-foot space promises lavish interiors inspired by the high-end finishes of the luxurious sports car brand.

Miami, FL

Realtor.com

The post Vroom! $59M Miami Penthouse in Aston Martin Skyscraper Is the Week’s Most Popular Home appeared first on Real Estate News & Insights | realtor.com®.

Rents Are Still Rising—but Not By Much. Are the Steep Hikes Finally Over?

a young couple touring an apartment for rent

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The rent may still be too damn high, but at least it isn’t skyrocketing anymore.

That’s the message from the Realtor.com® monthly rental report, which shows a welcome cooling-off after the craziness of the COVID-19 pandemic period.

Rental prices in the largest metropolitan areas across the country rose 11.6% for the full year in 2022 but downshifted steadily throughout the year. By December, prices were only 3.2% higher, compared with the same month a year earlier.

Nationally, the median monthly rent was $1,712 in December—down $69 from the peak in July.

However, the national numbers mask enormous differences in metros around the country, where the locations people are moving to and from are reversing. And instead of embarking on costly, cross-country moves or striking out on their own, many renters are staying put.

“Inflation is high, living costs are high,” says Realtor.com economist Jiayi Xu. “Instead of people looking for a new place, they may be staying where they are or maybe moving in with their families. The formation of [new] renter households is decreasing.”

Notably, some of the hottest metro areas during the pandemic are now experiencing annual price drops. Take Tampa, FL, for example. Rents were down 4.3% year over year in December in the Florida metro. Prices also slipped 4.5% in the Las Vegas metro area.

Slower price gains and even declines are a welcome change, Xu notes. But she points out that prices in many pandemic hot spots are still elevated, raising affordability concerns. The median monthly rental price in Tampa—for homes of all sizes—was $1,760 in December, for example. In Miami, it was $2,682.

Even as the Sun Belt cools, some of the big cities that people fled in the early days of 2020 are heating back up. In December, rental prices were up 12.2% in the New York City metro and a whopping 17.5% in metro Chicago.

The biggest rent growth in 2022 was seen among studio apartments, the report found—a reversal of the 2021 trend in which larger units commanded the biggest increases, as folks were stuck inside and clamoring for more space. Studios are much more common in bigger cities like New York City, Chicago, and Boston, where people are now flocking.

Rich Harty, who co-owns Harty Realty Group in Chicago, isn’t surprised that Windy City prices are through the roof.

“There’s so little inventory, and people have nowhere to go,” Harty says.

Chicago has gotten a boost in recent years from some high-profile corporate tenants, including Google and McDonald’s. The latter transferred its headquarters from the suburbs into the trendy West Loop neighborhood in 2018.

Those moves have attracted plenty of professionals to the city, particularly to higher-end rentals. This might be helping to skew some of Chicago’s numbers higher, Harty believes.

The post Rents Are Still Rising—but Not By Much. Are the Steep Hikes Finally Over? appeared first on Real Estate News & Insights | realtor.com®.

Many Recent Buyers Believe They Overpaid for Their Homes as the Market Corrects

Many Recent Homebuyers Believe They Overpaid For Their Homes As The Market Corrects

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In March 2020, Mark Joseph bought his first home: a spacious three-bedroom, 2.5-bedroom house in Saint Louis. He and his wife had recently had their second child, and they badly wanted more square footage.

Even in those earliest days of the COVID-19 pandemic, the housing market was very competitive. Joseph was convinced “someone else would swoop in and take it away if I didn’t make a strong offer,” he says, so he paid more than the asking price.

When Joseph moved in, he noticed the HVAC system, plumbing, and electrical wiring were in need of some costly repairs as he’d skipped having them inspected. That unexpected work exceeded his initial budget.

Joseph, founder of Parental Queries, a website devoted to pregnancy and child rearing, has since had trouble keeping up with his mortgage payments. And despite his home value rising, it hasn’t gone up as much as he initially anticipated.

“Little did I know then that overpaying for my home meant overburdening myself with an increased mortgage payment for years to come—something I could have done without during such a tumultuous time,” says Joseph, 32.

Joseph is not alone.

At the height of the pandemic, many homebuyers stretched their budgets into the danger zone as they found themselves caught up in bidding wars, offering whatever it took to secure a home of their own. Now with price growth slowing, and even falling in many markets, many of those now-homeowners believe they overpaid for the residences.

Some are even seeking legal recourse. There was a 9% rise in the number of lawsuits filed against real estate professionals from 2021 to 2022, according to data from Victor Insurance Managers, a firm representing over 14,000 real estate brokerages, mortgage lenders, and other industry professionals.

Many are recent homebuyers who are frustrated to discover that their new home needed costly repairs or otherwise has a problem that was missed in a home inspection. So they sue to recoup the costs of the repairs.

“This is actually fairly typical in any down cycle,” says Zach Vollmer, real estate leader at Victor. “No one wants to be the last person in buying at the height of the market. It breeds a sense of resentment.”

Real estate agents are often included in these suits because homeowners believe they should have warned them about these problems as well as any future shifts in the housing market. They typically carry insurance that can pay out such claims.

