What does the best time of year to buy a house really mean to you? For most people, what they mean is “when will I get the best price?” The traditional wisdom has been that the best time to be a buyer is in the fall and winter months when the real estate market is cooling down.
But, is this actually true?
Is Winter Really the Best Time of Year to Buy a House?
The real estate industry is definitely seasonal. The “Spring Season” in real estate actually starts in January. There is generally a pretty substantial jump in the number of listings in the spring, and this trend carries through all the way to the start of the new school year.
Then, at the end of summer listing inventory starts to taper off. It generally reaches it’s lowest point in the winter months during the holidays.
This means that buyers in the spring and summer will actually have more inventory to choose from than buyers in the winter. But, this doesn’t necessarily mean buyers are better off in the spring and summer. After all, if a buyer can find the house they want, it doesn’t really matter how many there were to choose from at the time they were looking.
The reason traditional wisdom says that winter is the best time of year to buy a house, is that there are less active buyers in the winter. The idea is that decreased competition among buyers for homes will lead to a lower price.
But, is this widely held belief justified? The truth is that the data just doesn’t support this idea. To help us understand why, let’s take a quick look at why the real estate market is seasonal in the first place.
Why is The Market Less Active in the Fall/Winter?
So why do the seasons matter when it comes to buying and selling homes.
The fact of the matter is that although buyers and sellers are on opposite ends of the transaction, they are usually motivated by the same things. Whether it’s a new job , marriage, a new child, divorce, downsizing or retirement, the reason for selling a home tends to also be the reason for buying one.
The reason that there are less listings in the fall/winter season, is that it is simply an inconvenient time to move for many people. With the new school year getting started and the major holidays right around the corner, many families would prefer to just wait until after Christmas to move. In other parts of the country, weather is also a big factor in the fall and winter real estate lull.
The inconvenience of moving during this season applies equally to sellers AND buyers. So, while the market activity decreases, the ratio of buyers to sellers actually stays relatively even. So, a decrease in market activity does not necessarily mean a decrease in the supply and demand relationship.
That being said, most regions in the U.S. do see a slightly lower sale price in the winter months. However, I believe this has more to do with demographics, and less to do with actual value fluctuations.
While the number of sales of detached homes drops off in the winter, for example, sales of condos and town homes tend to remain steady. Of course, this shift in the makeup of listings has an impact on average home prices for that period. With the more expensive homes coming off the market during this time, it makes sense that the average price would be lower. But this does not necessarily mean that it’s a better time to buy.
And let’s not forget that these trends are usually talked about on a national level, but real estate is a local business… so let’s look Southern California specifically.
Orange County is Another Story
The overall real estate market often tells a different tale than local markets. Orange County is no exception.
So how do the seasons affect the market here?
I’ve ran the number from Huntington Beach for 2016 and found that the average sale price in the winter was about $830,000 and the average market time was 56 days. But surprisingly, the average sale price was 3.3% lower in the summer at about $803,000 and an average market time of 61 days.
This is most likely due to the fact that inventory in Orange County is on a steady decreasing trend. Even with buyers and sellers “taking a break” for the holidays, there is still a wide imbalance between the two. With so many buyers competing for homes in Orange County, it’s unlikely we’ll see any apparent downward pressure from the seasons. Not to mention that weather here (which is always beautiful) has pretty much no affect at all.
When is the “Real” Best Time to Buy?
The most important takeaway here is that there are several forces affecting the real estate market, and seasons are only one of them. Interest rates and overall inventory trends are two more factors that are actually far more likely to affect the price you pay.
Interest rates are expected to continue on an upward trend, and inventory keeps getting tighter with no signs of loosening. So, from this standpoint, the best time to buy is now, so you can lock in a low rate and get into a home before inventory gets tighter driving prices up further.
But let’s put all the market and financial trends aside for a second and look at this another way.
The Realist’s Perspective
No one has a crystal ball that tells them what is going to happen in the market from one month or one year to the next. What you do know is when the best time FOR YOU is to buy a house. You know when your life will be hectic, when your job transfer is, when money will be tight, and when you’ll have a nice cushion in the bank.
While the market may trend in one direction or the other over the course of the year, it will do so unpredictably and slowly. You will probably be much better off timing your home purchase by the conditions of your personal life rather than trying to guess at the whims of the real estate market.
Just find the house you want and make an aggressive offer.
So in conclusion, there are trends and patterns we can look at, but they must be taken with a grain of salt. When it comes to the best time of year to buy a house, it’s a good idea to give less weight to seasonal changes and focus more on what works for you and your family.