Friday, May 04, 2007

Is Spring the best time of the year to purchase your next home?

Is Spring the best time of year to buy a home?

This article covers many of the pros and cons to buying at different times of the year. Spring is certinaly the hottest time of the year, but you may consider other times of the year if you are not in a rush.

Ah, glorious spring, a time for fresh starts and positive change.

Across Canada and the U.S., for-sale signs crop up like wildflowers on the lawns of subdivisions. Moving sales proliferate. Moms and dads box up their possessions and ponder what awaits them on a new block or in a new town. Kids finish out semesters, wary that a different school culture and a new set of friends await them in fall. It's a rite of spring and early summer in our transient society.

It's also a time when real estate agents get lightheaded from make-hay fever, as buyers and sellers come out in full bloom.

But is it always the best time to buy or sell a house?

That's a definite maybe, say experts. Like most buy-sell situations, it all depends on motivations.

Indeed, according to historic data from the U.S. National Association of Realtors, April through July outpaces the balance of the year in sales. So there'll surely be more home inventory and variety then. But you better move fast, because that's just what other home hunters are doing.

"It starts building up early in the year but peaks around June," says research economist Jack Harris of the Texas A&M University Real Estate Center. "There's school ending, there's vacation time and the weather is also nicer. It's generally just a good time to get out and look at homes."

Many buyers apply their income tax refunds toward down payments, adding to the spring push.
While the buying frenzy stays steady through most of the summer, it drops off in early fall, says Harris. It usually drags for a month or so, and then escalates briefly again around October. Some of that second spike is attributed to sellers who were overly optimistic pricers in the spring, but who have grudgingly decided to make concessions in the fall, he says.

According to the Canadian Real Estate Association, buying patterns follow a similar trend north of the border, peaking in April and May, as buyers prepare for July 1st, Canada's biggest moving day. Sales then slow during the summer and begin rising again in early fall. For obvious reasons winter months are the slowest.

Some seasonal house-hunting hints:

Be a contrarian. True, there's a greater choice of homes in the spring, but sellers then can better hold to their asking prices because of demand. "If you can stand to be a contrarian, it could pay to wait," says Harris. "Most people don't do that, though. They just get carried along with the crowd." Additionally, when home loans are less in demand, some lenders are willing to forego certain fees typically charged to win off-peak mortgage customers.

Off-season dealing: Sellers in late fall and early winter, especially between Thanksgiving and New Year's Day, are often more motivated to deal, real estate agents say. "I've done my best negotiating from October to December," says Jim Crawford, a real estate agent, lecturer and Web consultant in Roswell, Ga. "You don't want lots of people tromping through your home around Christmas time ... so you're more apt to accept an offer."

Window at summer's end: Sometimes, late summer opens a small window of leverage for buyers dealing with sellers of slow-moving family homes, says Crawford. "You usually find that the family ... is more important than the extra dollar."
Some sellers can wait you out: Empty nesters and single sellers will always account for some off-peak housing stock, but they're often less motivated to sell quickly, Crawford says.

Heed non-cycle or short-cycle markets: Parts of Florida, Colorado and California and other regions of the U.S. that have large resort areas or large numbers of retirees and semi-retirees don't follow the traditional sale season. Winter resort areas peak in sales between January and April, according to agents. In northern climates, the wintry elements can compress the annual peak seasons more to their warmest-weather months.

Tax timing: It can play a role if you plan to buy late in the year. Determine through a tax preparer if the deductions will better fit in the current or future year. If need be, try to close Dec. 31 rather than Jan. 2, or vice versa. (Be sure you know which items of your closing will be tax-deductible and which will be added to the value of the property.)

Opportunism: While it may sound ghoulish, layoff announcements or a planned corporate headquarters move in some markets can soon result in more homes on the market for the short term with a variety of price points and some motivated sellers. Proceed with sensitivity.
Home-buying "seasonality" can vary from market to market and may be slowly shifting, say trend trackers. In recent years, January has seen record or near-record sales for the month, says National Association of Realtors researcher Walter Molony. A buyer's market in a city will mean more inventory is available year round, while a seller's market, generally driven by local employment opportunities, can winnow peak seasons significantly

However, most agents agree on the seasonal axiom that homes generally sell for 3 percent more than the annual average during peak months, at or around the average annual price in very early spring and in fall, and then drop 3 percent below the average annual price during winter.

A few other seasonal-selling strategies:

Sell to a larger market: In most areas, May, June, July and August are considered the high-volume closing months, with about 40 percent of all homes selling during that four-month period.

The sooner, the better: While deed transfers do peak between May and August, most of those sales were actually arranged from one to three months earlier. It takes time to close home transactions.

Holding out: Your wait could be a long one. A home priced unreasonably high can be hard to sell in any season, particularly in a buyer's market. Industry statistics show homes with price tags 5 percent above market value have a 10 times greater chance of selling than those priced 15 percent above market.

Reduce selling stress: Placing your home for sale as far in advance of buying the new one as possible will help remove one component from the already complicated sales equation. You don't want to wind up juggling two mortgage payments in addition to the other exasperation associated with home selling. But don't tarry too long in visiting your targeted buying area, lest you miss its peak inventory season. (You may have to send your spouse out as a scout while you hold down the home fort.)

Get inside the buyer's mind: See seasonal house-hunting tips (above) and adjust strategies accordingly.

Buyers and sellers should also note that 60 percent of all moves in America take place in summer, according to Book as early as possible, especially if you have a clear closing date. Joyce and other movers advisehome buyers/sellers to call for an estimate at least 60 days in advance of a move.

Even with reliable spring sales peaks, the Internet has added a non-seasonal dimension to the home-buying mindset. Virtual tours, accompanied by a wealth of neighborhood, school and civic data, can speed along the decision-making process well before a prospective home buyer hits town, agent Crawford says. "It is literally open house, 24-7, on the Web."

In markets such as weather-friendly Southern California, seasonal factors play a much smaller role in home-inventory turnover, agents say. Terri Dillon, who owns four Realty Executive offices in the San Diego area, says house hunting is a year-round sport in her market, although spring still carries a slight edge.

However, at year's end, says Dillon, investors who sold off residential properties midyear are often in a hurry to close on the purchase of another investment residential property to satisfy requirements of a capital-gains deferring 1031 exchange. The IRS gives you 180 days from the date of your last property's closing to close on another real estate investment to defer the previous gains tax. This is less of a factor in Canada where the concept of replacement properties has long been phased out of the tax code.

Knowing the motivation of the seller can be very important in the sales process, says Realtor Susan Marthens of Windermere Services Co. in Portland, Ore. "If they're transferring, they'll want to get it out on the market quickly," she says. "That's something people can't always control. Sometimes they'll have to negotiate accordingly."

She adds: "But if a particular time of year isn't important to the seller ... then I always tell them, 'Right around spring.' "

See our seasonal housing trends in the GTA

Toronto Real Estate Board (TREB) Average Prices and Graph

For more information please contact A. Mark Argentino

A. Mark Argentino, Broker, P.Eng.,
Specializing in Residential & Investment Real Estate
RE/MAX Realty Specialists Inc., Brokerage
2691 Credit Valley Road, Suite 101, Mississauga, Ontario L5M 7A1

BUS. 905-828-3434
FAX. 905-828-2829

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