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Is winter still the best time to buy a home?

December 17, 2019

While winter is rarely thought of as being the time when people buy or sell houses, there is a surprising amount of activity that takes place during the colder months. In fact, a big part of the reason for that trend is that people seem to be increasingly cognizant that winter can actually be a great time to buy.

"December offers the lowest home prices of any month."

Buying in winter is often a great idea because it comes with a number of advantages, including the fact that sellers at this time of year are far more motivated to get a deal done, according to new analysis of some 23 million single-family home and condo sales from ATTOM Data Solutions. On average, December offers the lowest home prices of any month of the year, though given today's level of competition among shoppers, they're still about 1.2% above asking over the course of the month.

However, it's worth noting that this number is down from the roughly 7.1% premium buyers will pay for homes in June, the month when sales are at their highest prices, the report said. Moreover, there are a number of days when deeper discounts are common; from 2013 to 2018, the three days with the lowest average sales prices were all in December: Dec. 26, Dec. 31, and Dec. 4. Todd Teta, chief product officer with ATTOM Data Solutions, noted that these are days with extremely low levels of sales activity, as many Americans would rather prepare for the new year or cash in on after-Christmas deals at the mall.

the two other months with the second- and third-deepest annual discounts are October and November, respectively, the report said. At these times, buyers can expect to pay only 1.8% and 2.1% more for a home.

A perfect example
Take Cuyahoga County - the area in and around Cleveland, Ohio - as an illustration of just how deep these discounts can be. According to analysis of local real estate transactions, the Cleveland Plain Dealer found that from 2015 to 2019, home prices in the winter months ranged between 14% and 25% lower than they had been in the summer. While prices rose somewhat substantially over that period, there was always a sizable drop in prices, even from autumn to winter, let alone the summer.

"Home prices in winter ranged between 14% and 25% lower than summer."

Altogether, in winter 2019, the number of home sales completed in the region slipped to about 3,600 from the 5,800 seen in summer, and that kind of demand shift has a substantial effect on asking prices, the report said. Ruth Mather, a local real estate agent, told the newspaper that another part of this dip in activity comes because there are fewer first-time buyers in the market. These consumers are more likely to rely on their tax returns, which they receive after the start of the new year, to boost their down payments, so it's primarily repeat buyers driving the market throughout the early winter months, albeit in smaller numbers.

"There are fewer buyers out there this time of the year," Mather added. "If you are making a voluntary move, you want to choose a voluntary time. It's nicer to move in nice weather than in snow and ice."

The current situation
This data comes at a time when consumers are already feeling good about the state of the market - and their place in it - according to the latest survey of buyers and sellers from the National Association of Realtors. Heading into the fourth quarter of 2019, 63% of consumers say they believe now is a good time to buy a home, and more than half of those people felt strongly about this fact, though that number was down slightly from the previous quarter.

"63% of consumers say now is a good time to buy a home."

The discounts may, in fact, be even deeper than many people realize this year, the report said. That's because mortgage rates continue to hover near the lowest levels ever seen in the market, so coupled with the slowdown in activity, the long-term savings could be significant for any buyer. While the borrowing environment is unlikely to change in the near future, that's not the case for home prices.

"Mortgage rates are at historically low levels, so I see no sign of the optimism about home buying fading," said NAR chief economist Lawrence Yun. "However, the fact that slightly fewer are expressing strong intensity compared to recent prior quarters is implying some would-be buyers have concerns about the direction of the economy."

In all, 52% of those polled felt the economy is improving, down from 55% just six months earlier.

Meanwhile, even more good news came for would-be buyers, because nearly three-quarters of those polled believe now is also a good time to sell a home, up slightly from the start of the third quarter, the NAR survey found. That may result in more homes being put on the market in the coming months, and could help price increases to moderate further than they already have.