Some recent buyers are now underwater on their mortgages

Plenty of recent buyers find themselves watching nervously as their neighbors’ homes sell for less than what they paid for their own just a few months earlier—leading them to the inevitable conclusion that their own home valuations appear to be falling.

Roughly 11% of homeowners who purchased their properties last year with a mortgage were a bit underwater on those loans at the end of November, according to the most recent Black Knight data provided to Realtor.com®. Black Knight is a mortgage data and analytics provider. This is partly because home prices traditionally peak over the summer and then fall during the cold weather months. So even in a more normal market, someone who bought in June might see their home value drop off a little by December.

But this percentage of underwater borrowers is more than normal—the highest since 2011, according to Black Knight.

The housing correction that’s led to prices coming down in some parts of the country is a result of higher mortgage interest rates, which more than doubled last year.

During the height of the pandemic, rates had dropped to record lows, bottoming out in the mid-2% range. Since buyers weren’t paying as much in interest, they could afford previously unthinkably high home prices. But when mortgage rates shot up, briefly topping 7% last year, buyers dropped out of the market in droves. That slammed the brakes on prices, forcing sellers and builders to slash asking prices.

Home prices have even fallen in some of the most juiced-up housing markets that attracted legions of new residents during the pandemic, like Austin, TX; Phoenix; and Boise, ID.

But real estate experts urge new homeowners not to panic. Even in places where prices have dipped, they’re not down by much. And they expect prices will rise over the long term, so recent buyers who don’t intend to sell in the next year or two should generally be just fine.

“If you feel that you overpaid, try not to beat yourself up,” says Ali Wolf, chief economist of building consultancy Zonda. “Housing will go through cycles. … It still is a good long-term investment.

“Your monthly payment is now fixed, you’re paying to yourself, and in the long run, you’re building equity,” she adds.

The exception are those who purchased their home a year ago and now need to sell, especially if they’re in rapidly cooling real estate markets. Even those in more stable parts of the country could lose money even if prices haven’t fallen due to closing costs and other fees.

“If you’re trying to move in the next year or two, you’re probably going to feel the impact,” says Wolf.

Most recent homebuyers are still happy with their purchases

Happy Maori family walking towards their new home with a sold sign on traditional bungalow house in
Most people are happy after they purchased a home, even if they had to deal with a bidding war or spend over the asking price.

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Despite the housing market correction, just 1 in 5 homeowners who bought their properties within the past two years regretted doing so, according to a recent survey from online financial services marketplace LendingTree.

“Most people are actually pretty happy after they purchased a home, even if they had to deal with a bidding war or spend over the asking price,” says Jacob Channel, a senior economist at LendingTree.

They’re building wealth they can pass down to future generations, they no longer have to deal with a landlord’s rules and rent increases, and they “have the freedom to paint [their] walls neon pink if that floats [their] boat,” says Channel.

Those who bought during the pandemic and secured a low mortgage rate might now be in a better financial place even if they paid what now may seem like an astronomical sum for their homes. They likely have lower monthly mortgage payments. That’s because mortgage rates have risen from the mid-2% range in 2021 to over 6%. And while that may not sound like much of an increase, it can add hundreds of dollars to a monthly mortgage payment.

In comparison, small drops in home prices don’t translate into much savings. Even if home prices dropped 25%, buyers would still be paying more than they would have if prices were higher but rates were back in the 3% range as they were early last year.

Rates averaged 6.15% for 30-year fixed-rate loans in the week ending Jan. 19, according to the most recent Freddie Mac data. (The calculation uses the national median price tag of $400,000 and assumes buyers put down 20% on their purchase. It does not factor in taxes, insurance, and other costs.)

“Your interest rate is super important,” says Channel. “When you talk about the difference between 3.5% and 6.5%, it might not sound huge at first. But in mortgage land, that’s giant.”

Housing is cyclical: One year it’s up, the next it could be down

Homebuyers, sellers, and owners need to come to grips with the Newtonian laws of real estate: What goes up can also go back down again. But most real estate economists don’t expect the market to crash again like what happened during the Great Recession, where prices fell more than 30% in some parts of the country.

Most bad mortgages have been eradicated from the market. And this time around, there is a severe housing shortage leading to a greater demand for housing than there are homes to go around.

“There’s going to be fluctuations in the housing market, and you’re going to have to turn a blind eye,” says Wolf. “It’s going to feel a little dicey as the housing market rebalances over the next 12 months.”

Channel was quick to point out, though, that a decade after the housing bust, home prices had rebounded and then some in most of the nation.

“Timing the market is really hard—if not completely impossible,” says Channel. “The longer you keep your property, the more likely it is to go up in value and the more likely it is to pay off for you.”

He also pointed out that, while in the short term, it’s often cheaper to rent rather than buy in different parts of the country, that calculation often changes over time.

Renters might have to cough up a security deposit or sometimes even two months rent upfront, but they’re not on the hook for a down payment for a home plus closing costs on top of renovations, maintenance, and the plumber’s bill if the toilet overflows.

But over decades, rents rise. And eventually, they might be higher than a monthly mortgage payment.

