My wife wants to buy a boat. The summer is a horrible time to purchase one though. Everyone is out on the water. The sun is shining. The demand is high for boats, and sellers have the advantage.
My parents just purchased a Jeep Wrangler. The same is true about Wranglers. Don’t buy one in the summer if you want to get a good deal on the purchase price. Buy it in the winter when no one wants to drive around with the top down, and you can drive a hard bargain.
Purchasing a home is seasonal too. It’s all about timing. Supply and demand play a critical role in whether or not you will have to pay the full appraised value of the home or whether you can drive a bargain and get a discount.
Buying a home is the largest purchase most people will make in their lifetimes. We want to do it right, and we are often desperate to score a great deal on our home. Understanding the best time of the year to purchase a home can help you negotiate the price you pay and how big of a discount you can find on a home.
October Is the Best Month to Purchase a Home
RealtyTrac, a leader in real estate data collection, recently released a study of over 32 million home and condo sales over a 15 year period from 2000 to 2015. And, RealtyTrac found that October was the best month to purchase a home. Buyers received a 2.6% discount on their home’s current fair market value in the month of October.
While 2.6% doesn’t initially seem like a lot, it can add up when you consider that the average existing home sale price in the United States is typically $188,900. That 2.6% equates to a savings of over $4,900. That’s over five months of mortgage payments you could save through negotiations and purchasing in October.
RealtyTrac specializes in providing buyers and real estate professionals with data on pre-foreclosure, auction, bank-owned, currently for sale, and recently sold homes in over 2,200 counties throughout the United States. The site also provides information about community backgrounds, schools, crime statistics, and a host of other stats home buyers and realtors need to know to make an informed buying decision.
Like October, December, January, and February also rank high in months that offer the best discounts. While they don’t rate a 2.6% discount, each month saw over a 2% discount on homes’ current market value versus the amount paid by buyers. The worst month to purchase a home, according to the study, was April, where buyers typically paid a 1.2% premium to the home’s value.
Which Seasons Are the Best to Buy a Home?
Spring and summer are the worst times to buy a home. It’s when everyone is moving and looking for a new home. It’s called the “summer moving season” for a reason.
The price disparity between the seasons is a classic example of supply and demand. If there are a lot of buyers and the supply of homes remains the same, the price will rise. Or, sellers will not feel the pressure to lower their prices because more buyers are just around the corner thanks to the summer moving rush. The sheer volume of families moving is why spring and summer are the worst time to buy a home if you want to get the very best deal.
Things can get ever worse for buyers if there are fewer homes for sale during the peak season. It’s supply and demand theory that everyone learns in Economics 101. More buyers and homes available for sale equates to a seller’s market where buyers will get pinched for more money.
But, if you can wait until after the summer move cycle, you can typically negotiate a better deal on buying a home, which the RealtyTrac survey showed. Even if there are not more homes for sale, if the number of homes for say stays constant but there are fewer buyers because of the season, supply and demand imply that the market will favor buyers, all other things remaining constant.
That’s why October is the best month to buy a house. Sellers may find themselves in a sense of desperation, as fewer buyers are available for the same amount of homes for sale.
Best Time of Year to Get Approved for a Mortgage
The best time of year to get approved for a mortgage is when you can afford it. That sounds a little obvious, but it’s not timed to a specific month of the year. Instead, it depends on your finances.
In today’s market, you need a down payment. While you may find a few loan programs and lenders who allow for less than the standard 20% down payment, you’ll still need quite a heft amount saved for a down payment. Even if you find a lender who only requires a 10% down payment, that equates to almost $19,000 for our average new home price in America that we used in our earlier example.
If the down payment was just 5%, you’re still talking about almost $10,000. The best time of year to look for a mortgage is when you’ve saved for a down payment. The down payment is on top of your fully funded emergency fund too. Don’t skimp on the personal finance necessities like saving for retirement, buying insurance, or having a fully funded emergency fund a three to six months worth of living expenses.
Another time to apply for a mortgage is when your credit score is at its highest. You should apply for a mortgage after cleaning up any issues with your credit report. Do you have errors that you need to challenge on your credit report? Has it been years since you even looked at yours?
Now is the time to start looking at your credit report and boosting your credit score before you need to apply for a mortgage. It takes time to raise a credit score through paying off debts, paying on time, and fixing errors. You’ll want to start really focusing on these areas of your personal finance life well before you look to buy a house.
You should also look to shore up your budget before you buy a house. Do you need to make adjustments to your monthly budget for things like home maintenance, insurance, property taxes, homeowner association fees, and the host of other costs that go with homeownership? Some of these costs may surprise renters who transition into first-time homeowners.
Owning a home is a great endeavor. It’s still considered a large part of the American Dream. But, it takes planning. With a little forethought, you can save a lot of money and successfully negotiate the challenge and thrill of home ownership.
If you want to save a lot of money while buying your next home, it can pay to consider the law of supply and demand. As a buyer, consider waiting for the least desirable moving months during the year if possible to help you negotiate the largest discount possible.
