Timing any local real estate market is pure speculation most of the time. But there are some trends you can look for to help decide when it’s the best time to buy or sell a home (or rental property).
With experience and some basic trends, you can get better at timing the market and using that knowledge to negotiate the best deal possible. I recently wrote an article called Negotiation Secrets For Buying Real Estate, check it out if you want to learn more about negotiating real estate purchases.
Read on to find out more about how to time the real estate market.
Secret #1: Choosing The Best Time Of Year To Buy or Sell
The time of year that you chose to buy or sell a property makes a huge difference in your buying competition and price.
Quick Tip: There are many other factors to consider such as location, schools, and how safe the neighborhood is when valuing a property. The time of year directly affects all of these factors.
It’s good to research buying trends in your local area for the previous five years to identify any patterns to help you find the best times to buy and sell.
Generally, in most cities, you’ll find it to be more of a seller’s market in the months of April to the end of August (Spring and Summer months). Most realtors know this and will advise you on that being the best time to sell your house.
The kids are out of school during the summer, so most families are looking to relocate and move during this time of the year, so they don’t interrupt a child’s school schedule. Everyone gets moved into their new home before the start of Fall when school starts again.
But what if you’re buying a home and want to find a deal? That’s simple, buy your new home during rest of the year when it slows down, say between October through March. Not many people want to buy or move to a new home during these months. Especially with the winter weather and the holidays!
The downside, however, is that you will not have as much inventory either, so you can’t be too picky. Otherwise, you might have to wait until April or closer to May to find the perfect home. While also competing with other buyers.
Secret #2: Big Cities Like San Francisco Are Hot All Year
In the major cities like San Francisco, San Jose, New York City, Los Angeles, Seattle, Portland, and Chicago sometimes the time of year does not matter because the market is sizzling all the time.
It’s almost always a seller’s market because rents are very high and seem to keep going up with no sight of stopping. Many renters get fed up with the insecurity, so they rush to buy something instead. With so many people competing all the time, the supply cannot keep up with the demand all year round.
If you look at long-term trends, however, there could be some patterns to show you that prices have up years and flat years. In rare circumstances, prices could decline even in a city like San Francisco.
If San Francisco had an earthquake, I wonder what would happen to the prices? If the current Tech Job Market crashed as it did during the dotcom era of the year 2000, that could also temporality throw a city like SF into a buyers market.
Secret #3: Look At The Housing Prices For The Last 10 Years
If you were to look back at any trend of real estate sales and prices, you’d find that it typically always swings back and forth to be a good time to buy for 2 – 3 years, then sell for the next 2 – 3 years. So tracking a 10-year range can provide a decent window of time to make a consideration.
For example, let’s take a look at what happened from 2002 – 2012. It was a hot seller’s market from 2002 – 2006, the market went down, and then it was a buyer’s market from 2007 – 2012. Then in 2012, it got hot again and has been a seller’s market for the last three years, at least in California.
I cannot tell you when the next buyer’s market will be here, but my guess is soon. It seems like the prices have peaked and interest rates are going up, thus giving people less buying power.
In my local town in the East Bay Area, a lot of properties are sitting on the market longer and with price reductions as of 2017.
So the takeaway for this secret is to look at a buy and sell trend in the local area for at least the previous ten years or more.
Secret #4: Emotions, Confidence, and a Bad Job Market
Emotions that affect a buyer’s confidence can also control how and when home buying cycles occur. When people are not confident in the job market and nervous about the overall economy, they’ll rent instead of buy.
This will cause a buyer’s market in most cases, especially if lending is hard to qualify for because of a recession. With not as much competition buying a home, you might be the only offer on the table, so a seller decides to take it.
This makes it a great time to buy if you’re an investor.
If you notice interest rates for a traditional mortgage starting to get higher than previous years, that’s an additional sign that you have a great chance of getting a deal on a property.
If you’re planning on selling your home in a buyers market, don’t expect to get top dollar for your home. If you can, wait it out until the market picks up again and under no circumstances should you sell your house for cash to an investor. Don’t do it unless you’re desperate to get out of it and have no other choice.
Tip #5: Basic Supply and Demand
Housing and property prices are all controlled by supply and demand.
Bigger cities are exposed to the up and down cycles more than the Midwest and country areas of the United States. Most places will remain flat because the demand and supply are pretty well balanced. There’s always a lot of land around so building new construction is cheap and easy, unlike San Francisco or New York.
Other randomly located city areas will peak high while others peak low. So get familiar with the market you want to buy in, do some research, and then you can get a good gut feeling on when it’s the right time to pull the trigger.
If a big company is opening up a factory near a town, it’s a good chance prices will go up. The influx of new jobs will create more demand for housing, and it will exceed the supply. So always pay attention to the news and think about any event that might trigger something exciting to happen.
Quick Tip: Always remember that new homes can be built in a city or town when the demand calls for it. You always need to think about how that can make the prices go up or down.
At the end of the day, real estate values are mostly determined on the local area and not what’s happening in other areas of the nation. Become an expert in your local city, and you’ll do just fine.
Trying to time the real estate market down to the perfect time to buy or sell will make you stressed out. A good rule is, only buy a home you can afford. That way if it goes down in value you’ll be able to afford the payments long enough to stay there until the values go up again.
If you’re looking for an investment property to flip or rent out, you’ll need to feel confident with your research and the timing of when you buy and then plan to sell it.
REMEMBER! Research, Analyze, Get a Good Gut Feeling, and then Make a Move.