“If you’re renting a house, you could see your monthly rent increase by double digits because that’s what your landlord wants to charge you,” says Channel. “If you own a home, you may see your taxes go up. But generally speaking, your payment has the potential to be much more stable, especially if you’ve got a fixed-rate mortgage. … And once you pay your loan off, your housing costs will decrease pretty significantly.”

His advice to those who believe they overpaid for their homes is to avoid obsessing over their perceived mistake.

“Obsessing over this is probably just going to drive you insane,” says Channel. “As long as your house works for you and you can afford the monthly payments … you’re probably going to be OK.”

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White House Releases Sweeping Plan To Push for Rental Affordability and Tenant Protections. Here’s How It Could Impact You.

White House Releases Sweeping Plan To Push for Rental Affordability and Tenant Protections. Here's How It Could Impact You.

Photo by ED JONES/AFP via Getty Images

The White House unveiled a series of new measures Wednesday that it said could protect renters both from rising costs and the burdensome practices hindering their housing searches.

The wide-ranging announcement follows advocacy campaigns from tenants, progressive activists, and Democratic legislators.

The measures included a bid from the Federal Trade Commission and Consumer Financial Protection Bureau to identify measures that “unfairly prevent applicants and tenants” from housing and a pledge from the Federal Housing Finance Agency to examine proposed actions on tenant protections and limits to rent increases on “future investments.”

National median rent prices, though currently cooling off nationwide, soared by 21% between March 2020 and December 2022, according to Apartment List. For the first time in decades, the national average rent-to-income ratio is also at 30%, according to Moody’s Analytics, meaning the country’s renters are broadly considered “rent-burdened,” spending a third or more of their income on housing and putting themselves at greater risk of eviction and financial precarity.

“Over a third of the American population—44 million households—rent their homes. Before the pandemic, well over 2 million eviction filings and roughly 900,000 evictions occurred annually—disproportionately affecting Black women and their children,” the White House said in a fact sheet on Wednesday. “Since then, rental housing has become less affordable with some landlords taking advantage of market conditions to pursue egregious rent increases.”

The administration’s plan to address that reality also included a “blueprint for a renters bill of rights,” a non-binding white paper from the White House Domestic Policy Council and National Economic Council outlining support for “minimally burdensome application and documentation requirements and fair and equal tenant screening,” reasonable rent increases, and freedom to organize tenant unions. Relatedly, the Consumer Financial Protection Bureau will work with the Federal Trade Commission to ensure accurate information in credit reports and background checks, the White House said.

Some prominent affordable housing advocates, including Diane Yentel of the National Low Income Housing Coalition, applauded the Biden administration’s announcement, while noting more still has to be done to shield renters from the worst of the rental market.

“The time, energy and focus that the Biden-Harris administration has dedicated to strengthening tenant protections and hearing directly from impacted people at the White House is significant and historic,” Yentel said on Twitter Wednesday.

Meanwhile, Tara Raghuveer, the director of the national Homes Guarantee campaign for People’s Action, said on Twitter that the announcement failed to meet the mark in some ways but nonetheless provided “good organizing hooks.”

“Today’s announcement affirms a role for the federal government in correcting the imbalance of power between landlords and tenants,” Raghuveer said. “There is much more the president can do to provide material relief to tenants. We are counting on that, and we won’t stop organizing till it happens.”

Industry groups also said the Biden administration’s plan fell short, albeit in different ways. The National Multifamily Housing Council, which is joining the administration’s newly announced “resident-centered housing challenge,” said it will help to identify standards for management practices that may help tenants build credit or find resources. It said in a statement that while the White House “rejected calls for failed policies such as national rent control, we are disappointed they are pursuing potentially duplicative and onerous regulations that are already appropriately addressed under state and local law.”

“These efforts will do nothing to address the nation’s housing shortage and could discourage much-needed investments in housing,” the council said. “We continue to urge the administration to prioritize enacting the Housing Supply Action Plan they issued in May. The best renter protection is an abundant supply of housing.”

The National Apartment Association also said it has worked with the White House “in good faith,” but is opposed to more federal involvement in the rental market.

“Complex housing policy is a state and local issue and the best solutions utilize carrots over sticks,” Bob Pinnegar, the president and CEO of the National Apartment Association, said in a statement Wednesday.

The post White House Releases Sweeping Plan To Push for Rental Affordability and Tenant Protections. Here’s How It Could Impact You. appeared first on Real Estate News & Insights | realtor.com®.

Exclusive: ‘Rico to the Rescue’ Reveals the Biggest Mistakes Homeowners Make With Contractors

Rico León steps in when homeowners have a problem with the contractor they hired.

HGTV

Nearly every homeowner has run into problems with a contractor at some point—and a new HGTV show delves into what goes wrong, and how to keep a renovation on track.

On “Rico to the Rescue,” Denver-based builder Rico León helps homeowners and the general contractors they’ve hired mend fences. If a conflict can’t be settled, León and his crew take over.

