NerdWallet's Smart Money Podcast - Seasonal Housing Market Trends and Travel Credit Card Tips

Episode Date: August 14, 2023

Learn how to take advantage of seasonal housing market trends and enjoy travel credit card rewards — even in small cities. 1:03 This Week in Your Money: Seasonal housing market trends can have a big impact on homebuying (or selling!), which is why NerdWallet data writer Liz Renter joins today’s episode to discuss the latest patterns. She talks with hosts Sean Pyles and Liz Weston about the fluctuating trends of home prices, inventory and sales, with a focus on how they’ve shifted over the past few years — including with the impact of the pandemic. They discuss how rising interest rates may influence the housing market in 2023 when it comes to prices, inventory and homeownership feasibility. The Nerds evaluate the pros and cons for buyers and sellers in the second half of 2023, including potential benefits of larger down payments and shorter mortgages. 10:57 Today’s Money Question: Travel Nerd Sam Kemmis joins Sean and Liz to answer a listener’s question about how to maximize the benefits of travel credit cards, particularly for those based in smaller cities with limited amenities. They discuss the perceived value of airport lounge access, when it makes sense to use points instead of paying cash and how to maximize benefits when flying out of smaller airports. They also offer insights into how to approach airline loyalty, and they wrap up the discussion by sharing their personal tips for traveling through small airports and small towns. 25:19 Takeaway Tips: In their conversation, the Nerds discuss: seasonal housing market trends, home prices, housing inventory, homebuying, home sales, mortgage loan interest rates, homeownership, the real estate market, travel credit card rewards, small airports, maximizing credit card benefits, travel tips, airport lounge access, frequent flyer miles, and buying flights with points instead of cash. To send the Nerds your money questions, call or text the Nerd hotline at 901-730-6373 or email [e-mail]. Like what you hear? Please leave us a review and tell a friend.

Travel credit cards can offer lucrative perks like sign-up bonuses, shopping credits, and the ever-sought-after airport lounge access. But are these cards still a good idea if you don't live in a place where all of the rewards are available? We've got the answer this episode. Welcome to NerdWallet's Smart Money Podcast, where you send us your money questions and we answer them with the help of our genius nerds. I'm Sean Piles. And I'm Liz Weston. Listener, send your money questions our way, whether you're wondering how to buy a house right now, or if it's a good time to get an electric vehicle, or maybe you aren't sure how to choose the right travel credit card for your lifestyle. You can leave us a voicemail or text us on the nerd hotline at 901-730-6373.

That's 901-730-NERD. You can also email us at podcast at nerdwallet.com. This episode, Liz and I answer a listener's question about how to make the most of a travel credit card when you live in a small city. But first, we're going to give you the scoop on the housing market. After three years of pandemic-induced wonkiness, there are signs that the housing market is returning to some old patterns. So we're going to talk about that and what it means for you, whether you're hoping to buy or sell a house this year. And joining us for this conversation is another Liz, NerdWallet data writer Liz Renter. Liz recently wrote about these housing market trends for NerdWallet.

Welcome back to Smart Money, Liz. Thanks, Sean. I'm happy to be here. Liz, over the past three years, we saw the housing market do some pretty wild things. Prices shot up early in the pandemic. The housing inventory shriveled up in some places, and the regular seasonality of when people buy houses went out the window. But now it looks like that's changing. So what are you seeing? Well, it looks like some of that is changing, right? If anybody listening has tried to shop for a home or even like watch the news for the past several months, they know that not all of that is changing.

Prices are still up and inventory is still down from before the pandemic. But what is normalizing is how those things move throughout the year. So the housing market is very seasonal. It's why we talk about quote unquote home buying season, you know, and if you were to sort of like create a line graph with several decades of pricing or inventory information, and each line is a year, most of those lines are going to have the same shape with the exception of 2020 and 2021. But now we're starting to get that shape back. That seasonality is starting to come back, even though prices and inventory are still very disrupted. So let's talk about what that seasonality looks like across the three main areas of the housing market, home prices, inventory, and sales trends. What should

people know? Right. Well, I think first up is price seasonality. So generally speaking, the normal seasonality of prices is that they start low in the beginning of the year. January, February prices are low. They begin climbing in late March. They climb into summer and they most often peak in June. You know, over the past 10 years, prices have peaked in June in all but two years. And those two years were 2020 and 2021. Both of those years, they peaked in December. So like, if you think about that, what that looks like on the line chart that I mentioned would just be an uphill climb. Prices started low in the winter and just continued to climb through the year. And then as you went from 2020 to 2021, they just kept on climbing. So 2022 looked a little bit more normal in that prices started to come down

