Patti Payne’s Cool Pads at PSBJ
It’s Okay to Buy and Sell Over Winter
As we head into the winter housing market, people often ask “When is the best time of the year to sell my home?” The answer to this question is actually quite simple:
“When the timing is right for you!”
Like every home, every person’s motivation to sell is unique. Many factors can make the timing right to move forward with buying and selling in the current market. Whether it be a new job, finding your dream home for sale, or determining your current home no longer fits your needs, everyone has a different motivation that drives them to make a move.
Buying and selling within same-market timing
Regardless of the market, it’s okay to buy and sell within same-market timing, as you will usually end up with approximately the same net asset equity. In practice, in the spring, you’ll buy and sell in a market with higher sales activity intensity. However, in the rest of the year, you’ll buy and sell in a market with slightly lower sales activity intensity. Both scenarios will affect the pricing for both the buy and sell sides of a transaction.
While this is typically the case, there are certain scenarios that could have a notable difference in net asset equity. One such example would be someone who moves from one price range that has been appreciating higher than another price range they are considering. However, when the timing is right for you, it’s usually the right time to move, especially if you’re buying and selling within same-market timing. You can investigate by looking at both the percentage and actual dollar appreciation differential of your home and your next home when considering buying and selling within same-market timing.
At the end of the day, your goals and what is most important to you should be center view as you weigh when you’d like to buy and sell.
Financing + interest rates
If you’ll require home financing to purchase your next home, we recommend getting the ball rolling on the pre-approval process. Or better yet, work with a lender to get fully underwritten which will help boost seller confidence in your offer.
Currently, mortgage rates are historically low but are likely to go higher in 2022. Rising interest rates will affect affordability due to higher monthly payments and will impact the buyer of your home. Outlined below is principal and interest on a 30-year fixed loan (the most common home loan) at 3% versus a rate of 3.750%, which is forecasted by some for the end of 2022.
• For each $100,000 in a loan:
• 3%: $421 per month
• 3.750%: $463 per month
The numbers above illustrate what happens to monthly payments with an interest rate increase of 0.750% - simply multiply each monthly payment to find what it would be for higher loan amounts. Interest rates are projected to go higher, which could be something to take into consideration when determining the right time to sell and purchase a home.
Though rates will likely go higher, it’s important to understand that they will still be historically low. Past 30-year fixed loan interest rates have been six, seven, eight percent or higher.
Six phases in the yearly housing cycle
While every year won’t be exactly the same for residential real estate, year after year, our market follows a consistent,
six-phase cycle when you examine the number of new resale listings by month. Each cycle phase encompasses two months, and with each phase comes different market nuances.
Characteristics of each phase include:
• New Year Kickoff (January/February): After the holidays and the first of the year, a surge of buyers enter the market, but the number of new listings coming onto the market is about 40% lower than the summer monthly levels – until they increase in March. Because of this, in this period we normally see the highest sales activity intensity of the year through April (for new listings selling in the first 30 days). It can be advantageous to buy and list after Jan. 1, the week after the big game in February or in the spring. The biggest price appreciation boost for the year happens after Jan. 1, through the spring.
• Spring Market (March/April): Prime-time selling season begins in this phase as the number of new monthly pending sales is heightened from March-October. This is due to more listings coming on the market and increased buyer demand compared to the winter months.
• Pre-Summer (May/June) and Summer (July/August): Typically, the highest monthly number of homes going under contract occur during this time. But with more listings than new pending transactions, the sales activity intensity for new listings going under contract in the first 30 days is about 20% lower than spring. Many people choose to list in this phase to time a move around the school year. Beginning the selling and buying process in this market can help you potentially avoid seller gridlock – not being able to find or get an accepted offer on your next home. From May onward, as more homes come on the market, prices start to moderate.
• Fall Market (September/October): This is the last best chance for buyers until March for availability and selection. Historically, September usually has the highest number of available homes, but in 2021, we were virtually sold out in many areas and price ranges. As summer fades, so do the number of new listings before the even lower winter drop.
• Winter Market (November/December): In the winter of 2021, if you can find a home to purchase that fits your need, it’s a great opportunity to buy in the face of potentially higher interest rates. The typical winter market clean-up sets the stage for an explosive start of the New Year Kickoff.
It’s true that there are fewer sales over the winter months versus the spring, summer and fall. The winter months have fewer new resale listings by month than other times of the year. Additionally, these months have multiple holiday weekends when people are out of town. The backlog of holiday buyers come out of the woodwork in droves after Jan. 1.
Today’s Market + Your Next Steps
Currently, there is extremely high Sales Activity Intensity™ for each new listing that comes on the market, and many markets and price ranges are virtually sold out. These conditions have led to record price appreciation in many areas as we approach the seasonal low point of inventory on Jan. 1, 2022.
Once the new year hits, a backlog of buyers will lead to a mini power surge of sales activity. Additionally, “the great reshuffle” is still in play, with many people drawn to lifestyle and destination markets for their ideal work-from-home base, retirement location or to seek local employment.
In many cases, homeowners who choose to sell this winter or spring will get premium pricing for their homes in price ranges that are currently virtually sold out. To ensure you maximize your investment, it’s critical to work closely with a broker associate you trust. For sellers, your broker associate will help formulate a marketing and pricing strategy plan to get your home sold for the best price. For buyers, your broker associate can help you get “Buyer Ready – Day One” to get a home in today’s market.
If you’re thinking of selling this winter, I’d encourage you to investigate, explore and understand your unique situation to determine the best path forward. At John L. Scott, we aim to serve as your partners in success, being your personal representative every step along the way.
By J. Lennox Scott