Interested to hear how to resolve a clash with a contractor (and protect money involved), we got León to share his best advice for calling out and holding the contractor accountable. Plus, he shares the biggest red flag to look out for during the hiring process to avoid a problem in the first place—as well as his favorite renovation in his own house.

Rico León stands outside a partially renovated home on "Rico to the Rescue."
Rico León stands outside a partly renovated home on “Rico to the Rescue”

HGTV

Have you ever had a bad experience with a contractor?

I had general contractors that worked under me that were stealing hundreds of thousands of dollars to work on other projects. When they started doing bad work, I was giving them less and less work. And they knew it.

What’s the most common issue homeowners have with contractors?

It’s language—the homeowner and the contractor speaking different languages.

When the contractor’s selling, they’re saying what a homeowner wants to hear, not the good, bad, and ugly of a construction job.

They’re like, “I’ve been doing this 30 years. I’m amazing!”

As a homeowner, you’re like, “The value of my house is going to skyrocket!” And you sign the dotted line.

I think the communication is skewed because the contractor needs to tell the homeowner, “We’re going to be ordering these materials. Sometimes these materials could take this length of time,” so the homeowner can understand things before, all of a sudden, nothing’s happened in three weeks.

What red flags should homeowners look out for to weed out problematic contractors?

If they’re telling you too much good, it’s a red flag. If they say everything’s going to be rainbows, assume they’re a sales guy.

A thing a lot of homeowners don’t understand is when they hand [over] a check for $150,000, they should get conditional lien waivers making a statement that they’ve paid that contractor. Because what happens is contractors [may] mismanage the money and not pay their subcontractors, and their subcontractors would put a lien on your house.

There’s things you could do to prevent things like that—the biggest is milestones.

Tell the contractor, “Where is the first milestone? Once you hit that milestone, I’ll hand you another check,” and it needs to be agreed upon first. If he or she says, “The same doors you wanted just increased in price,” [the contractor must] prove it to the homeowner. Sign a change order that you both agree to, order the doors, and move forward.

Rico León surveys the scene while mediating a conflict between homeowners and the general contractor they hired.
León surveys the scene while mediating a conflict between homeowners and the general contractor they hired.

HGTV

How should homeowners pay a contractor to protect their investment?

It’s hard because people do things differently: 50-50 [or] 30-30-30-10, it depends on the size of the job.

I’m going to say, how quickly do you want us to do the job? The first check is going to pay my mechanical, electrical, [and] plumbing guys half down so they can start buying materials, start getting demo done, start pulling permits.

If you want to be back in your house in four months versus 12, if you give 60%, we’re going to use this amount of money to order the materials now because sometimes cabinets are three months out, sometimes windows are six months out.

You have to be very descriptive on how [contractors] are going to start using the funds and how quickly [homeowners] want the job done.

How I like to do it, if a job is $7,000, I tell the contractor, “I’ll give you $1,000 for every day you’re here.” That makes that person hyper-concentrate versus come in here, dilly-dally, and then leave. It gets them moving, and sometimes they’ll get it done quicker.

What are your top tips for confronting a contractor when things go south?

I love that you use the word “confront,” because that’s how things go even worse. Just like arguing with relatives or a spouse, tone is everything.

If I’m screaming, you’re going to be defensive. When things start going south, the best thing to do is say, “I was expecting this job to go a certain way. Can we all sit back down and plan out from now to the future how it’s going to look? And if things are going to take a long time, let me know ahead of time. Communicate with me.”

Use that tone, because the last thing you want to do is have them be defensive, and then guess what? Liens. Not a good solution.

Having a third-party [contractor] for a few hours is 100% worth it because sometimes you don’t understand, and sometimes contractors are not good explaining it to the homeowner. If you have someone you would pay for one day that can mediate, he or she could say, “This is happening nationwide. This is normal.” Or that third-party contractor could tell [your] contractor, “Lumber doesn’t cost that much. Where are you getting your lumber from? Did you file for an inspection? Can you prove it?”

What’s the best technique for holding a contractor accountable?

People get annoyed and then they start pointing the finger. Having a hierarchy tree of who takes care of what and what their responsibilities are puts the accountability to the contractor. The homeowner also needs to be held accountable. Having that laid out in the beginning is so nice. It’s not the most fun conversation, but it prevents headaches.

When is it worth it to cut your losses and move forward with a different contractor?

It’s a headache-to-income ratio. Think of all the time, energy, and value of the house you’re losing because you want to have this battle. It’s just math. Sometimes you can file a claim against their insurance and get some money back. If you go legal, you’re going to lose money, you’re going to pay a lawyer. If the [contractor] took money from you, he probably doesn’t have money. So when you sue this person, they close their business and start another one the next day. I try to avoid that at all costs.

Rico León leans on a ladder while working on a kitchen renovation for clients.
León leans on a ladder while working on a kitchen renovation for clients.

HGTV

What’s the worst state you’ve seen a contractor leave a job?

I’ve seen contractors get $300,000 upfront, put $50,000 into the project, and ask for another check. That is where I get really angry. They use that money to do something else [like] buy a truck, vacation. But let’s prevent those things from happening by saying, “I’m only going to give this much money. We can put things into an escrow where the mortgage company or the bank can divvy out certain amounts. They can do an inspection.”