as weather cooled in the fall and we went into winter. 2023, we expect it to be even more quote unquote normal with that seasonal fluctuation. And again, that doesn't mean pre-pandemic prices. Prices are still going to remain high, but they are going to trend downward as we go towards the end of the year a little bit. Well, let's talk about one of the reasons why home prices are so high right now, and that's inventory. Can you give us the scoop on what's happening there? Right. So inventory moves pretty similarly to prices, only maybe not as dramatically. The number of homes on the market starts low at the beginning of the year, and it climbs

in spring and peaks a little bit later than prices in late summer before it starts coming down slightly in the fall. We know that changed in 2020, but it's interesting the way that changed compared to prices was a little bit different. So in 2020, inventory was low at the beginning of the year, as it always is at the beginning of the year, but it just kept going lower. So they never really increased as we generally see in the summertime. Now, inventory remains about half of what it was before the pandemic, but 2022 did see more of a recovery in that seasonality where as we hit warmer weather in the summer, the number of listings increased, and 2023 will likely echo this as well.

And then the final thing you could talk about would be sales trends or the number of homes that are changing hands. And all of these things, prices, inventory, sales trends, they're all very, very interconnected, right? This is all supply and demand in one form or another. So the sales volume generally follows inventory and pricing. As spring and summer come, we're in home buying season, there's more sales happening as those prices are high, inventory is high, homes are flying off the market. In 2020 and 2021, one thing that was interesting is we had very, very low interest rates. So even though prices were extremely high, demand was still high. People were still buying homes because we had such low rates. That drove higher sales late in the year or later in the year than what would normally happen.

Again, 2022 helped normalize this. And we did see some sales trends that more closely resembled a seasonal end to the year. Liz, you mentioned interest rates. And I want to talk about how the rising interest rates have affected the home market and the feasibility of home buying for a lot of people. Because right now, homeownership is increasingly unaffordable. So how is that playing out in the data you examined? Yeah, so high rates at the beginning at the end of 2022 helped to weaken that demand that we saw. So as I said, we saw that high demand in spite of high prices because of low rates. Well, that changed as rates went up.

Those higher prices became more and more difficult to stomach. So we saw demand drop off in the second half of 2022. The way we're seeing that impact things now is people are realizing that higher rates are going to be here a while. And so they're tiptoeing back onto the market and demand has picked back up in 2023. But high rates also mean that inventory stays depressed. So current owners are less likely to put their homes on the market because it means giving up their current low rate mortgage and signing up for a higher rate one on their next house. Yeah. My friends and I who have those lower rate mortgages joke that we are in our starter

homes, which are also our forever homes, because we don't want to have a higher interest rate. And one thing that I found that really stood out to me is that according to a June report from Redfin, 62% of homeowners have a mortgage rate below 4%. And folks would be really hard pressed to find such a low rate on a mortgage today. Yeah, I you know, Sean, I don't like using absolutes very much, but it would probably be pretty close to impossible to find a rate that low today. Yeah. So let's talk about what these changes mean for consumers, starting with home buyers. Yeah. So buyers are likely to see the most competition in the highest prices of the year

right now. This is going to subside slightly over the next several months as things start to cool down, both the weather and the housing market. But as I said earlier, prices aren't going to come down substantially. If you're waiting for 2019 prices, you might as well hang it up. That's not happening. But if you want just a slight decline in prices, you might see it as we get closer to the end of the year. There's always a tradeoff with that, though, because as we get towards the end of the year in a traditional home buying season, we're also going to see less inventory. So inventory is already constrained. If you hold out for a slightly lower price come November or December, there's going to be even fewer homes to choose from.

And as we talked about, rates are going to remain high. Don't hold your breath for lower rates by the end of this year. Okay. And what should those hoping to sell a house this year keep in mind? Well, as we said, it's hard to give up that low mortgage rate. But if you are really motivated to get out of your current home, there are some sort of perks or some things working in seller's favors right now. Well, for one, it is still largely a seller's market. It's benefiting the seller. The problem becomes when you're a buyer, right? You sell the house, now you have to buy again. The good news on this front is a lot of current homeowners have a ton of equity in their existing home. And a bunch of equity makes for a bigger down payment on your next home. Tied very closely

to that is if you have a bigger down payment, you might be able to borrow less or take out the amount of mortgage relative to the home price. And if you could do that, you could probably get a shorter mortgage. So instead of that 30-year fixed interest rate, you could look at a 15 or a 20. And there's two benefits there. Number one, those shorter mortgages generally have a smaller interest rate, but also you're paying for 10 years less. So you're going to save potentially thousands of dollars in interest anyways. Right. Okay. Well, Liz, I'm going to end this conversation with an annoying crystal ball question for you. Do you have any predictions

