2023: The Year of the Homebuyer? Our Bold Predictions on Home Prices, Mortgage Rates, and More

2023: The Year of the Homebuyer? Our Bold Predictions on Home Prices, Mortgage Rates, and More

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It’s safe to say we’ve never encountered a housing market nearly as unpredictable as the one we’re in right now. After months of navigating wild fluctuations, homebuyers, sellers, owners, and renters are now desperately trying to read the tea leaves to figure out where real estate prices, inventories, sales, and mortgage rates are going in the coming year.

And just in time, Realtor.com® is here to help them all figure it out with our annual housing forecast.

The bottom line: Homebuyers and renters hoping for some financial relief in 2023 will likely be disappointed. But they won’t get whiplash either. The dramatic swings and wild gyrations in the housing market are expected to taper off as the real estate ecosystem continues to slow.

While the Realtor.com 2023 forecast anticipates home and rental prices will keep climbing next year, the increases will be much more modest than the huge surges seen earlier this year. Mortgage interest rates, which have become the bane of many first-time and other buyers who can’t pay all in cash, will remain high. But they aren’t expected to substantially rise again.

Sales are expected to continue falling as buyers simply can’t afford the onerous combination of towering home prices and high mortgage rates. Home and rental prices have been falling from their peaks over the summer, but they’re still rising year over year.

“It’s going to be a tough year for homebuyers, home sellers, and the overall housing market,” says Realtor.com Chief Economist Danielle Hale. But “we’re going to take some steps toward a better balance between buyers and sellers.”

One bright spot for buyers will be the number of homes for sale, which has been hovering near crisis level and is finally expected to rise. But will that be enough to bring buyers back into the market?

This is what homebuyers, home sellers, and renters can expect in the new year.

Home prices won’t drop, defying expectations

Simply put, higher mortgages have utterly bludgeoned the housing market.

Buyers, particularly first-timers, can’t afford to offer as much for a home when their monthly payments are inflated by higher interest rates. But home prices next year aren’t expected to crash.

Nationally, Realtor.com predicts they’ll rise 5.4% year over year in 2023. That’s still going to hurt—but not as much as the double-digit increases seen during the COVID-19 pandemic.

Median monthly mortgage payments are expected to be about 28% larger than this year and twice as large as they were in 2021. To put into perspective how tapped-out homebuyers are, monthly mortgage payments were about three-quarters larger in late October than they were in 2021. (The latter figure depended on that week’s average mortgage rates.)

“Most other forecasts call for price declines,” says Hale. “But that’s not what we’re expecting.”

Sellers don’t want to lower their asking prices too much after watching their neighbors make bank just a few months ago. And there are still too many people who want homes than there are available residences to go around.

“What buyers can afford to pay with mortgage rates as high as they are may not match what sellers are looking for,” says Hale.

Home price growth will continue to slow and could even dip a little over the next few years. Realtor.com anticipates the correction in the market could last through 2025.

Renters, many of whom are already suffering from sticker shock, won’t fare any better. Nationally, rents are expected to rise by 6.3% year over year in 2023.  While painful, it’s also far below the double-digit jumps experienced earlier this year.

“Landlords are aware that demand is not as unlimited as it was at the beginning of the year,” says Hale.

The exceptions are the big, expensive cities where rents seemingly fell off a cliff during the pandemic as renters fled to quieter, less-populated communities. Landlords slashed their asking prices, then jacked them back up and then some when tenants returned seeking rentals. There might be more room for rents to grow in 2023 in the urban areas than in the suburbs.

Mortgage rates will stay frustratingly high

Soaring mortgage rates have ground the housing market to a halt, forcing many would-be buyers to stay put or rent for longer than they had anticipated. Many plan to jump back into the homebuying fray once rates come down. But they may have to wait for longer than they had hoped.

Realtor.com predicts that mortgage rates will average 7.4% in 2023, trickling down to 7.1% by year’s end.

Rates are expected to remain high thanks to the Federal Reserve. As it hiked up its own interest rates to slow inflation, mortgage rates have followed a similar, upward trajectory. And the Fed seems committed to continuing to raise rates.

While the Fed’s actions are only one component that goes into mortgage rates, it’s emerged as a significant one this year. That’s expected to keep rates around 7%, where they were a few weeks ago, before falling to the mid-6% range after inflation showed signs of cooling.

“Even though we have seen some progress on inflation, it’s three-and-a-half to four times higher than the Fed would like it to be,” says Hale. “That means there’s more work for the Fed to do.”

The number of homes for sale will surge…

The silver lining for buyers, long frustrated by the anemic number of choices out there for them, is that more homes will be available for sale. The inventory of properties is expected to spike by 22.8%. (This includes only existing homes, which are previously lived-in residences, and excludes new construction.)

However, the surge won’t be due to more sellers putting their homes up for sale. Homes are expected to sit on the market for longer, as there will be fewer buyers who can afford to purchase property with mortgage rates so high. Those homes will accrue, which is why inventory will rise.

“It’s definitely needed,” says Hale of that increase in real estate on the market. “Buyers are more cautious in an environment where costs are higher for them.”

While those extra homes are sorely needed, they’re still far below what they are in a more normal housing market. The number of existing homes forecasted to be for sale in 2023 will still be 15% less than in 2019—when there was already a national housing shortage.

Despite the scarcity, builders aren’t expected to put up as many homes in 2023. Their pool of customers is drying up because buyers can’t afford the homes at higher mortgage rates. New construction is anticipated to fall about 5.4% year over year.

“They can’t build them at prices that buyers can afford,” says Hale. Land, materials, and labor costs are simply too high. “They’re pulling back on permitting and the housing units they are starting.”

… while the number of home sales will fall

The number of home sales is expected to keep dropping as buyers keep getting priced out of the market. Sales are anticipated to fall 13.8% year over year in 2022 and then keep decreasing by 14.1% in 2023. There will be just 4.53 million sales next year, the fewest transactions since the depths of the Great Recession in 2012.

(These predictions include only existing homes and exclude new construction.)

Realtor.com expects the usually busy spring season will be quieter than normal in 2023 as buyers struggle against the higher prices and mortgage rates. Renters are already stretched thin contending with higher and rising rents along with inflation, making it difficult to save up for a down payment on a home of their own.

