Best Time to Buy a Home?

This week is the best time to buy a home because of the culmination of market factors that favor buying over every other week of the year.

In a ‘typical’ (pre-pandemic) year, early-fall brings near-peak inventory, waning demand, a slower market pace, below-peak prices, still considerable new listings, and more homes seeing reduced prices. Last year, the 2022 homebuying season largely behaved like a pre-pandemic year, albeit with higher price growth, a sharper fall-off in demand and more significant inventory growth. Last year’s market shifted rather abruptly mid-summer as the impact of climbing mortgage rates was fully realized. The beginning of 2023 carried over lower buyer demand as well as a lower rate of new listing activity and slower price growth. The number of homes for sale increased over the previous year from May 2022 through June 2023, marking the first period of active listing growth since June 2019. Active inventory growth was driven by declining buyer demand, which left homes on the market for longer.

However, mortgage rates have remained within the 6% to 7% range since September 2022, leading to declining seller activity as homeowners feel locked in by their low mortgages. After all, who wants to trade a 2% or 3% mortgage for 7%?  As a result, active listings started to fall again year-over-year in July 2023, leading to fewer home options overall for buyers. In general, the homes listed on the market in the summer were slightly lower priced than the previous year, but limited inventory kept prices afloat, despite extending time on market.

As summer fades, the mixed bag of slower (or even negative) price growth and longer time on market amid limited inventory and fewer new listings indicate that this year’s homebuying will follow a more typical pattern in some areas, but will present a challenge for buyers in others. Buyers continue to feel the effect of uncertain economic conditions, looking to cooling inflation to determine the housing market’s path forward.  Despite these challenges, the typical seasonal trend coupled with the shifting market will play in the favor of persistent, informed buyers who are ready to purchase. Today’s market, though still challenging, tilts slightly more in the favor of buyers than in the last few years.

So far in 2023, price growth has slowed relative to the pandemic norm, mirroring pre-pandemic trends. The number of new listings on the market fell relative to the previous year starting in mid-2022, and the impact made its way through the market, eating into the active inventory built up in 2022. By July 2023, the number of homes actively listed for sale fell relative to the previous year as new listings failed to keep up with buyer demand.

In the second quarter of 2022, homeowner vacancy reached the lowest level in the data’s history as many homeowners stayed put and buyers filled the available homes. The present inventory shortage builds on the historical gap between housing supply and household formations, leading to fewer options for buyers, especially at an affordable price point. As of July, homes spent 45 days on the market on average, 11 days longer than the previous year. However, the inventory shortage kept time on market lower than pre-pandemic.

Despite a generally slowing market, more affordable areas continue to see relatively high demand, which keeps time on market brisk, and prices climbing. In this year’s hottest zip codes, most of which were relatively affordable locales, prices climbed an average 7.2% in the first half of the year compared to the national average of 4.2%. Similarly, homes in these markets spent more than a month less time on market than the typical US home. The best time to buy nationally applies to many local markets, though the conditions within the markets may vary greatly due to ongoing affordability challenges that have shifted buyer demand.

Nationally, the best time to buy in 2023 is the week of October 1-7. This week historically has shown the best balance of market conditions that favor buyers. Inventory tends to be high, prices are below peak levels, demand is waning, and pace of the market slows to a more manageable speed.

School schedules and weather patterns to this seasonal slowdown. Of course, the market picks up again in the spring and peaks in summer as families hoping to move while kids are out of class look to close on a home with enough time to settle in before the back to school rush.  The surge starts off, I think, with people who are recovering from the holidays and have vowed to move in the new year.  They start off the spring market just after Super Bowl Sunday with a bang because they are the really motivated buyers.  Next come school aged families trying to find a new home within the school calendar. Those families, warmer weather, daffodils and azaleas carry that surge along through the spring into early summer.  Finally, as the year transitions to fall and more families bow out due to the school schedule, demand wanes, and prices dip to post-peak levels as leftover inventory stays on the market.

Early fall is generally the sweet spot for buyers who can capitalize on that confluence of factors to have a wider variety of options at a more reasonable price.

Historically, inventory peaks in early fall as homes that did not sell in the summer are joined by the new listings.  Interestingly second home purchases are down significantly over last year.  This year, inventory will likely be lower than in years past as hesitant sellers shy away from the market, but we expect the seasonal inventory trend to hold. The typical seasonal trend expects this week to have 11.7% more active listings than the average week, and 17.2% more than the start of the year. However, inventory levels in 2023 may remain lower than the typical trend suggests, but will still increase slightly.

