Planning on buying in the off-season? Arm yourself with strategies from the pros.
Rainy open houses and icy walkways make shopping for a home in winter less of a thrill than in the busy spring and summer months. But there are some distinct advantages (as well as some downsides) to shopping in the off season. If you’re thinking of buying a home in the next few months, you’re probably wondering what to expect from this year’s winter real estate market. One thing is for sure: Taking your high-season strategies into a low-season game will not serve you well. Here’s what you need to know to adjust your thinking to this winter’s realities.
1. It’s slim pickings out there.
There are fewer homes on the market in winter than at other times of the year. And in cities where winter means lots of snow and ice, the decrease is even more dramatic. In Denver, for instance, there are only about one-third as many homes for sale in winter as in spring or summer, says Denver real estate agent Jani Bielenberg of Bielenberg & Associates.
And this year, the inventory crunch is even worse. Home inventory is now at a post-recession low, down 9.1 percent nationally in the third quarter compared to a year ago, according to Trulia’s research. And this winter isn’t shaping up to break the trend, so buyers in many markets should be prepared for slimmer pickings. If you’re committed to buying this winter, it may be time to widen your idea of what your dream home looks like or which block it’s on.
2. But starter home buyers have a bit more to choose from.
For first-time buyers, though, the outlook in winter is sunnier. The inventory of less-expensive starter homes actually increases by about 7 percent in the last three months of the year compared to the spring, Trulia research shows. And the bump is widespread: 70 of the largest 100 metros see peak annual starter home inventory in the fourth quarter. That influx of homes for sale leads to listing prices that are about 4.8 percent lower in the first quarter of the year than in summer.
All of this can make winter a great time to shop for a starter home. But even with the seasonal bump, choices will be limited this year, when inventories are unusually low across all home types and the number of starter homes for sale is about 20 percent lower than at the same time last year.
“The takeaway here,” explains Ralph McLaughlin, Trulia’s head economist, “is that even though starter home inventory is now at the lowest count since we first started keeping track in 2012, starter home buyers should be able to find consolation at the end of the year.”
3. Open houses and bidding wars chill out for the season.
The upside of shopping in winter is that many would-be buyers call it quits till spring. That means less competition, a welcome reprieve for those disheartened by packed open houses and seemingly unwinnable bidding wars.
In Sacramento, for example, open houses this summer attracted 50 to 100 shoppers, and solid listings often received up to 10 offers, says agent Elizabeth Weintraub with Lyon Real Estate in Sacramento. In winter, that’ll drop to more like a dozen open-house shoppers and maybe two or three offers, maybe just one. There may even be time to visit a house more than once before making an offer, she says, which definitely wasn’t often the case this past summer.
To hit the market at its absolute slowest, aim for the weeks right around Christmas, when buyers more or less evaporate.
4. Sellers are ready to make a deal.
Many realtors advise their clients to wait until the spring and summer rush to sell. So homes that are on the market in winter often have motivated owners who cannot wait that long. These homes, especially those that failed to sell in the fall and are still on the market, may be ripe for a lowball offer.
“There is opportunity,” says Denver agent Bielenberg. Especially if you’re up for some renovation. Realtors sometimes encourage homeowners who haven’t updated homes in a while to put them on the market in winter, when they face less competition from snazzier homes. So, if you can look past oak cabinets, white tile counters, and worn carpets, you may find a home with good bones, fewer bidders, and a tempting price.
5. FHA buyers have a better shot at a winning bid.
With fewer shoppers in the market, prospects brighten for buyers with an FHA loan. These loans, backed by the Federal Housing Authority, have looser requirements than conventional loans, making them less appealing to home sellers who are getting all-cash offers or conventional loan buyers with big down payments. But with fewer winter bidders, home sellers often become more amenable to FHA buyers.
6. Home inspections may not tick every box.
In winter, home inspections may be more notable for what they don’t include than what they do. The air conditioning cannot be tested in cold weather, and snow may cover the roof. Also, are those trees just dormant or are they actually dead? Be aware of the gaps in the inspection and pay close attention to the age and type of the roof and air conditioner. If you’re concerned about the trees, an arborist can assess their health in any season of the year.
7. Interest rates are still stable, but some predict they’ll rise.
Interest rates shift more with economic conditions and policy decisions than with the seasons. And rates have been so stable, hovering around 4 percent all year, that “hardly anybody ever mentions them anymore,” says Lori Hicks, an agent with Hicks Elite Realty Professionals in Columbus, Ohio.
But don’t get too complacent. The Federal Reserve recently hinted at future increases, and the Mortgage Bankers Association has predicted that the Fed will raise rates in December and three times in 2018, though they also predict that 30-year-mortgage rates will remain below 5 percent throughout the year. It’s wise to watch this closely. If rates rise while you’re house-hunting, it can make a real difference in what you can afford.