Many homeowners will simply stay put and weather the storm in the housing market. Plenty are locked into mortgages with very low rates. That will make them think twice before selling their property and purchasing a new one with a mortgage rate that will be significantly higher. Even if they’re downsizing into a much smaller home, it could cost them significantly more to do so.

The homeownership rate in America is expected to basically hold steady, ticking down to 65.7% in 2023 from 65.8% in 2022.

Those who do sell will still do well. The average homeowner will see their equity rise by $25,650 in 2023. Those in more affordable parts of the country could see even higher gains as people from higher-priced markets relocate to cheaper ones, bidding up prices.

A severe recession could upend these predictions

While Realtor.com doesn’t expect the nation will succumb to a major recession, economists aren’t ruling it out entirely. Typically during a downturn, the Fed cuts its interest rates. That could cause mortgage rates, prices, and home sales to fall.

While some buyers are likely to jump into the market as soon as rates go down, others won’t want to make what is often the largest purchase of their lives during a downturn when their jobs might not be stable. And some folks will become unemployed or lose overtime and side gigs, making homeownership unaffordable.

“If prices decline, it might bring buyers back,” says Hale. But “a more severe recession would mean fewer sales.”

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Watch: 5 Costs Buyers Should Prepare for During Closing

 

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Hoping Your Home’s Value Will Rise? Live Near This Grocery Store

Aldi grocery store

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Those hoping to watch their home’s value soar might want to live near this grocery store.

Homeowners who lived closest to an Aldi, a German chain of discount supermarkets, saw the greatest home appreciation, according to a recent report from real estate data firm ATTOM. Home values jumped 58% for homeowners near an Aldi compared with 49% for those not far from a Trader Joe’s and 45% for those close to a Whole Foods.

“Having a grocery store nearby, particularly a store with a brand that resonates with the homebuyer, is definitely a plus, and one of the conveniences that can differentiate one home or one neighborhood from another,” says Rick Sharga, executive vice president of market intelligence at ATTOM.

“There’s also probably a psychological factor involved. Buying a very expensive home located near discount retailers and grocery stores may be offsetting to prospective buyers, while budget-conscious buyers may worry about cost-of-living issues if they purchase a lower-priced home surrounded by luxe retailers.”

To come up with its findings, ATTOM examined average home values, five-year appreciation for year-to-date 2022 compared with the same period in 2017, average home equity, home seller profits, and home-flipping rates. Only ZIP codes with at least one of each grocery store were included in the analysis.

While homes near Aldi saw the largest increase in values, they also had the lowest average prices, at an average of $321,116. This means prices have more room to rise.

“Aldi locations will be in areas with more affordable housing than neighborhoods adjacent to Trader Joe’s and Whole Foods, which attract a somewhat more affluent clientele,” says Sharga.

Home flippers pocketed the biggest profits near Aldi stores as well. They earned about a 54% average return on investment, according to ATTOM. That’s compared with 28% for properties near a Whole Foods and 25% for those near a Trader Joe’s.

The most expensive real estate was located near a Trader Joe’s. Homes near the store had an average value of $987,923. Meanwhile, properties near a Whole Foods were the second priciest, with an average value of $819,416.

“Trader Joe’s and Whole Foods target affluent neighborhoods, where homeowners are more likely to be able to afford these chain’s higher-priced offerings,” says Sharga. “Having these high-end stores nearby gives the neighborhood a certain panache and implied quality of life, which in turn protects and enhances home values.”

The post Hoping Your Home’s Value Will Rise? Live Near This Grocery Store appeared first on Real Estate News & Insights | realtor.com®.

Tech Companies Are Laying Off Thousands of Workers. Will the Housing Market Survive the Cuts?

a tech employee being laid off from his job

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The once-hot housing market has been humbled in recent months. Higher mortgage rates, raging inflation, and widespread recession fears have brought the market to a standstill. Now a wave of mass layoffs at the country’s largest and highest-profile tech companies could hobble it even further.

Meta, formerly known as Facebook, laid off about 11,000 workers. Amazon has plans to let go of about 10,000 employees. And there’s been an ongoing bloodbath at Twitter since Elon Musk became the “Chief Twit.” These are the kinds of companies that grab big headlines and often influence the direction of smaller organizations. They also play an outsized role in the nation’s psyche.

Most homebuyers want to ensure their jobs are secure before making what is often the largest purchase of their lives, one that many will spend the next 30 years paying off. Higher mortgage rates have sidelined scores of potential homebuyers, while concern over the economy has caused many others to hold off on purchasing homes.

Nearly 137,000 workers were let go from about 850 tech companies and startups this year, according to tracking website layoffs.fyi.

“Financial uncertainty is never good for housing markets,” says Patrick Carlisle, chief market analyst for the San Francisco Bay Area at Compass. “If people are fearful of losing their jobs, they’re less likely to embark on their largest financial investment.”

Renters could also be affected. They are often wary of finding a new apartment, agreeing to a large rent hike, or purchasing property if they’re concerned about keeping their jobs.

“As people experience or read about job losses, they get concerned. They will then pull back on their willingness to rent a new apartment or buy a home,” says Robert Dietz, chief economist of the National Association of Home Builders. “In an extreme case, somebody may have to get roommates or move in with family.”

More than half of adults, 53%, delayed a big financial milestone because they were worried about the economy, according to a recent Bankrate.com report. About 25% put off home improvements and renovations, while about 15% delayed buying a home. (The report was based on a survey of nearly 2,500 adults taken in October.)

However, home sales will still happen, albeit at a lower level.  Those with growing families will still trade up into larger homes, while empty nesters will continue to downsize. And people will still move for new jobs—they just might not be quite so mobile.

“Even during the Great Recession, people were still building and buying homes … but at reduced rates,” says Dietz.

Will rising layoffs lead to a housing crisis?

Even before the recent torrent of layoffs, the housing market was struggling.

Rising mortgage rates have made it financially impossible for many buyers to become homeowners. This was all part of the Federal Reserve’s plan to cool off the economy, the housing market in particular, by raising interest rates. Higher interest rates aren’t just hurting homebuyers; they’re also affecting companies, precipitating some of these layoffs.