You’re adding another third party to control the money so you don’t get screwed.

What’s your favorite renovation you’ve done for yourself?

My own closet, making it 10 times bigger. It’s kind of my own little oasis. I like my bathrooms warm, so I have heated floors, heated toilet seat. I have a steamer. I host a lot, so having a nice kitchen with the wine rack and all that kind of stuff are my favorite things personally.

What in your own home needs rescuing?

My water heater busted! What sucks is, since I have to redo the floor, all the furniture in my house has to be put away. They put new flooring, sand it, and repaint it, and then my furniture has to come back. So right now there’s this area in my kitchen that’s cut out from the water damage, and I just have not gotten to it yet. It’s such an eyesore.

“Rico to the Rescue” airs Saturday nights on HGTV and is now streaming on discovery+.

The post Exclusive: ‘Rico to the Rescue’ Reveals the Biggest Mistakes Homeowners Make With Contractors appeared first on Real Estate News & Insights | realtor.com®.

Want To Save $150K on a Home? Here’s the One Place Where These Bargains Are Hiding Today

December's hottest markets

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America’s hottest markets might have a few reigning champs, but some serious competition in the Midwest is nipping at their heels.

The Realtor.com® Hottest Markets List reveals that the average home listing price for December’s 20 hottest real estate markets was $313,000—about 21.8% lower than the national median as buyers increasingly sought out affordability. (The rankings factor in a combination of demand—measured by the number of unique views per home listing—and how quickly homes are selling in that area.)

Manchester, NH, about an hour northwest of Boston, took the No. 1 spot for the 16th time in the past 22 months. Rochester, NY, not far from the U.S.-Canadian border, also maintained a strong showing on the list, coming in second in the rankings. But these Northeastern hot-market heavyweights might not stay in the lead for long.

Homebuyers seeking deeper discounts are now finding them in the mighty Midwest.

Ten of December’s hottest markets were smack dab in the middle of the country in states such as Ohio, Wisconsin, Illinois, and Kansas—where median list prices hovered at a mere $245,000, more than $150,000 lower than the national median.

While Midwestern markets have always made a strong appearance in the hottest markets list, the region started to dominate the rankings in spring 2022. That’s when mortgage rates crested 5% and tacked on hundreds of dollars to homebuyers’ monthly mortgage payments.

So what’s a home shopper who’s feeling financial pressure from all sides to do? Take out an affordability calculator and run the numbers. What home shoppers discovered is the savings in these Midwestern markets were significant.

Mortgages rates drive homebuyers to the mighty Midwest

Though median home list prices fell from June’s high of $450,000 to $400,000 in December, higher mortgage interest rates erased much of those savings. Mortgage rates more than doubled last year, ending the year in the low- to mid-6% range for 30-year fixed-rate loans, according to Freddie Mac. That made monthly mortgage payments uncomfortably high for many buyers.

“Buyers have to factor in how higher interest rates affect their monthly payment and set their budget accordingly,” says Hannah Jones, an economic data analyst at Realtor.com. “We continue to see high demand in affordable locales because they are among the areas that, despite price growth, are still within the realm of possibility for many buyers.”

Plus, buyers were being squeezed by high inflation. Even the most basic goods jumped in price: The cost of eggs spiked 60% over the same 12 months.

All of this has made the real estate deals in the Midwest more appealing than ever.

“The typical buyer in one of these markets is looking at a home payment that is $755 [38.8%] lower than the home payment on the median-priced U.S. home,” says Jones. (The savings number is based on a 20% down payment for both homes at today’s mortgage rate of 6.15% and does not include insurance and taxes.)

Why Ohio is a bargain hunter’s paradise

The Midwest’s hottest state in December was Ohio, with five locales on the list: Columbus, coming in third, followed by Dayton, Akron, Canton, and Cincinnati.

“If a house goes up, it sells,” says Jan Leverett, real estate agent at Irongate Inc. Realtors in Dayton. “Inventory is still low. So homes in good shape are still selling on the first day, though without the bidding wars of the past.”

Leverett credits Dayton’s hot market not just to affordable homes that average $214, 900, but also to a strong economy powered by jobs at Wright-Patterson Air Force Base.

Nearby Akron (No. 10) and Canton (No. 12) stand out for offering homes for sale priced below $200,000.

And so does neighboring Illinois, which had two metros with properties priced below $200,000. Springfield (No. 9) was the least expensive market, with home prices averaging $162,450.

And buyers don’t just save money by moving to the Midwest. They’re also landing “spacious homes in areas with robust economies,” adds Jones.

The West is finally warming up

America’s Western markets were nowhere to be seen on the hottest markets list since May 2022. But one metro finally crept back in just before the year came to a close.

Billings, MT (No. 19), broke in, offering homes with a median list price of $470,000. And while that’s far above the Midwest price tag, Billings offers buyers “bang for their buck with spacious homes in a beautiful setting,” says Jones.