for what will happen in the housing market as we head into the back half of 2023? Yeah, Sean. So I think I touched on a couple of these, but number one, rates are going to stay high. Because of that, demand is going to remain moderate. That doesn't mean demand is going to cool or you're not going to see competition

because the other thing that's going to happen towards the end of this year is supply is going to remain constrained. So you're still going to be out there, even though there's going to be maybe fewer borrowers than a couple years ago or fewer shoppers than a couple years ago, there aren't enough homes to go around. So competition is going to remain high. And as I said at the top of the episode, prices may come down slightly in that seasonal trend, but we're not going to undo the price gains that we saw in 2020 and 2021. Right. So it seems like the housing market will remain challenging for many, but at

least it's somewhat more predictable now. Exactly. All right. Well, Liz, thank you so much for talking with us. Yeah, absolutely. It's been fun. That wraps up our This Week in Your Money segment. Today's money question is up next. Stay with us. This episode's money question comes from Ian, who left us a voicemail. Here it is. Hi, my name is Ian. I'm calling about airline points when you don't live in a large city. So my experience here is I grew up in Milwaukee, which is a beautiful place to live.

However, its airport is dwarfed in comparison to the 90-minute ride to O'Hare for cheaper flights and more flights. And I'm in the same scenario now where I live with my wife in Nebraska. Omaha is great, but it only has about 20 gates. So what I'm saying is how do I maximize the programs for airlines knowing that, you know, most of the airports that I start at or connect from might not have a lounge, might not have all the fancy features. Thank you for your advice. I look forward to seeing how we can change our rewards.

And I really enjoy the podcast. Thank you. Goodbye. To help us answer Ian's question on this episode of the podcast, we're joined by travel nerd Sam Kamis. Welcome back to Smart Money, Sam. Thank you so much. Great to be here.

Sam, our listener is in an interesting situation where they want to take advantage of the fun perks that you can get with these fancy travel credit cards like lounge access and other amenities. But their primary airport is a small one that might not have all the bells and whistles that we coastal elites are accustomed to. So Sam, the question is essentially, how can you make the most of a travel credit card's perks if they aren't accessible where you live? Yeah, it's a great question. And I think it boils down to FOMO at some level, right? There's this fear of missing out that my credit card offers something, but I can't take advantage of it because of my small airport. And my biggest piece of advice here is just not to feel too much of that FOMO,

because in my opinion, the lounge access that many of these cards offer is actually kind of overrated. I just wrote an article that has literally that headline, airport lounges have become a bit overrated. Okay. Why is that? Well, there's a few things. One is that they have become increasingly popular because everyone wants them, right? And a lot more people have these credit cards that offer them. So they're just a little harder to get into. So it's not uncommon to either need to wait in line or to wait on a waiting list to get into one of these lounges or to show up and find that they're actually not letting folks in at all who have access through a credit

card. That happens to me with maddening frequency. So in some ways, our listener who's in a smaller airport is spared this outrage of showing up and not being able to get into a lounge that they think they have access to. The main appeal is to have a go-to place where you can hang out. And of course, they usually have some food and drink for you too. But I tend to just find an empty gate and park there with my book and a coffee and hang out because I do kind of want to get away from people. But it seems like airport lounges were appealing because that was one way to escape the crowds and get some snacks at the same time. But if that isn't really an option for a lot of folks, maybe they're better off going the empty gate route.

Yeah, totally. I think it's a great option. And especially at smaller airports, smaller airports are just generally a little nicer, a little quainter, a little quieter. So yeah, they're kind of like built-in lounges in some ways. But I'm also noticing that more airports are adding lounge-like amenities,

like more charging stations, quiet areas, comfortable seating, sometimes play areas for the kids. I haven't found any free booze yet, but, you know, otherwise, you don't have to have a lounge to have a decent experience. Yeah, no, totally. Really, the free booze is the distinguisher. So if that's what you're after, then maybe the lounges are worth it. But otherwise, yeah, a lot of airports have made improvements that have made them a lot more lounge-like. The one I'll harp on that I wish more airports did is there's a thing called a quiet airport movement that some international airports are taking on. And it's this idea of making way fewer announcements that aren't for your gate and all the random