During the COVID-19 pandemic, when interest rates were very low, many tech companies went on hiring sprees. But as interest rates rose and the economy shifted, many business leaders realized they could no longer afford the legions of workers they’d recently brought on. So they began laying off workers en masse.

Many economists say there is no cause for concern—at least not yet. Nationally, unemployment is still extremely low. And many companies that don’t generally make big headlines are still seeking tech workers. That’s left many economists hopeful that these pink-slipped workers will still be able to find new jobs relatively quickly.

“The job market remains very solid,” says Nadia Evangelou, director of real estate research at the National Association of Realtors®. “The unemployment rate remains near record lows. We have two jobs for every unemployed person.”

“In the big picture, these are not going to be huge, pronounced layoffs,” says Anneliese Vance-Sherman, a regional labor economist at the Washington State Employment Security Department. She covers the northern part of the state, including Seattle. “But I also don’t want to lose sight [that] for a number of families this is life-changing,  We are in a confusing time right now. … There are plenty of reasons for people to be on edge and concerned.”

Vance-Sherman uses a metaphor to describe what’s happening now as prominent tech companies shed large percentages of their workforce.

“If you drop a pebble in a pond, you see those ripples. Those first couple of waves are tremendous. That’s what we’re seeing right now,” she says.

Subsequent ripples aren’t nearly as pronounced.

Meanwhile, other economists believe these recent layoffs are just the beginning of a much bigger and more impactful wave.

“It’s the leading edge of job losses that are going to come about,” says NAHB’s Dietz. He expects a recession—if, in fact, the nation isn’t already in one. “That rise in unemployment is coming.”

Some parts of the country will be hit harder than others

While the national housing market is expected to hold up fairly well against the layoffs, some tech-heavy markets will fare much worse.

Home prices are determined by supply and demand. If there aren’t as many people looking for homes or an influx of cheap housing hits the market, such as short sales and foreclosures, prices tend to come down.

Tech hot spots are likely to be hurt the most by these rounds of downsizing. Places like Silicon Valley in California; Seattle; Sacramento, CA; Denver;  Austin, TX; Raleigh, NC; and the Salt Lake City and Provo, UT, area could be more affected, says Devyn Bachman, senior vice president of research at John Burns Real Estate Consulting.

“Anytime there are layoffs, that’s a reduction in the number of buyers in a given market,” says Bachman.

In the San Francisco Bay Area, the impact of the tech troubles hasn’t so far hurt the broader housing market. But the downtown San Francisco condo market, popular with tech workers, has begun to feel the effects of the shift. Median prices for two-bedroom units dropped 14% year over year, according to Compass. (Prices were from August, September, and October of this year compared with the same period last year.)

Is the U.S. hurtling toward a recession?

Some believe the layoffs are a sign the nation is hurtling toward a recession. About 91% of U.S. CEOs believe America is heading toward one within the next 12 months, according to the professional services company KPMG.

However, this doesn’t appear to be a prelude to another Great Recession–era housing meltdown, say real estate experts. The mortgage market is much more stable today.

In the 2000s, there were also scores of bad mortgages that went bust when they ballooned suddenly and homeowners couldn’t afford the higher payments. Foreclosures flooded the market, and that inundation of cheap housing brought home values way down.

There were also many more homes than there were buyers back then. This time around, the opposite is true.

“There is now a housing shortage of anywhere from 1 million to 2 million homes for sale,” says Dietz.

So even if there are widespread layoffs, people will still need places to live. That should put a floor under home and rental prices.

And while foreclosures will rise if unemployment ticks up, most homeowners will remain employed or find new jobs. Those struggling financially who can’t afford their mortgage payments may choose to sell their homes instead of going into foreclosure. Prices are still high, and they could even walk away with a profit.

Says Dietz, “The housing market is in a lot better shape than it was in 2007.”

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Welcome to the United States of Neighborliness: America’s 10 Kindest States

America's 10 Kindest States

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Are you looking to live where your neighbors will mow your lawn when you’re away on vacation, donate diapers to a young family that’s just moved in, or buy school supplies for children whose parents can’t afford them?

Then you might want to start looking for homes in Georgia, according to a recent kindness survey led by kindness.org and commissioned by Nextdoor and Verizon.

The second annual survey interviewed 10,000 people across all 50 states to measure which acts of kindness people would do for their neighbors and ranked each state according to a “Kindness Quotient.”

Eight of the 10 kindest states in America are located in the South, known for its friendliness and sense of community. And all but one have a median home list price less than the national average of $427,250 in September. (Utah was the only exception.) Conversely, states such as New York, Hawaii, California, and Florida, where median home prices are among the highest in the U.S., didn’t even crack the top 25 for kindness.

Savannah, GA
Tree lined historic homes on a residential street in Savannah, GA

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According to Oliver Scott Curry, chief science officer for kindness.org, Georgia scored most positively with respondents to questions such as the following:

  • How satisfied are you with your neighborhood?
  • Would you say that “I identify with my neighborhood”?
  • How do feel about your neighborhood?

Other key takeaways from the survey suggest American homeowners believe kindness builds stronger communities, contributes to individual happiness and social well-being, and creates a sense of inclusion and acceptance—which are particularly important around the holidays when acts of kindness can have an outsized impact on the neighbors who need them most.

Nationally, most Americans would perform small, kind acts to help their neighbors. About 94% would return a lost item to a neighbor, and 61% would forgive a debt from someone who lived close to them.

In addition, about 63% reported being happy with their neighbors and 61% said they were grateful for their neighbors.

Kindness from neighbors was the single best predictor of individual happiness, satisfaction with one’s neighborhood, identification with one’s neighbors, and a sense of inclusion with one’s neighborhood, according to a statement from a Nextdoor spokesperson.

Even the smallest actions, such as saying hello to a neighbor, makes room for more harmony and increased neighborhood unity.

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“Even the smallest actions, such as saying hello to a neighbor, makes room for more harmony and increased neighborhood unity—building a world where everyone has a neighbor to rely on.”

So, if you’re looking for great neighbors, a strong sense of community, and an affordable home, here are 10 states that should be on the top of your list.

