As the Leaves Crisp
Much like many things in life, the housing market is cyclical. At times sellers are more in control of pricing, while in a so-called buyer’s market home values are on the decline. But it turns out the housing market isn’t just defined in cycles, but also in seasons.
The seasonality of the housing market is best illustrated by historical pricing data spanning 2013 to 2021. By the numbers, October is the best time to purchase a home. Real estate data company ATTOM says buyers who close on a home in October pay the lowest premium in comparison to that property’s value on the open market. October buyers pay around 3.3% more than market value, which compares to a 10.5% premium in May – which is the highest amount.
Wearing Jackets, and Kids in School
In terms of why home values tend to dip this time of year, analysts say weather and school schedules are major factors. When it’s colder outside, activity at open houses for example will decline, or it could be more difficult to arrange showings during periods of ice and snow.
Meanwhile, families tend to look for places to live when kids aren’t in school. For that reason, October tends to favor buyers, because there’s less competition. ATTOM’s analysis suggests home sales drop off each year in September, when classes start up again.
And Yet… Mortgage Rates
Present macroeconomic conditions put a wrinkle in the October buy strategy. Due to the Federal Reserve’s tightening monetary policy and ensuing rate hikes, mortgage rates have been on the rise throughout 2022. According to data from Freddie Mac (FMCC), the average rate on a 30-year fixed rate mortgage has more than doubled this year.
The good thing is this trend will likely cause home prices to weaken further, because more would-be buyers are forced out of the market. The National Association of Realtors® notes the median sales price of previously-owned homes experienced a larger-than-normal monthly decline in July and August. Meanwhile, year-over-year price growth has started to cool, and some markets have actually seen prices go down.
In essence, rising mortgage rates present themselves as a sort of mixed bag for people looking to buy a home. You may encounter cheaper homes and face less competition, but also need to adjust your own expectations when it comes to affordability due to rising rates.
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