Perhaps the best time to buy a home, or any real estate for that matter, is in the beginning of the Winter season. Think about it. The heaviest volume of new listings and people starting their home hunting hits in the Spring and Summer. This trend starts to taper off in the Fall, but the traffic is still heavy enough to provide ample competition if you’re going after a hot property. When Winter starts, however, people and especially families shift their focus to the holiday season, leaving the “leftovers” from the Summer and Fall to sit on the market with significantly decreased competition. After all, people don’t want to be worrying about moving to a new home amidst the holidays, travels, let alone the cold weather.
$98,000 Saved Buying in the Winter!
I tested this theory in Winter of 2010 and saved 15% off the average price of comparable units in the area. In my condo complex, there are 14 two-story 3-bedroom townhome-style units, each at 1,600 sq ft. All but two are still in the hands of the original owners (built in 1992). One is now mine, and the other was last purchased in 2006 for $750,000. Outside of our complex, the closest in terms of comparable properties are 3-bedroom condos, at a lower 1,100 sq ft each, that have sold in the past six months at $650,000, which two different appraisers have used to appraise my home. On January 14, 2011, I purchased mine for $552,000, a 15% discount off a conservatively pegged “fair market value”.
If you know the San Francisco market well enough, you know that San Francisco hasn’t been hit that hard outside of the foreclosures and short sales (which are still high-priced relative to the SF market). In fact, the median price for a 3-bedroom home was approximately $800k in 2006 and now it’s at $700k. Since my condo is smack dab in the middle of the City (i.e., one of the higher priced neighborhoods), one could argue the value of my place is hovering above the $700k mark, meaning my real savings are over 20%! But I’m a relatively conservative guy, so let’s stick with the 15%.
So back to the original tip, and to speak a bit about shopping for a home in Spring/Summer: If you’re looking for value, target late Fall and Winter for some properties you can snatch up at discounted prices. Often, these are properties that weren’t sold in Summer/Fall for whatever reason (these days, often the buyer couldn’t secure financing even after going into contract). In the Spring/Summer, you’re going to see a lot of inventory that will provide you plenty of choices, but they’re also going to come with heavy competition, requiring you to deal with the stressful bidding process. Summer is probably a good time to start feeling out the market to see what’s out there, and once you enter the Fall, you can see what types of properties have lingered and not sold.
In my own example above, it turned out the seller put her listing on the market in the Fall with the hope of selling before the holidays and moving across the country (i.e., she was a “motivated seller”). Unfortunately, she out-priced the condo early on and as she approached early December, she had to drop the price significantly in order to leave by her target date. That allowed me to swoop in and only have to deal with one competitor, who I knocked out by putting a strategic $2k increase over the asking price. More on this in a future post.
One last point about hunting in late Fall and Winter: Your real estate agent will be able to provide you with more attention with less home hunters on the market. A good agent will take care of you, especially when you enter the contract phase. Until next time, good luck in your home hunting and hope you save a ton of cash!