The 10 kindest states in America

  1. Georgia: ($389,900 median home list price* in October)
  2. Tennessee ($425,000)
  3. North Carolina ($410,000)
  4. Arkansas ($280,000)
  5. Utah ($575,000)
  6. Louisiana ($283,450)
  7. West Virginia ($220,000)
  8. Mississippi ($279,000)
  9. Texas ($381,490)
  10. Nebraska ($325,000)

* The median home list prices in October are based on Realtor.com® data.

The post Welcome to the United States of Neighborliness: America’s 10 Kindest States appeared first on Real Estate News & Insights | realtor.com®.

Hey You Guys! Oregon Home Featured in the ’80s Movie ‘The Goonies’ Is the Week’s Most Popular Listing

most popular home listings

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Never say die! The house from the ’80s adventure comedy “The Goonies” has hit the market for $1,650,000. Located in Astoria, OR, the three-bedroom abode is this week’s most popular listing on Realtor.com®.

Built in 1896, the historic home has been modernized over the years to now offer restored hardwood floors, an updated kitchen, and a skylit bedroom on the top floor, which is also the famed attic from the film. (Sorry, treasure map not included.)

Other digs that drew your clicks include an affordable farmhouse in North Carolina, a ginormous New Jersey mansion, and a spectacular private island in Florida.

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

10. 504 E Lafayette St, Fayetteville, AR

Price: $1,950,000
Why it’s here: 
This gorgeous abode features original woodwork, pocket doors, and built-in bookcases.

Built in 1913, the five-bedroom home was remodeled in 2008. Modernizations throughout the 5,400 square feet of space now offer a chef’s kitchen with a double-oven range and Carrara marble countertops. A primary suite boasts a walk-in closet and dressing area.

There’s also a heated saltwater pool, spa, and fountain in the backyard oasis, along with a pool pavilion with a fireplace.

Fayetteville, AR

Realtor.com

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9. 117 6th St, Del Mar, CA

Price: $16,900,000
Why it’s here: 
It’s all about the views at this spectacular waterfront beauty; the magnificent vistas span La Jolla to San Clemente.

Nearly every room in this spacious 4,615-square-foot home offers a front-row seat to 160 feet of water frontage. The eye-catching, two-story living room features a gas fireplace, and the loft area leads to three en suite bedrooms, each with a private deck.

There is also a pool and spa.

Del Mar, CA

Realtor.com

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8. San Carlos 2NW of 12th St, Carmel, CA

Price: $1,950,000
Why it’s here: 
This 1,719-square-foot residence known as Crooked Pines and “oozing Carmel cottage charm” offers two unique spaces that could be split for income potential or transformed into a single-family dream home.

The two-bedroom home was built in 1939 and features a front residence with a kitchen, dining room, bedroom, and bathroom. The rear portion of the house has a partial kitchen, dining room, living room, upstairs bedroom, and bathroom. A wall currently separates the two spaces.

The property is being sold as is.

Carmel, CA

Realtor.com

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7. 1927 Elevation Rd, Four Oaks, NC

Price: $435,000
Why it’s here: 
Built in 1900, this reasonably priced farmhouse offers 1,731 square feet of modernized space. And you can bring your chickens, goats, and horses, too.

Located just a half-hour from Raleigh, the three-bedroom abode boasts a secluded primary suite that overlooks the horse pastures. A bright and airy family room features a cathedral ceiling and a decorative fireplace.

Known as “The Poole Family Farm,” the picturesque, 4.7-acre equestrian property also features a working farm, a five-stall horse barn with loft, detached outbuilding, and flower farm.

Four Oaks, NC

Realtor.com

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6. 5475 Dune Dr, Avalon, NJ

Price: $12,999,000
Why it’s here: 
This eight-bedroom estate sits prominently in the protected “High Dune” area and offers spectacular views.

Built in 1987, the 7,800-square-foot mansion was renovated 10 years later. Designed for entertaining, the spacious interior has two living rooms, three laundry rooms, and two elevators. A chef’s kitchen features twin ranges, dual refrigerator-freezers, and a steam oven.

The half-acre property also comes with a pool, hot tub, and outdoor shower.

Avalon, NJ

Realtor.com

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5. 100 Watkins Ave, Pittsburgh, PA

Price: $699,900
Why it’s here:
The eight-bedroom Marius Rousseau House offers breathtaking details, including a marble entrance foyer and a kitchen with a ceiling tiled in stained glass.

Built in 1906, the 5,821-square-foot mansion features an oak dining room, 11-foot ceilings, and nine fireplaces.

A sprawling, five-room suite upstairs features dual walk-in closets.

Pittsburgh, PA

Realtor.com

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4. 1125 Darlington East Rd, Bellville, OH

Price: $459,000
Why it’s here: 
This three-bedroom cedar log home comes with 10 acres.

Built in 1999, the 2,758-square-foot home features a two-story stone fireplace in the great room. The updated kitchen has hickory cabinets and quartz countertops. An enormous primary suite boasts a separate sitting area, and a spacious loft overlooks the great room below.

Take in the peaceful views from the covered back porch or enjoy morning coffee on the front porch.

Bellville, OH

Realtor.com

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3. 501 N Third St, Kentland, IN

Price: $170,000
Why it’s here: 
This affordable four-bedroom home was built in 1893 by Indiana’s 30th governor, Warren T. McCray.

The Queen Anne Victorian offers 5,024 square feet of living space. Period details include inlaid hardwood flooring, stained-glass windows, two fireplaces, and wood pocket doors. The music room houses a piano that’s been in the home since it was constructed.

The historic house also features a rear staircase, a cozy turret with seating, a finished third floor, and an attached gazebo accessed by the wraparound porch.

Kentland, IN

Realtor.com

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2. 10 Tarpon Isle, Palm Beach, FL

Price: $218,000,000
Why it’s here: 
Nothing says you’ve made it big like a jaw-dropping mansion on your own island.

The only private island in Palm Beach, Tarpon Island is currently undergoing a massive renovation. Developer Todd Michael Glaser bought the gated property last year and is looking to transform the 1930s classic into a spectacular stunner spanning 21,406 square feet.

Luxury details planned include a hair salon, massage room, five-car garage, humidor, movie lounge, home gym, wine room, and pool bar.

The megamansion on 2 acres will offer unsurpassed views of the Intracoastal Waterway.