messages from the mayor of the town that you're in, whatever it is, they're cutting those. And that's one of the, for me, the biggest benefits of a lounge is they don't have those announcements and it's just a much more peaceful place to be. Yeah. You don't realize how much stress you are experiencing with all that noise going on. Yeah, no, totally. It's a sensory overload in every direction at an airport because you're navigating people coming at you and noises everywhere and flashing lights. So, I mean, I'm just a big fan of my noise canceling headphones. Those help me stay sane while traveling. Yeah, totally. And, you know, another thing to point out with these cards is that the lounge access is one benefit that they offer, but there

are tons more and tons more that have more tangible benefits in some ways. There's the points and miles that they offer, which can be used directly or they can be transferred to partners. There's sometimes travel credits, especially on these premium cards that offer lounge access. So you can use those for airline fees or things like global entry and TSA pre-check. There's trip protection, car insurance coverage, and then some have all sorts of other statement credits for like wireless services, streaming services, ride shares, department stores, sometimes $50 at Saks Fifth Avenue and that sort of thing. So there's really a lot of benefits beyond the lounge access that I would encourage our listener to pay attention to. That makes me wonder what

type of card our listener is using and whether they'll be able to use all the benefits that the card offers. Because I will say I've never been to Omaha, Nebraska, but I'm not sure if they have a Saks Fifth Avenue. So they might want to make sure that they have a credit card that they are actually able to use to its full extent given where they are. And that might mean not getting the most premium flashy travel credit card, but one that is more general all purpose, that they're still getting some good points and miles from. So what about the idea of driving to a larger city that has a bigger airport, maybe one with airport lounges? In Ian's case, that would probably of driving to a larger city that has a bigger airport, maybe one with airport lounges.

In Ian's case, that would probably mean driving to Kansas City, Missouri, which is like a two hour and 45 minute drive. Is it worth it? You know, it's hard to say for sure, right? I just interviewed this economics professor who said something really nerdy that I love, which is that you should know your own utility function when you're traveling. Yeah, I like that. Yeah. And that's basically just to know what do you care about and what do you not care about? If you're short and you don't care about legroom, well, you probably shouldn't pay for extra legroom. If you don't mind driving, then maybe a two hour and 45 minute drive is a great way to catch up on some podcasts like this one. Very good. If you're like me or many other people, I wouldn't drive two hours and 45 minutes out of my way to go to the Kansas City airport, no matter how much free booze they're offering at the lounges. Yeah. But what about, I mean, some of the bigger airports may have less expensive flights. So that

could be a draw for someone to make that trek. And that's a more classic utility function right there, right? It's figuring out how much is my time worth? How much cheaper is it? I face this all the time. I'm usually flying either out of LAX or Santa Barbara airport, which is closer to me. And the Santa Barbara ones are more expensive, but it's so much closer and the airport's so much nicer. So yeah, I'm making this utility function tradeoff calculation basically every week. And we've been promised at LAX that within a year or two, we're going to have less of an issue. But right now, the traffic and just trying to get to the airport is phenomenal.

So I don't blame you, Sam. Stick with Santa Barbara. Yeah, right. And it's so beautiful. They got the spanish tiles everywhere but going back to the airport lounge question it probably isn't worth driving two hours and 45 minutes just to get to an airport where there's maybe an airport lounge unless i guess you're some sort of fanatic unless you really love those tiny cubes of cheese

that's what you're in it for it's it's probably not worth the drive and yeah you don't even know if you're going to get in when you show up yeah yeah well sam you grew up in a pretty small town right so assuming that you were a diehard nerd from a very young age how did you navigate the situation growing up i'm from a small town missoula montana i can't say i was a frequent traveler from a young age but my my dad was, and he flew a lot and he was loyal to Delta. And what that meant was that he could only take two flights per day. He was either going to Salt Lake at this time or Salt Lake at the other time. And so that's definitely a big trade-off for people who are at smaller airports is whether it's worth maintaining airline loyalty because it just limits your options so much.

It might make sense to be loyal to a couple airlines, have kind of a polyamorous situation. Personally, I really love small airports in part because it reduces some of those choices that you have to make, right? Like if you're flying from Missoula to Seattle, there's one flight and that's the one you're going to take. And they're just so much, like we said, they're so much easier to navigate, to park at, all of that sort of thing. Yeah. And smaller airports can also have a lot of unique charm to them. Like people in the LA area will just rave about the Burbank airport, right, Liz? Well, I don't know that I call Burbank charming, but it's definitely smaller. The TSA is much better. You know, which one is charming is Long Beach. It actually is a pleasure

to go there. They've kind of kept that retro thing with a modern update. And they just did a beautiful job with that. Palm Springs also has a very charming airport. Oh, yeah. Very good. Yes. Our colleague Sally French covered a lot of these little charming airports in a recent column. So we'll link to that too.