Already taking advantage
Given that it is one of the months ATTOM found as providing stronger discounts, and consumers entered the final quarter of the year feeling like it was a good time to buy, it should perhaps come as no surprise that home sales were on the rise in October. The NAR's latest data shows that existing-home sales ticked up slightly in the first month of the fourth quarter, rising 1.9% from September and 4.6% from October 2018 on a seasonally adjusted basis. In all, the rate of sales rose to an adjusted 5.46 million, even as the most densely populated regions - the Northeast and West - saw declines in sales numbers overall.

"Existing-home sales rose 4.6% from October 2018."

Yun noted that near-record-low interest rates were certainly a factor here, as were things like more job creation and rising earnings, the report said. He consequently expects to see more sales activity increase as the year draws to a close. However, that comes with a caveat: Because of rising demand, the national inventory of homes for sale actually contracted on an annual basis, sliding more than 9%, to 3.9 months from the previous 4.3.

Altogether, there were about 1.77 million houses on the market nationwide at the end of October, a drop of about 800,000, the data showed. However, Yun noted that more construction permits are now being issued across the country, so the start of the new year could bring with it more buying opportunities.

In the meantime, prices for existing homes are on the rise as well, ticking up 6.2% on an annual basis in October to nearly $271,000, up from slightly more than $255,000 a year earlier, the report said. The typical sale closed in 36 days at the end of October, little changed from the same month last year, but nearly half of all sales were completed in less than a month.

A closer look at home building
As it regards home building activity in the market writ large, it seems that construction firms recognize a significant market opportunity in focusing on consumers likely to be first-time buyers. The latest data from the National Association of Home Builders shows that counties where Millennials - those most likely to be first-time buyers these days - live contain 62% of the entire country's population, and that's where they are largely focusing on putting up homes. At the end of the third quarter, almost 3 in every 5 homes nationwide were being built in these counties.

However, that number is still not where many experts think the level of construction should be in those areas, the report said. That, in turn, may make it more difficult for would-be first-time buyers to find a property they can afford.

"On the surface, these numbers look similar, but you would expect the single-family construction share to be higher in millennial intensive areas, which tend to feature greater amounts of household formation and population growth that require additional housing," said NAHB Chief Economist Robert Dietz in announcing the findings.

The other effect of low rates
While many would-be buyers are encouraged by low mortgage rates for obvious reasons, these lending conditions can - in some ways - have a negative effect on the number of homes for sale, as they often encourage owners to stay put. the most recent data from Black Knight Financial Services shows that low rates have driven a tsunami of refinancing over the past several months; through the end of the third quarter, such transactions were up 94% since the start of the year. That was up from a low in refinance activity at the end of 2018 comparable to levels not seen since the early-2000s boom.

"Refinances were up 94% since the start of the year."

Simply put, homeowners seem to know a near-historic opportunity when they see it and are quick to act, the report said.

"The bulk of that increase was driven by people refinancing to improve the rate or term on their current mortgage, with five times the number of such rate/term refis as there were in Q4 2018," said Black Knight Data & Analytics President Ben Graboske. "Cash-out refinances were up as well, although by a more modest 24% over the same period. Still, cash-outs made up 52% of all Q3 2019 refinances, with homeowners withdrawing more than $36 billion in equity, the highest amount withdrawn via cash-outs in nearly 12 years."

Getting a deal done
Those who are thinking about getting into the market as soon as possible may also find that sellers who are keeping their homes on the market at this time of year are particularly motivated, according to the Home Buying Institute. The typical home on the market in the summer is there less than 40 days before being sold, versus nearly 60 for those being sold in December, January and February.

That may mean it's more likely that owners will not only be more eager to sell, but more willing to reduce the price to ensure the home moves sooner than later, the report said.

For all these reasons and more, consumers who are thinking about getting into the housing market may want to do so in the near future. Talking to financial and real estate professionals about the best course of action may help shoppers find a homebuying strategy that works for them, and allows them to take advantage of today's low rates.




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