Palm Beach, FL

Realtor.com

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1. 368 38th St, Astoria, OR

Price: $1,650,000
Why it’s here:
Own a piece of movie history. This is the home Steven Spielberg made famous in the hit 1985 comedy “The Goonies.”

Built in 1896, the 2,336-square-foot home is where Mikey Walsh (played by Sean Astin) lived. The attic, which is accessed by pull-down stairs, is where Walsh and his friends discover the ancient map pinpointing pirate’s treasure. It now leads to a cozy bedroom with skylights.

You will treasure the beautiful views of the Columbia River, the bridge, and the city from every level of the home.

Astoria, OR

Realtor.com

The post Hey You Guys! Oregon Home Featured in the ’80s Movie ‘The Goonies’ Is the Week’s Most Popular Listing appeared first on Real Estate News & Insights | realtor.com®.

Will Plunging Mortgage Rates Spark a New Homebuying Rush? Here’s What the Latest Housing Statistics Say

weekly housing trends data

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While mortgage rates are rarely great conversation fodder over Thanksgiving dinner, this Thanksgiving is a whole different story. If there’s a homebuyer or seller at your table, you can bet your good gravy the topic will pop up.

After all, mortgage rates have more than doubled throughout 2022, blasting past the 7% threshold and hitting a 20-year high in late October.

Yet in the past two weeks, there’s been an astonishing reprieve.

We’ll take a look at the latest statistics that have made the American dream of homebuying such a roller-coaster ride this year in our column “How’s the Housing Market This Week?” And lo and behold, the overall message this Thanksgiving week is actually good news.

Mortgage rates fell again

The headliner is that mortgage rates fell for the second week in a row, with the 30-year fixed-rate mortgage averaging 6.58% in the week ending Nov. 23, according to Freddie Mac. The most popular mortgage product is now half a percentage point lower than its recent high.

So is this enough of a break to bring out more homebuyers? It was in the past, but whether this cycle will repeat remains to be seen.

“When mortgage rates dipped this summer, it boosted buyer demand enough to stabilize cooling trends,” noted Realtor.com® Chief Economist Danielle Hale in her weekly analysis. “While that is a possibility going forward, economic uncertainty and the sense that low rates may not last long enough for shoppers to capitalize on them could mean we don’t see the same boost in demand this time around.”

It’s worth noting, however, that applications for mortgages have risen in each of the past two weeks, in line with the decline in rates, according to data from the Mortgage Bankers Association. Apparently, prospective buyers are keeping their eye on the ball and pouncing at any window of opportunity.

Home prices are becoming more manageable

Another hopeful trend is underway: Home prices have decelerated for the sixth straight week, meaning that they rose, but at a slower pace than before. Glacially slower, in fact.

In this case, prices were 11% higher compared with a year ago for the week ending Nov. 19, a bit slower growth than the prior week’s 11.1%.

While double-digit yearly gains are still a bit hard to swallow, they’re likely to slow even further, to single-digit, year-over-year increases by the end of the year.

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Watch: ‘Uncertainty Is Leading to Hesitation’: This Week in Real Estate

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Home sellers are still sitting out

Realtor.com data, however, shows that fewer homes were listed for sale in the week ending Nov. 19 compared with a year ago. That’s the 20th straight week of yearly declines.

So despite the good news on mortgage rates and home prices, seller confidence still seems to be in the pits, as our October report showed. And this, in turn, gives homebuyers fewer fresh properties to consider.

On the upside, though, the bargain bin of old listings is growing. For the week ending Nov. 19, overall inventory is up 49% compared with a year ago, and these homes sat on the market seven days longer than they did a year earlier. This means buyers can take their sweet time shopping for real estate deals. Black Friday home purchase, anyone?

Still, as Hale points out, “Home shoppers this year have had to contend with nearly 3X the mortgage rate volatility of a typical year. With the inflation and economic outlook continuing to evolve and the Fed continuing to observe and react, volatility may very well worsen before it begins to improve. Fed decision-makers have made it clear that they view this victory [one month’s inflation data] as one battle in a longer-term war that is not yet over.”

The post Will Plunging Mortgage Rates Spark a New Homebuying Rush? Here’s What the Latest Housing Statistics Say appeared first on Real Estate News & Insights | realtor.com®.

Mom-and-Pop Real Estate Investors Are Pulling Way Back. Here’s Where—and Why It Matters

Housing Markets Have Shed Investors

Photo-Illustration by Realtor.com / Getty Images (4)

For the past several years, venture capital–backed investment behemoths and mom and pop newbies alike have poured money into real estate. With mortgage interest rates at historically low levels and stimulus cash sloshing through the economy, real estate investment went from vigorous to full-on feverish. And along the way, investors—many of whom came to the party with all-cash offers—fully changed the face of many markets, sometimes locking out first-time homebuyers.

However, many of those investors, especially smaller ones, have recently slammed the brakes on their purchases as the housing market has shifted.

The market conditions that made the foray into real estate investment such a sexy proposition have in large part begun to dry up as mortgage rates have soared—and the large hikes in rental prices are beginning to slow.

In some parts of the country where investors competed directly with first-time and other buyers, often winning the bidding wars, investors have been beating a hasty retreat. So Realtor.com® dug into the data to figure out where investor home purchases have fallen the most. Buyers might have a stronger shot at purchasing homes where they hope to live in these markets if they’re not competing with as many cash-flush competitors.

Note: We looked only at sales of investment properties that were purchased using mortgages, which, according to Daren Blomquist, is where you’ll find more of the beginner investors. These homes are generally flipped or rented out.

“Established investors who have more capital reserves would be more likely to buy with cash,” says Blomquist, the vice president of market economics at Auction.com, a website that specializes in foreclosure listings.

Rising home values of the past several years pushed many of these investor buyers out of the premier, coastal real estate markets and into smaller cities, says Matthew Gardner, the chief economist for Seattle-based Windermere Real Estate. They include places like Boise, ID, where home prices were traditionally more affordable than urban hubs such as New York City, Boston, Chicago, and San Francisco.

However, those places where investors flooded into are now the places where investors are pulling back the most.

“The geography has started to shift,” says Gardner. “Investors are going to be looking at markets that are cheaper.”

