When is the Best Time to Buy or Sell Your Home?
Does timing really matter when buying or selling your home? And if so, when is the optimal time to act? If you have the luxury of deciding when you're going to move, then these are definitely questions you should be asking.
Most people believe it's best to sell in the Spring and buy in the Winter, and I'd have to say that most people are right...for the most part. In this post, I'd like to provide some tips on how you can utilize timing to help you save money on your next real estate transaction. We'll be digging into MLS data and evidenced-based practices to help you get the most bang for your buck!
For more money-saving tips, or to learn about the Common Cents flat-fee home listing service, be sure visit the home page at www.commoncents614.com!
Supply & Demand
Supply and demand is a fascinating subject, at least for econ nerds like myself. Like most things, home prices are subject to the laws of supply and demand. If there are more sellers (supply) than buyers (demand), then prices go down. But if there are more buyers than sellers, prices go up. Make sense?
While it's difficult to track the exact number of home buyers at any given time, we do know how many homes go into contract each month. Compare that against the number of homes for sale, and we have ourselves a makeshift supply and demand chart!
Based on this calculation, there will always be more sellers than buyers. But we still see massive changes in the ratio of sellers to buyers over the course of the year. A higher ratio means there are relatively more sellers than buyers, which should equate to lower home prices...AKA a good time to buy (and vice versa).
Therefore, in theory, January is the best month to buy and April is the best month to sell. While this gives us a nice foundation to work off of, it's still theoretical. Next, we'll look at actual home sale data to determine the optimal times to buy a home and sell a home.
The Best Time to Buy a Home
Based on the seller to buyer ratios referenced above, it appears January should be the best month to buy a home. But is this actually the case? And if so, how much money will you save by buying a home in January?
To answer this, I reviewed 16,180 real estate transactions from 2016 in Central Ohio. For clarification, the dates mentioned in this discussion refer when a the home purchase contract was accepted. This is an important distinction, since the average closing occurs 1-2 months after contract acceptance. With that said, here's the data:
December is actually the best month to buy a home, offering an average discount of 3.9% off the original list price. This is a stark contrast to the month of May, which offers an average discount of just 1.3%. While this 2.6% difference may not seem like a lot, just think about how much a home costs. With the typical Central Ohio home now above $200,000, we're talking an average savings of more than $5,000! Not bad, eh?
But here's where things get tricky. There aren't many homes for sale in December. So while prices are lower during the winter months, there's a lot less to choose from. If you're really particular about finding the perfect dream home, or if you're seeking a very unique property, you'll probably have better luck buying in the Spring or Summer. Therefore, if you find your dream home in December, you should receive some nice savings.
So with all that said, it's clear you can save a nice chunk of change if you buy a home in the winter. January, December, and November offer the biggest discounts. While the number of homes to choose from during these months is lower, it's certainly worth trying. After all, you could find some bargains!
The Best Time to Sell a Home
The best time to sell a home should be, in theory, the exact opposite of the best time to buy. But theories aren't always reality, and in this case, we came to a slightly different conclusion (keyword slightly).
For this analysis, we looked at a data set of 18,164 homes listed on the Columbus MLS in 2016. Rather than comparing contract acceptance dates, we're going to look at the listing date. After all, this is what you, as a homeowner, have control over. Here's what we found...
As a general rule of thumb, listing your home in the Spring will yield a sale price 1.5% higher than if you list in the Fall or Winter. Further, your home will sell up to 2 weeks faster by listing in the Spring. Not too shabby, right?
While the sale price is the main indicator I look at, days on market is also important. If your home sells 2 weeks faster, then you save 2 weeks worth of mortgage payments and property taxes. Plus the reduced stress will certainly add a few extra days to your life!
As you can see in the charts above, the best month to put your home on the market is April (April 4 to be exact). Homes listed in April sell, on average, just 1.5% under asking price and in only 20 days! Interestingly enough, April is 0.4% better than runner-up, May, making it by far the best time to list your home.
In contrast, there's not a significant difference in results at the bottom end of the spectrum. Listing from August to December is likely to yield similarly sub-par results, ranging from an average discount of 3-3.3% of your asking price. So if it's possible to swing it, you should definitely try to list your home in April.
What if I Have to Buy AND Sell a Home?
Every money-saving hack has a catch, and real estate is no exception. A common issue people have when timing the market is the fact that they have to buy AND sell a home...at the same time. This makes timing the market a little tricky, since the optimal time to buy is (more or less) the opposite of the optimal time to sell.
However, there is a silver lining. First, the best time to buy is not an exact opposite of the best time to sell (see the chart below). It's close, but it's not a perfect match, which creates some unique opportunities.
Second, and more importantly, the home you're selling is likely going to be a different price than the home you're buying. Whether you're upgrading or downsizing, there's probably going to be a price difference in both homes, and this is where you can save money!
As a general rule of thumb, people buying a more-expensive home should move in the Winter, whereas people buying a less-expensive home should move in the Spring. But I'm not one to chalk things up to rule's of thumb, so I created this nifty cheat sheet to help you out. Just estimate the approximate price of the home you're buying and the home you're selling to determine the best time for you to move. It's that simple!
Timing the market isn't full-proof, but should, on average, save you thousands of dollars! The average home buyer in December saves 2.6% more than the average home buyer in May. Further, the average homeowner makes 1.8% more on the sale by listing in April versus October. So if at all possible, try your best to buy in December and sell in April.
In addition, each city, school district, and neighborhood has their own unique quirks and nuances. Dublin, for instance, tends to be more volatile, thus offering much better prices in the Winter months. Whereas places like German Village tend to have fairly stable prices year-round.
If you want to know the best time to buy or sell a home in your area, just leave a note in the comments section and I'll get back to you as soon as possible!