“Homes in Billings were priced only slightly higher per square foot, but were almost 25% larger, on average, than the typical U.S. home for sale in December,” adds Jones. “Additionally, both the median listing price and median listing price per square foot were lower than last December, offering budget-constrained buyers more options.”

So if you’re thinking about going West, you might want to move quickly. The hottest markets receive 1.5 to 2.7 times the number of viewers per home for sale compared with the national rate. And while the average home spent 67 days on the market in December, properties in Billings were snatched up in 58 days.

The post Want To Save $150K on a Home? Here’s the One Place Where These Bargains Are Hiding Today appeared first on Real Estate News & Insights | realtor.com®.

Starter Home Prices Are Soaring and Luxury Is in a Slump—What’s Going On?

Starter Home Prices Are Soaring and Luxury Is in a Slump—What's Going On?

Photo-Illustration by Realtor.com; Photos: Getty Images (3)

For those navigating America’s residential real estate market, it’s lately felt a bit like an out-of-control cargo train, ever threatening to veer off the tracks—stomach-churning price accelerations followed by interest rate hikes slamming the brakes. It’s little wonder that just about everyone seems to be searching for clues on where housing sales are going this year. But it’s not a one-size-fits-all market. Different kinds of homes—and the diverse people buying and selling them—have been affected in significantly different ways, especially when it comes to prices.

In fact, a deep dive into what’s going on with two of the nation’s significantly iconic, bellwether housing categories—representing opposing ends of the price spectrum—might provide the clearest indications of what to expect for 2023 and beyond.

On one end are starter homes, traditionally smaller and more affordable, geared toward first-time homebuyers; on the other, luxury homes, the spacious mansions with every amenity imaginable marketed to the wealthy. Each market has faced its own highs, lows, and distinct challenges.

And their current price trajectories might come as a surprise.

Starter homes seem immune to the correction currently roiling the housing market, but luxury homes have been feeling the full effects. The Realtor.com® data team dug in to figure out exactly what’s going on in these very different segments of the housing market.

Starter homes, which Realtor.com defines as all two-bedroom listings, have been on a relatively steady and energetic upswing since early 2020 as cash-strapped buyers have competed for a limited supply of more affordably priced properties. These homes have outpaced the price growth in other parts of the real estate market: They finished 2022 with 15% year-over-year price increases.

Meanwhile, during the COVID-19 pandemic, prices for luxury homes—defined as the most expensive 10% of homes in any given market— skyrocketed as the stock market surged and buyers sought more living space. There was almost a 40% year-over-year price bump for luxury homes in the middle of 2021. But by the end of 2021, the luxury boom faded as the stock market struggled and recession fears grew. For most of 2022, luxury homes have seen modest-to-stagnant price growth, around 2.5%, ending the year close to flat.

So where are the metros where luxury home prices are stalling the most—and where entry-level home prices are rising the fastest?

To come up with these findings, Realtor.com compared the monthly year-over-year price changes for starter homes, luxury homes, and midprice homes to see how each segment of the real estate market has fared. Then we found five metropolitan areas where each segment tracked closely to the national trends. (Metros include the main city and surrounding towns and smaller urban areas.)

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“Luxury purchases are more discretionary,” says Danielle Hale, chief economist at Realtor.com. After all, no one really needs a third or fourth home or a 10,000-square-foot abode with ocean views. So when market conditions are right, activity in that segment can change quickly.

During the early part of the pandemic, homeowners saw their equity rise as prices went up across the board. That gave high-end them a lot more cash for a next purchase, somewhat negating elevated prices. Rock-bottom interest rates made borrowing incredibly inexpensive. A migration of people who lived in coastal urban hubs, but who could newly work from anywhere, also meant buyers coming into markets with both high equity and high wages, driving up prices. And the bullish stock market performance resulted in more money in their pockets.

“You see a correlation between the stock market and real estate, simply because stocks make up a greater portion of the financial portfolios of high net worth buyers,” Hale says. And the stock market has been down through 2022.

For starter homes, different forces are at work, Hale says.

“If you think of luxury home purchases as discretionary, starter home purchases are almost the opposite,” she says. “It’s more about timing and strategy.”

For people buying for the first time, or for those with tighter budgets, a home purchase is driven more by finding an opportunity to buy or sell that matches a need, not a whim. A rise in interest rates makes it more difficult for these buyers to gain a foothold.

When interest rates go up, the most affordable segment of the market gets squeezed. Homeowners who would normally sell their starter homes to move up to larger, nicer homes can’t sell because they would be trading their existing mortgages with a low rate for a new loan with a higher rate. It’s not financially viable, so many homeowners are staying put, limiting the number of starter homes for sale.

“When people in the market for a house are most looking for affordability, that’s challenging now,” Hale says.

What does it all mean in the current stressed-to-the-max housing market? Let’s take a deeper dive into the U.S. cities that are most indicative of these trends.

Where luxury home prices are stalling

Salt Lake City, UT

A luxury home for sale in Salt Lake City, UT

Realtor.co,

Luxury home price in December 2022: $1.15 million-plus
Change from 3-year price peak: -28.1%

Salt Lake City became a pandemic destination for urbanites leaving more expensive, coastal population hubs, and the area’s luxury market shows it: Salt Lake City saw the highest highs of any metro on the list. Luxury home prices hit 52% year-over-year price growth in January 2021.