Nationally, the portion of investors using a mortgage to buy a rental property or a home to flip is at a three-year low as of October, according to seasonally adjusted data from Optimal Blue, a mortgage data clearinghouse. Fewer than 1 in 17 mortgages is being used for an investment purchase, down from around 1 in 12 a little less than a year ago.

Many smaller, mom and pop investors who don’t have the mountains of cash of the institutional investors—aka the big banks, hedge funds, and other large financial companies—usually buy homes with mortgages. Some of these homes are then used as rentals, which can be highly profitable in places where home costs are low but rents are high and rising. Or they purchase properties that need work, hold onto them for only a few months (while paying the mortgage and the costs of required repairs, updates, or upgrades), then sell them for a hefty profit.

But it’s harder to make the numbers work in today’s cost-squeezed market.

For example, an investor buyer who was looking at borrowing $400,000 to buy a rental property last year with a 3.5% mortgage rate on a 30-year fixed-rate loan, would need to earn about $1,800 a month to cover the investment.

If that same hypothetical investor is looking at borrowing $400,000 with today’s roughly 7% mortgage rate, it will take around $2,700 to cover the monthly payment. In many places, renters simply can’t afford that $900 rent hike, so the investment no longer makes sense.

“Investors will jump back in when things change,” Gardner says, meaning some combination of lower borrowing costs, significant price reductions, or the capacity of renters to cover much higher leases.

So where have investor buyers pulled back the most? To figure it out, we looked at Optimal Blue mortgage data for the 100 largest metropolitan areas. Then we identified the places where investor purchases, as a share of all mortgage-financed purchases, have dropped the most, year over year, since their post-pandemic peak.

To add context, cash-purchase data from ATTOM Data Solutions, another real estate data provider, was included for metro areas where it was available. And we included only the single metro area with the largest drop for any state, to ensure geographical diversity. (Metros include the main city and surrounding towns, suburbs, and smaller urban areas.)

1. Seattle, WA

Seattle, WA

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Median home list price: $750,000*

Investors have backed off of their real estate purchases in the Emerald City as their purchases just aren’t penciling out the way they did earlier. Roughly 1 in 30 mortgages in the metro area is now for investment properties, compared to 1 in 20 about a year ago.

“In markets like Seattle, which have gotten so expensive, where buyers are paying $800,000 to $900,000, the rent required to cover that is going to be $6,000 or $7,000 per month,” says Gardner, of Windermere Real Estate.

For a potential landlord, the prospect of finding a renter who can pay that kind of money every month is increasingly slim. Nonetheless, cash purchases in Seattle have held steady for about the past year, at around 20% of all sales.

For those still looking to jump into the market, this two-bedroom, one-bathroom fixer-upper is being advertised to handy investors at just $425,000.

2. Cincinnati, OH

cincinatti ohio
Cincinnati, OH

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Median home list price: $323,175

In Cincinnati, the portion of homes being bought by investors with mortgages surged before the COVID-19 pandemic, making up about 1 in 11 mortgages. But in 2022, they dropped to about 1 in 20.

Charles Tassell, the chief operating officer at the National Real Estate Investors Association, who is based in Cincinnati, says he watched as property values in the area appreciated rapidly in the late 2010s, which, combined with low interest rate mortgages, attracted boatloads of investors.

In Deer Park, OH, a suburb where Tassell lived for several years, homes used to sell for $60,000 to $130,000 in the 2000s. In the past few years, however, their price tags have shot up to the $150,000 to $250,000 range.

With higher prices and mortgage rates, deals for investors have come with slimmer and slimmer margins.

“Until [prices] come down a little bit, [we’re] not going to see the investors jump back in strongly,” Tassell says.

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Watch: ‘Uncertainty Is Leading to Hesitation’: This Week in Real Estate

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3. Boise, ID

boise idaho
Boise, ID

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Median home list price: $539,900

Boise has been at the top of hot real estate market lists for the past couple of years, with soaring demand and real estate values to match. Many buyers flocked to the city during the pandemic, especially those hailing from California in search of cheaper real estate and a lower cost of living. Builders, home flippers, and landlords jumped in with both feet.

However, the real estate market in Boise has since cooled. More new construction and more homes sitting longer on the market have given local inventory a boost. At the same time, there are fewer buyers in the market. So prices dipped nearly 2% in October from September. And prices rose just under 2% year over year in October. Those aren’t the kinds of numbers investors want to see.

By late 2020, 1 in every 7 mortgages was taken out by an investor. Most recently, the portion of mortgages going to investors matched the national figure of 5.7% in October.

4. Denver, CO

denver colorado
Denver, CO

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Median home list price: $620,000

Home prices in the Mile High City have steadily increased through the 2010s. That gave many local investors a sense of stability as they bought up properties they assumed would continue to go up in value.

But that changed at the beginning of 2022, as the market began to turn. Investor activity dropped as the wild price growth of the past few years came to an abrupt halt. The percentage of sellers cutting prices shot up about 189% year over year in October.

Some Denver listings, especially those with a price below the metro’s average, still are advertised as investor opportunities, like this midcentury, four-bedroom home in the southwest part of the city.

5. Minneapolis, MN

Minneapolis, MN
Minneapolis, MN

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Median home list price: $405,000

Minneapolis is typically known for its shimmering lakes and having the largest mall in America—not for its real estate investors. But the portion of cash buyers, many of whom are flippers and landlords, has been rising since the coronavirus pandemic began.

And there are plenty of listings squarely aimed at investors. Take this four-bedroom home that’s almost 100 years old. It “needs a lot of work,” the listing explains, and is “suited best for investor.” The property is listed for $250,000, or about 40% below the median price per square foot in Minneapolis.

On the other end of the spectrum, this 6,600-square-foot, multifamily property is listed for $725,000, which is about 8% above Minneapolis’ median price per square foot. The listing boasts a new roof, siding, and appliances, and makes it clear who it’s aimed at: “Good cash flow investment property.”

6. Worcester, MA

Worcester, MA
Worcester, MA

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Median home list price: $449,000

About an hour west of Boston, Worcester is the second-largest city in New England, and it became a hotbed for investor activity in the past few years, says Nick McNeil, the owner and broker of McNeil Real Estate in Worcester. But as the pandemic-era real estate surge has faded, so has investor interest.

