Buying a home in the spring and summer these days looks like something you’d see out of “The Hunger Games.” For sellers, it’s the golden opportunity to get the most return on their real estate investment. Buyers, on the other hand, might feel like they’re in a gladiator ring.
A lack of affordable homes in many markets, along with fierce competition, rising prices and higher mortgage rates, have sidelined many buyers this year. That was evidenced in July by a continued slump in existing-home sales, which crawled to their slowest pace in two years, according to data from the National Association of Realtors.
As summer fades to fall, though, recent market shifts could give buyers a leg up in the latter part of the year. In July, for instance, the national inventory of homes listed above $350,000 rose 5.7 percent, according to new data from Realtor.com. The inventory swell is mostly in markets that have seen continual price growth that’s starting to decelerate. In fact, 16 major housing markets had a year-over-year increase in their inventory levels, Realtor.com found.
These slight changes, along with less buyer competition and sellers eager to get to the closing table before the holidays, could give serious buyers more latitude, says Danielle Hale, Realtor.com’s chief economist.
“Make no mistake: It’s still a sellers market in many places, but we’re starting to see the tide shift,” Hale says.
Fall and winter give buyers more negotiating power
Homebuyers with children tend to abandon their homebuying plans by August because they want to be settled before school starts. National housing data shows that August and September tend to have the most drastic price reductions of any time during the year, Hale says.
Although there’s less inventory in the fall than in the spring, buyers can often get better deals on what is available. Fall is a last-ditch opportunity for sellers to close on their homes before the end of the year. And with fewer buyers coming through the door, sellers tend to price their homes more aggressively to get buyers’ attention, says Bill Gassett, a real estate agent with Re/Max Executive Realty in Hopkinton, Massachusetts.
Aside from nabbing a better price, you might also score more flexible terms in the fall, such as an extended closing time, or home inspection repairs or credits, Gassett says. The longer a home sits on the market, too, the more willing a seller will be to negotiate, he says.
“You do not want to give Jeff Bezos a seven-year head start.” Hear what else Buffett has to say
Once November sets in, substantially more buyers and sellers drop out of the market. The odds of finding a home become much slimmer because inventory levels typically plummet further in November and December, Gassett says. You can use that lull to your advantage — and gain the upper hand.
“Sellers who can’t wait until the spring to sell are even more motivated (in the winter),” Gassett says. “The weather isn’t nice, people are celebrating the holidays and no one wants to move during that time.”
To narrow your buying window, look at local data
The saying “all real estate is local” isn’t just a catchy mantra; it’s rooted in fact. The best time to buy (or sell) in your area depends on its supply and demand, as well as local seasonality, climate, economic conditions and historical trends.
“When demand is low and supply is high, there’s an opportunity to pounce,” says Jay Phillip Parker, CEO of Douglas Elliman Florida Brokerage. “Buyers can’t control supply, so they have to look for periods of low demand.”
Those low periods of demand can vary from market to market. Buyers should ask their real estate agent to get granular with local market data to help them figure out a more precise window for scoring a good deal.
Here are some important questions Parker suggests you ask:
- For the house type I want, how many of those homes are for sale or have recently sold?
- What was the list-to-sales average for these homes?
- How many days are these types of homes staying on the market?
- How many of these homes are on the market today compared with last year?
- How many price reductions have there been for these type of homes?
Parker agrees that buyers have more leeway in negotiations during off-peak times, but says that asking for too many contingencies can still be a deal-killer. Buyers should always get a home inspection to identify major issues, but there’s a much bigger picture to consider, Parker says.
“You’re better off focusing on price,” Parker says. “Once you know what you’re buying and you know you can afford it, the most important thing is price.”
SOURCE: Bankrate.com via CNBC.com