But the area’s meteoric price gains were destined to reverse, and just one year later, in January 2022, they were wiped out, with prices down 24%. That’s led to some sellers cutting prices.

This enormous six-bedroom home in Holladay, a small town in the Salt Lake City metro next to the Wasatch National Forest, had been listed for $1.65 million. After sitting on the market for several weeks, it was recently marked down by $150,000.

Sacramento, CA

A row of newly built townhouses in the Sacramento, CA area.

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Luxury home price in December 2022: $1.35 million-plus
Change from 3-year price peak: -18.2%

Sacramento was another high-demand market during the pandemic, drawing buyers from the San Francisco Bay Area, as lots of people with newfound flexibility for where they could work looked for less expensive areas with more spacious homes.

The Sacramento luxury market tracked closely to the national trend, with 38% year-over-year price growth in January 2021.

“People came in with a lot of money down,” says Tom Gonsalves, the broker and CEO of Gonsalves Real Estate Properties, in Sacramento. “They came from other cities with higher prices.”

But in September of the same year, those luxury homes were losing value.

Gonsalves says there’s still plenty of activity in Sacramentos’ luxury segment, but he’s seen homes that were bought and sold near $2 million at the peak of the pandemic pump now priced closer to $1.5 million.

Now, luxury home prices are 18% below that peak.

This large four-bedroom home near Folsom Lake is now priced at $1.5 million, down nearly $200,000 from the initial listing price.

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Houston, TX

A luxury suburban residential community in Houston, TX.

Getty Images

Luxury home price in December 2022: $799,000-plus
Change from 3-year price peak: -18.1%

In Houston, luxury home prices didn’t rise as high as in Salt Lake City or Sacramento. But after prices ramped up in 2020 and the first half of 2021, hitting almost 30% year-over-year increases, listings have been priced below where they had been the year before since September 2021.

Greg Nino, a Realtor® with Re/Max Compass in Houston, says he’s not surprised to see higher-end homes stalled in the area.

“We’ve always said here that we don’t have a lot of [home] appreciation, but we don’t have big slumps either,” Nino says. So it’s expected that the demand-driven price increases of the pandemic are followed by a downturn.

Nino says he sees buyers taking more time—and being more cautious—making a luxury purchase.

“If someone is looking at a million-dollar home and it’s more than 20 years old, I ask if they have $200,000 or $300,000 for pipes or foundation work,” Nino says, noting that flood damage eventually affects a lot of the homes in the area.

That conversation wasn’t even happening in 2021, as multiple offers for every home were the norm, and prices shot up to what buyers were willing to stomach.

For a lot of upper-echelon buyers, he says, the frenzy of pandemic-driven demand has died down, and they are becoming more thoughtful.

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Where starter home prices are rising fastest

Nashville, TN

Nashville, TN

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Starter-home price in December 2022: $349,900
Year-over-year price change: +10.8%
3-year price change: +43.7%

Nashville starter home prices have been higher than the national average, and they’ve been rising faster than in other housing markets since the middle of 2022. The city was one of the hottest real estate markets in the nation even before the pandemic.

“Nashville has honestly been an underpriced market for a long time,” says Brian Copeland, a Realtor at Doorbell Real Estate in Nashville. “People would come here and be shocked at three-bedroom homes for under $200,000.”

But Copeland says that in Nashville, lots are expensive, meaning new suburban construction is often geared toward higher-priced buyers. Where there are more multifamily homes, the price points are as high or higher than traditional standalone starter homes.

“Yes, Nashville is more expensive than it was 10 years ago, and it’s going to be more expensive 10 years from now,” Copeland says. “But it’s still relatively affordable.”

At the end of 2022, starter home prices in Nashville were up almost 11% compared with the year before, when Nashville’s median listing price growth was about half that.

For $350,000, a starter-home buyer in Nashville can get an 800 square-foot, two-bedroom home near Tennessee State University.

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San Diego, CA

San Diego, CA

Getty Images

Starter-home price in December 2022: $678,470
Year-over-year price change: +13.5%
3-year price change: +29.9%

Housing prices, of course, are relative—which is why San Diego has the most expensive starter homes on the list, at more than a half-million dollars.

“There’s no such thing as a starter home in San Diego anymore,” says Norm Miller, a professor emeritus at the University of San Diego’s School of Business. “They say here that you buy your third home first, because the prices are so high now.”

With mortgage rates above where they’ve been for the past several years, Miller says, the supply of San Diego’s starter homes will probably stay quite limited, as the homeowners who stretched their budgets to get into them see that selling and buying something different would mean paying more for the same home, because of the elevated interest rates, or paying the same for less home, for the same reason.

“If you have a mortgage below 4%, you have absolutely no incentive to sell and go get a 6% rate,” he says. “Why take on a higher cost of ownership than you need to? So that’s going to keep supply down.”