Investment mortgages have now dropped to the lowest percentage on the list (tied with Louisville, KY, No. 9), at only 1 in every 32 mortgages.

“Investors have moved on. They’re not interested in Worcester anymore,” McNeil says. “Prices have gone too high.”

The area became a huge draw, he says, for investors coming from Boston with lots of cash or equity, looking to take advantage of the area’s relatively affordable housing stock. Now, McNeil says, investors are looking farther west and south, to smaller nearby cities where the same dynamic has yet to play out.

7. Oklahoma City, OK

Oklahoma City, OK
Oklahoma City, OK

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Median home list price: $320,000

Oklahoma City has been hot for investors for years, largely due to its more affordable home prices. The portion of mortgages going to investors there has ramped up for the past five years, hitting a high point of 1 in 7. But that number has receded significantly since.

Home prices have surged in the metropolitan area, rising 16.5% year over year in October. That slashes deeply into investors’ profits.

This three-bedroom home in a suburb north of downtown is offered with seller financing, which means the buyer could potentially save with a lower mortgage rate. It’s advertised as “a great opportunity for an investor or an owner who likes a project.”

8. Pittsburgh, PA

Pittsburgh, PA
Pittsburgh, PA

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Median home list price: $219,900

Like many of the places on the list, the attractive home prices and ready inventory of Steel City attracted tons of investors during the pandemic. Home flippers flocked to the neighborhoods of Lawrenceville, East Liberty, and Garfield, boosting prices in these communities.

At its height, as many as 1 in every 14 mortgages went to an investor. In October, the figure was only 1 in 27.

The area is still seeing cash buyers make around one-third of purchases.

And there are still plenty of listings that offer shoppers an “investment” property, like this large three-bedroom home with garage space for four vehicles. It sits on more than an acre and is listed for just under $200,000. It’s described as “calling all investors.”

9. Louisville, KY

Louisville, KY
Louisville, KY

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Median home list price: $299,900

Louisville, known for being the birthplace of Muhammad Ali and Kentucky Fried Chicken, has long been popular with investors due to its lower home prices and cost of living. At the height of the pandemic, as many as 1 in every 14 mortgages was for an investor buyer.

But prices have fast been rising in the metro, going up about 15.6% year over year in October. That’s led investor mortgages to fall to 1 in every 32.

For keen investors, there are still some investment deals to be had in the home of the Kentucky Derby, though. There is this historic 10,000-square-foot multifamily building near downtown Louisville. It needs some renovation, to be sure, and it’s listed for a cool million dollars. But the listing minces no words by starting its property description with this declaration: “INVESTMENT OPPORTUNITY!!!”

10. Dallas, TX

Dallas, TX
Dallas, TX

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Median home list price: $449,999

Most people know that Texas offers a combo of low taxes and relatively affordable homes, says Debbie Murray, a real estate broker at Allie Beth Allman & Associates in Dallas. This explains much of the rush to Dallas in recent years.

But where it was possible to find a spacious single-family home for around $250,000 just a few years ago, she says, the entry point for the same home is now closer to $450,000.

“We are a declining market for investors,” she says, because they want to find a good deal, one that ensures a healthy return, and that’s harder and harder to find now.

Where 1 in every 13 mortgages went to an investor in late 2021, by mid-2022 only 1 in every 25 to 30 mortgages went to an investor buyer.

Like many of the places on the list, Murray says, Dallas had offered investors a relatively cheap way to buy, then fix up a home to rent it out or sell it again at a profit. But with appreciation and high interest rates, it’s just not the same opportunity it was even a year ago.

“If they’re not a cash buyer,” she says, “they’ve probably been priced out of the market.”

Median metro home list price in October using Realtor.com data

The post Mom-and-Pop Real Estate Investors Are Pulling Way Back. Here’s Where—and Why It Matters appeared first on Real Estate News & Insights | realtor.com®.

Are Lower Mortgage Rates a Holiday Gift for Homebuyers—or a Temporary Reprieve?

Lower Mortgage Rates

Photo-Illustration by Realtor.com / Getty Images (1)

The drumroll of bad tidings in the housing market was interrupted last week by a glimmer of good news. Finally.

Soaring mortgage interest rates, which have caused deep financial pain for many homebuyers and led to a freeze in the housing market, dropped by about half of a percentage point last week. They fell from above 7% to 6.6% for 30-year fixed-rate loans in the week ending Nov. 17, according to Freddie Mac.

Buyers shouldn’t celebrate just yet, though.

Many real estate experts believe the lower rates are a temporary reprieve, not a sign that rates will go back to the 2% and 3% ranges seen last year. In fact, many anticipate rates will return to around 7% this year.

“The sharp drop in mortgage rates this week opened a window of opportunity for buyers who are looking to lock in their rate. At the lower rate, they not only save money on their monthly payment, but a significant amount in interest over the life of the loan,” says Realtor.com® Manager of Economic Research George Ratiu.

But the good times aren’t likely to last for long, he says. “I still expect rates to potentially move back toward 7% in the next few weeks.”

The respite in rates will save buyers about $100 a month on their mortgage payments—and nearly $48,000 in interest over the life of a 30-year fixed-rate loan. (This assumes they put down 20% on a median-priced home of $425,000, not including taxes and insurance.) While that’s encouraging for buyers who have grappled with how to make the math of homeownership pencil out, prices are still high and rates haven’t cooled enough to make much of a dent.

But most experts believe the big increases in mortgage rates, which have more than doubled in the past year, are in the rearview. While they expect rates will fluctuate a bit, they predict mortgage rates will stay in the 7% range, but won’t go as far as 8%.

This “suggests that mortgage rates may have peaked,” Bright MLS Chief Economist Lisa Sturtevant says in a statement. The multiple listing service covers the mid-Atlantic region. But she cautions, “there will likely be ongoing volatility in rates amidst economic uncertainty.”

Why did mortgage rates fall?

Mortgage rates rise and fall for a variety of complex—and often competing—financial reasons.

As the Federal Reserve has raised its interest rates to combat inflation, mortgage rates have similarly shot up. Since inflation is still high, rates are expected to remain elevated as well.

“Inflation tends to really drive mortgage rates,” says Ratiu.

