People ask me all the time, “Steve, when is the best time to buy? When is the best time to sell? When is the best time to move?” As with many questions, the answer is usually, “It depends.” Everyone’s goals and objectives are different. If you have a family and you don’t want to disrupt your children’s schooling, you generally want to time your move over the summer. If you want the largest selection of available properties, then you are generally focused on the spring market. But if price is a factor, you might want to try to time your move differently.
Prices do not simply rise steadily over time. There are a lot of year-over-year comparisons that are made in real estate. You will often hear that prices for this year are up over last year. Often what is meant by that is when comparing this month to the same month last year, prices are up or down, or the volume of sales is up or down.
But what about this past month as compared to earlier in the year? What might surprise many is that even if prices increase for the year, as they did in 2013 (a 2.72% increase from 2012), the average price can fluctuate by as much as 7-10% throughout the year. In 2013 the peak monthly price average was $253,142 and the low was $235,340, a 7.5% swing in price. Even though the average for 2013 ended up at $246,858, an over all increase over the 2012 average of $240,332, throughout the year that number can be as much or more than $10,000 above or below the yearly average.
So when is the best time of year to buy? If you click on the images of the table and chart below to expand the images, what you see is that there are generally two peak periods each year. Prices typically reach their yearly high in the month of April. April and May are the best two months of the year. Prices then fall over the late spring and summer and are often at their lowest or second lowest in the month of August. Prices then rise again in September and October, often hitting numbers that are close to or slightly better than the spring high. Even though much is made of the spring market, there are really two busy periods, a spring and a fall market.
As you can see in both the table and line graph, that even though each year’s curve is a little higher than the year before, each of the last five years has gone through the same up and down, the same rise of prices during the spring and fall and the same drop in prices during the summer and the winter. Typically prices are at their lowest for the year in December. What is interesting is that in each of the last five years, the month after the lowest month of the year has seen as much as a $10,000 bump in value in the next month. While December is the worst month to sell, January, even though it is not the best month of the year, is usually much better on average than the month before.
This is a good time to caution the reader that the price of their house may or may not rise and fall throughout the year as much as the averages as there are other things than the time of year that affect value.
So how should the time of year affect your decision making process? You have to remember first of all that these sales numbers are generated from the day that a deal becomes firm, not when the sale actually closes. The closing date can be anywhere from 30-90 days or more from the time an offer clears conditions and becomes firm and binding. This explains why April and May are the best two months of the year in terms of prices as there are many homeowners with families who wish to move over the summer. If you move back 60 days from the middle of July, you end up in the middle of May. The average length of time it takes to sell a home in London was 43 days in 2013. That means the house that closed in the middle of July was likely listed at the end of March. It typically takes most people a month to a month and a half to get their house ready and up on the market. That means that to sell at peak price in the middle of the month of May to close in the middle of July, you need to start the process at the beginning to middle of February. This is something to keep in mind as you begin to think about making a move.
With all of that said, even though a summer move disrupts the family the least, selling your home in the spring might not make the most financial sense. If you are moving up in the market, buying a larger and more expensive home than the one you have now, buying and selling at peak price is the worst time from a financial perspective. If prices have risen by as much as 7.5% from their lows of the year, you may have sold your house for 7.5% more, but you also bought a house at 7.5% more!
Let’s use some nice round numbers to make the math easy. Say that at the low point for the year your house would potentially sell for $200,000 and the house you are buying would be $300,000, if both properties increase in line with the averages, your home could be worth as much as $215,000 at the year’s peak, but the house you are buying will likely be selling for as much as $322,500. You will be paying $7,500 more for the same house when you buy at the peak point of the year as opposed to the low point for the year. It may be tougher to attract buyers when your are trying to sell in July, August or December, but you will likely have more negotiating leverage at these off times of the year when buying, which will be to your advantage. The greater the move up, the greater the advantage. Typically, its $7,000-10,000 in your pocket for every $100,000 you are are moving up in price as compared to your current home when you buy and sell at the lowest price point of the year, that is, in December. Always remember, these are averages, not guarantees. There are always other factors that affect pricing other than seasonal adjustments.
When you are downsizing and moving to a smaller house, all of these numbers work the same, but in reverse. To maximize your financial potential, you will want to firm up the sale on your current home at the absolute peak of each year, that is sometime in April, May, September or October with spring being better than the fall.
If you are a first time buyer and other factors are not at play in terms of the timing of your move, then the best time of year from a financial perspective is to buy in August or December. The only downside in buying during these months is that the selection is usually a bit less than in the peak periods. But the prices will never be better! I have seen nice homes sell at lower than expected prices simply because it was the off peak time of year. It happens every year.
The thing to remember is the market is always moving up and down, even from month to month and the smart buyer will consider all these factors when making their real estate decisions. If you would like a personal consultation to discuss your situation, contact me, Steve Baarda, Sales Representative with Royal LePage Triland here in London Ontario and I can help you work through all your options so that you make an informed real estate decision that maximizes your best interests and considers all of your needs.