That limited supply adds up: A San Diego starter home costs nearly $90,000 more than it did one year ago.

A 1,000-square-foot, two-bedroom condo in a posh downtown San Diego high-rise will cost around $675,000.

Houston, TX

Houston, TX

Getty Images

Starter-home price in December 2022: $255,200
Year-over-year price change: +4.5%
3-year price change: +25.3%

Yes, you’re reading it right: Houston is a bellwether market in both luxury and entry-level homes.

Like its luxury segment, Houston’s starter home listing prices track with the national trend, continuing to rise through the end of 2022 at a faster pace than other segments in the market.

Houston’s starter homes are less expensive than in other areas on the list, and price growth isn’t as high as in Nashville or San Diego. But with prices rising about 4.5% annually, that’s still higher than the 3% to 4% home appreciation that was the norm before the pandemic.

And it’s squeezing buyers who have to swallow the huge price increases of the past few years, plus higher mortgage rates, rents, and inflation.

For $236,000, you can get this classic 1,500-square-foot, two-bedroom house in Houston’s East End neighborhood that’s walking distance to Buffalo Bayou.

The post Starter Home Prices Are Soaring and Luxury Is in a Slump—What’s Going On? appeared first on Real Estate News & Insights | realtor.com®.

5 Storybook Cottages That Are Too Cute—and Affordable—To Pass Up

5 Storybook Cottages That Are Too Cute—and Affordable—To Pass Up

Realtor.com

Storybook cottages are what dreams are made of, with their eye-catching, romantic style.

While the darling exteriors might seem like they belong in a Disney movie, the interiors boast many unique features.

So, what exactly is a storybook house?

These quaint cottages were designed to look like something found in a fairy tale—and are most identified by their whimsical, deeply pitched roofs. The exterior is typically made of brick or stucco to give it a historic, distressed look that stands the test of time. Often, the landscaping is also intentionally overgrown to give it an enchanted appeal.

As for the interiors, think arched doors and artfully mismatched windows placed uniquely to offer an unexpected peek outside.

Here are five storybook cottages on the market that caught our eye. Priced below $500,000,  they’re adorable and affordable.

1713 E Blaine St, Springfield, MO

Springfield, MO

Realtor.com

Price: $284,000
Active rental: This three-bedroom charmer was built in 1921 and recently updated. It’s currently being used as a rental property.

Distinctive highlights of the stone cottage include an arched doorway, an open floor plan, custom blinds, and beautiful hardwood floors. The modern kitchen features granite countertops and an oversized island. A primary bedroom with an en suite bath and brick accent walls can be found on the first floor, with two more bedrooms and a bath located upstairs.

The home sits on a half-acre lot.

Springfield, MO, interior

Realtor.com

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3200 Homan Ave, Waco, TX

Waco, TX

Realtor.com

Price: $229,900
Downtown location: This three-bedroom, 1,559-square-foot beauty was recently refreshed and features new plumbing, HVAC, and electrical. The original hardwood floors were refinished, and a fresh coat of paint was applied to brighten up the interiors.

Highlights of the modernized kitchen are the penny tile backsplash and stone countertops.

The home’s corner lot features a stunning magnolia tree, which will surely offer some relief from the Texas heat.

Waco, TX, interior

Realtor.com

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720 South St, West Dundee, IL

Dundee, IL

Realtor.com

Price: $330,000
Less than an hour from Chicago: This three-bedroom abode features many original details from its 1931 construction. They include vintage woodworking, solid-wood doors, Tudor archways, and custom built-ins.

The retro kitchen comes with a “unique built-in vintage foil, wax, and paper dispenser,” according to the listing.

The 1,600-square-foot floor plan includes a primary bedroom with a sitting room, a living room with a fireplace, and a full basement with plumbing.

A two-car detached garage provides additional storage space.

Dundee, IL, interior

Realtor.com

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715 Taylor St, Bristol, TN

Bristol, TN

Realtor.com

Price: $429,900
Guesthouse included: This four-bedroom brick house features diamond windows, restored hardwood floors, and a gorgeous fireplace in the living room.

The 3,112-square-foot house was built in 1933 and recently modernized. The updated kitchen now shines with stainless appliances, granite countertops, and a pantry. A spacious primary suite comes with a fireplace and a separate sitting area.

There’s also a detached, three-car garage with a one-bedroom apartment above. Bonus: The list price was recently reduced by $20,000.

Bristol, TN, interior

Realtor.com

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399 Melmore St, Tiffin, OH

Tiffin, OH

Realtor.com

Price: $185,000
Corner lot: This four-bedroom domicile was built in 1928 and features original woodwork, restored hardwood floors, French doors, classic archways, leaded-glass windows, and two fireplaces.

A cozy kitchen has lots of storage space, along with a pantry that features original cabinetry. Two bedrooms can be found on the main floor, with two more located upstairs.

The 2,100-square-foot home comes with an above-ground pool, play set, and shed.

Tiffin, OH, interior

Realtor.com

The post 5 Storybook Cottages That Are Too Cute—and Affordable—To Pass Up appeared first on Real Estate News & Insights | realtor.com®.