Home buyers shopping now should expect less competition from other buyers. Many buyers are sitting out this fall market because of the recent hikes in interest rates. Though still-high prices and elevated mortgage rates mean many buyers are on the sidelines, if inventory growth stalls relative to buyer demand, competition may heat up.

Another challenging aspect of homebuying in the last few years is how quickly homes have been selling. The market has slowed relative to the previous year, though homes are still selling more quickly than in pre-pandemic years. This slow down has allowed buyers to spend more time considering their options – although well priced homes are still selling quickly and often for more than list price.

The best week should offer more time for buyers to deliberate and may even mean more flexible sellers, eager to get their home sold. The best week historically slowed by 29.0% compared to the peak pace earlier in the year. With a peak market pace of just 43 days in June, based on seasonal trends and a cooling market, the Best Week is expected to add more than a week to the peak this June. However, waning inventory may mean the market slows down less than is typical as buyers compete for a limited number of options.

As the market cooled in 2022 and into 2023, housing prices leveled out.  In fact, the national median listing price fell slightly below the previous year’s level in June and July, sustained by the limited inventory. At a national level, prices typically dip 3.3% compared to the typical season high during this week. Prices have mirrored a typical pre-pandemic trend year-to-date. Adjusting for this year’s trends, buyers shopping during the best week could save close to $15,000 compared to the year’s peak nationally. And in several of the largest housing markets around the country, home prices during the best week can dip over 10% lower than their peak price earlier in the year, potentially saving buyers tens of thousands of dollars.

The best week to buy a home also represents one of the peak weeks for price reductions throughout the year, with an average of 5.5% of homes seeing price reductions that week, historically. In fall 2022 price reductions returned to near pre-pandemic levels. However, in spring 2023, the share of listings with a price reduction started to lag the previous year’s rate, suggesting that sellers and buyers are more closely matched on price expectations. Nationally, the best week could mean roughly 40,000 homes seeing price reductions, based on inventory estimates. This weekly price reduction rate would translate to a monthly price reduced share of more than 20%. This peak is historically driven by a combination of buyers leaving the market, which brings down demand, in addition to a build up of inventory throughout the year.

In addition to active inventory on the market, the addition of fresh listings entering the market as the market is slowing down tends to give the buyers out there more options even into the fall. The best week historically has added 18.9% more than the start of the year. However, the new listing count has fallen relative to the previous year for the last 14 months. A majority of homeowners are feeling ‘locked-in’ by their current low mortgage rate, making them hesitant to sell as to avoid financing a new home at a higher mortgage rate. This trend is expected to continue into the fall as mortgage rates remain elevated. Nonetheless, new listing declines have leveled off and the Best Week to Buy is still expected to offer buyers more fresh listings than during the remainder of the year.

Homebuying has been challenging this year with mortgage rates over 6%  and now above 7%.  That has meant that the monthly payment for a home is up 20% in July 2023 compared to July 2022.  Core inflation is still above the Federal Reserve’s target level of 2% and the latest inflation data and Fed comments suggests we are not at the end of higher interest rates (or even one or two additional hikes.)

The current level of mortgage rates not only dampen buyer activity, but also mean many homeowners would rather not sell as to avoid buying at today’s rate. 70% of homeowners either have no mortgage at all or an interest rate under 4%.  As a result, this year’s market has seen lower levels of new listings and overall active listings. Though options may be slim with fewer listings, a longer time on market may force sellers to be more flexible.

Remember that you can always refinance when rates come down but you can’t make a higher price disappear.  There is a reason to move forward during these higher interest rates if you believe that you can get a better price and then refinance later.

How should all this information factor into your homebuying decision? Knowing your priorities can help you navigate any uncertainty.  However, if price is your chief priority or if you’re laser-focused on having the largest number of fresh home options, your best time to buy a home may be slightly earlier or later.

If low home prices are your chief priority, consider waiting until a bit later into the fall, as home prices tend to come down as the holidays approach. In this case, keep an eye on mortgage rates to be sure your patience pays off and higher mortgage rates don’t sabotage your plan for a lower monthly payment.

If instead you are looking to have the maximum number of options, consider buying a bit earlier as new and active listings tend to peak a bit earlier in the fall. Early buyers are likely to have the highest number of fresh homes to choose from, maximizing their potential to find just what they’re looking for, even if they pay a slight premium for buying a bit earlier.