However, there are signs that inflation could be tapering off. The Fed scored a win earlier this month when the October inflation report was released. Inflation began to cool in earnest, going from a high of 9.1% year over year in June to 7.7% in October.

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Watch: 5 Costs Buyers Should Prepare for During Closing

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That cheered investors, who also play a big part in determining the direction of mortgage rates through the mortgage bond market. Lenders typically bundle up mortgages they make and then sell them to investors to free up more cash to make new loans.

When inflation is high, investors seek higher returns on their purchases of mortgage-backed securities, aka mortgage bonds, in the form of higher mortgage rates. Since inflation appears to be responding to the Fed’s actions, they’re hopeful that the Fed will slow its rate increases. So there isn’t as much pressure on rates to stay high.

“When there’s higher inflation, investors ask for higher returns. But now we see that inflation is cooling, the rates are cooling off as well,” says Nadia Evangelou, director of real estate research at the National Association of Realtors®. That doesn’t mean rates will stay a little lower.

“We expect [rates] to be volatile until we see even further deceleration of inflation,” adds Evangelou.

In addition, lenders are also doing their best to keep rates low enough to attract customers, says national real estate appraiser Jonathan Miller.

The problem with higher mortgage rates

Higher mortgage rates have essentially frozen the housing market.

Coupled with still-high home prices, many who had planned to purchase their first homes can no longer qualify for loans. Others have been forced to cut their homebuying budgets drastically. Despite home prices beginning to fall, they would need to plummet dramatically to outweigh the higher rates. So even though there are many who would like to become homeowners, they can no longer afford to do so. So home sales have dropped.

“If rates were cut right now, we would have another housing boom,” says Miller. “The demand is still there.”

The number of homes for sale is also still critically low. Builders worried they won’t find buyers for their residences are slowing the pace of construction. And sellers, most of whom are also buyers, are reluctant to give up their low mortgage rates to buy a home with a new loan with a higher rate.

“People are wedded to their mortgage rates, and they’re unwilling to become buyers with all the uncertainty,” says Miller.

In addition, many buyers don’t realize that mortgage rates have dipped, says mortgage broker Rocke Andrews, of Lending Arizona in Tucson.

“Hopefully, it means rates are topping out so people can begin planning their purchases,” he says. “Buyers may become a bit more interested in going out to look at homes.”

And as high as mortgage rates are today, they’re still substantially lower than they have been. In 1981, rates peaked when they briefly topped 18.5% for a 30-year fixed-rate loan.

“What we have to have in mind, [is] it’s better than an 8% rate, which is the historic average,” says Evangelou.

The post Are Lower Mortgage Rates a Holiday Gift for Homebuyers—or a Temporary Reprieve? appeared first on Real Estate News & Insights | realtor.com®.

What Is a Catio? A Purr-fect Home Addition for Your Pet

what is catio

jonist/iStock

What is a catio? These home additions, designed specifically for cats, are a growing trend that offer fresh air without the risk of your cat roaming away.

Even domesticated animals need to get some fresh air, but cat owners find themselves confronting a dilemma: No self-respecting cat will submit to going for a walk on a leash, but when allowed to roam free, they’re likely to get in a fight, pick up fleas or ticks, or bring back the lovely gift of a half-dead rodent.

What is a catio, anyway?

So that’s why “catios” are catching on across the nation. As you might guess from the name, a catio is like a patio for a cat—and often quite a bit more.

“A catio can give [cats] access to all that nature has to offer in your backyard while keeping them protected,” says David Murphy of TheCatCarpenter.com. “Cats stay safely inside but see, smell, and hear everything that’s going on outdoors.”

Seattle offers catio tours to inspire cat lovers, or perhaps even entrepreneurs looking to grab a piece of this growing market.

“I’ve built over 50 catios in the Austin area over the past several years. This year I’ve seen a noticeable uptick in interest,” Murphy says. “I’ve been working continuously just trying to keep up with demand.”

The skyway was constructed using welded wire hardware cloth. Cat doors at both ends provide a seal against insects coming into either room.
The skyway was constructed using welded wire hardware cloth. Cat doors at both ends provide a seal against insects coming into either room.

The Cat Carpenter

Catio design takes off

Catios “don’t need to look like a cage attached to the house,” says Cynthia Chomos of CatioSpaces.com, who’s built over 65 catios and claims business has doubled in the past year. “They can be designed and painted to integrate with the home so that they’re aesthetically pleasing.”

Some are set up like mesh tunnels winding through the backyard, and include climbing structures and toys.

This catio includes a catwalk that connects the main house to a treehouse.
This catio includes a catwalk that connects the main structure to a treehouse.

The Cat Carpenter

This outdoor amenity isn’t just for cats, either.

“Catios can also benefit their human owners, because they provide a place to enjoy nature,” says Chomos, who built herself a “catnap catio,” where she and her feline friends can bask in the sun together.

Cynthia Chomos and her cat Serena in Chomos's custom built "catnap catio."
Cynthia Chomos and her cat Serena in their custom-built “catnap catio.”

CatioSpaces.com

How to build a catio

If you’re going to pounce on this project yourself, treat it like any other real estate endeavor. Location is everything. Where you build your catio should:

  • Be level and stable, whether it’s a window box, your patio, or a stand-alone structure in your yard.
  • Have enough sun exposure. Cats love napping in the sunshine!
  • Be exposed to stimulation. This can be anything from squirrels and songbirds in your yard to a place where your cats can survey what their human neighbors are up to.

 

If you have more than just a window box’s worth of space, consider including these creature comforts:

  • A covered litter box
  • Cat-friendly plants
  • Water fountains
  • Shelves or branches for climbing

 

Tempted to try building one yourself? CatioSpaces.com sells blueprints (and Chomos donates a percentage of the proceeds to a different animal charity every quarter), which can be tailored to your needs. Maybe you have space for only a window box; perhaps you want something that blends in with the rest of your home. Or you can let your imagine run wild, like this Seattle catio below that’s clearly rooting for the home team. Either way, there’s a catio for every cat and cat lover out there.

You and your cat can be a part of the 12th Man in this Seattle catio.
You and your cat can be a part of the 12th Man in this Seattle catio.

CatioSpaces.com

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