All right. I think it's all relative when it comes to people in the LA area that everything is charming compared to LA. Our standards are so low. Yes. But it is getting better. It is, it is that they're doing the people mover thing and they're going to have transit finally hooking up with the actual airport instead of abandoning you, you know, miles away. So it is getting better. It's just

been a long haul and a lot of construction. You just got to be patient for it. So Sam, Ian's question is also just a good opportunity to talk about travel tips in smaller cities in general. So what are your thoughts on making the most of small cities, whether you're traveling to one or you happen to live in one? Yeah, great question. One big one is to always check award flights when you're going to a small airport or out of a small airport, because some programs base the cost when using miles on distance. And flying out of smaller airports can be more expensive when paying cash, but not when using miles. So if you're flying from Seattle to San Francisco, it might be really

cheap. But if you're flying to Eugene, Oregon, it might be more expensive if you're paying with cash. So that might be a great time to check the cost when using those miles. And then I already touched on this, but choosing your allegiance wisely. If there are only a few airlines operating, it might not make a ton of sense to be loyal to one since it will reduce your options. For example, if you're flying out of Missoula and trying to be loyal to American, you're always going to be flying out of Dallas, Fort Worth, which really limits your mobility to fly from the top of the country to the bottom and then fly from there. So yeah, just be mindful of the routes when flying through a smaller port. That makes sense. And then when you visit a smaller city, this is for you,

Sam, and you too, Liz, what do you like to do? Like, how do you approach traveling in a place that's not a bustling metropolis? I'm just thinking of the one time that I flew into Manchester, New Hampshire, when we were like the last flight and the place was deserted. It was actually a little bit creepy. Yeah. So I think be cognizant of the fact that you may not have all the amenities that you are used to if you've been flying out of a larger airport. One thing I always like to do when I'm traveling to a smaller city is find the most specific museum they have to that location. Like I did a road trip through Tennessee one time with two of my really dear friends from college. And we went to this museum that was from an old general store. They had been open for over 100 years, and they turned

everything that they've been selling over that century into little pieces of the museum. And it was so charming. And that's the kind of thing you can only really get in a place like that. That is so true. I went to a tool museum in Troyes, France. And I can't imagine a similar museum anywhere else in the world. They had thousands of handmade tools from like the 18th and 17th century. And it was beautifully lit. It was absolutely gorgeous. And I'm still trying to get to the cleaning museum, which is in Idaho. So that's on my bucket list. Yeah, cleaning museum? Wait, I want to hear about this. Yeah, there was this dude that was like really into cleaning and he's got a cleaning museum and I can't wait to go. It was closed the one time that we drove through. So now I have to go back. Yeah, that's amazing. This is a pretty generic tip, but I live in a small town and I really love it when people just ask me what to do here. And I find that that's really useful that instead of looking at guidebooks or

on Google or whatever, just go to a coffee shop and say, Hey, what, what's the thing to do here? You know, it's sort of like going to a restaurant and being like, what do people order at this restaurant? But just saying here in Ojai, California, there are hot springs nearby that sort of only the locals know about and they change locations. So it's hard to put on Google Maps. And that's a great example

where if you didn't ask anyone, you would never know about it, right? Oh, that's awesome. Right. As opposed to checking TripAdvisor where you might be going to something where thousands of other people are also going to be lining up

to see like a waterfall or something. That's what we get a lot out in the Portland area. Yep. People love their waterfalls. They do. Awesome. Well, Sam, thank you so much for talking with us. Thank you. And now let's get onto our takeaway tips. Liz, will you please start us off? Yes. First, don't sweat the lounges too much. Lounges are increasingly crowded and many airports are adding lounge-like amenities. Next, know your utility function. Make trade-offs that matter to you. Finally, enjoy the perks of smaller airport living. Less traffic means less crowded

with easier access and less onerous security lines. And that's all we have for this episode. Do you have a money question of your own? Turn to the nerds and call or text us your questions at 901-730-6373. That's 901-730-NERD. You can also email us at podcast at nerdwallet.com. Visit nerdwallet.com slash podcast for more info on this episode. And remember to follow, rate, and review us wherever you're getting this podcast. This episode was produced by Liz Weston and myself with help from Tess Vigeland. Kevin Tidmarsh mixed our audio.

And a big thank you to the NerdWallet copy desk for all their help. And here's our brief disclaimer. We are not financial or investment advisors. This nerdy info is provided for general educational and entertainment purposes and may not apply to your specific circumstances. And with that said, until next time, turn to the nerds!