A lot of people ask, “When should I buy? What part of the real estate cycle should I buy in? Should I buy in a down market? Are the values going to keep going down? When should I buy and where is the cycle right now in my area?”
But these are the wrong questions – it’s not “WHEN should I buy?” You should always buy NOW.
I've said this when the market was good and I've said it when the market was down. The real question is “WHERE and WHAT should I buy?”
There is always a place, somewhere in the country that is either appreciating or is an undervalued market. And the reasons may be local economics; it may be demographics, or it may be related to its location. Maybe it’s because the population is growing in those areas, or maybe it’s in a town where a large industry is moving in. For example, there are towns and markets where large oil companies are moving, creating a large number of new jobs which creates a need and demand for more housing (purchase and rentals).
Those are a few things to look for in a good market.
But one of the most important things to look at in an investment property is its income. This is measured by looking at the property's net cash-flow, but a quick way to do that is to look at the Rent-to-Value Ratio (or R/V ratio for short).
You want to find the biggest possible ratio you can find. That means you want to look for areas with lower prices and higher rents. There are areas where you can find low prices and there are areas where you can find high rents, but there are usually only a FEW areas where you can find BOTH low prices and high rents. Those are the areas to take a close look at.
Generally, you'll want an R/V ratio of 1.0% or more. You can still purchase property with a ratio as low as 0.7% and still generate positive cash flow, but it's best to stick to an R/V ratio of at least 1.0%.
Look for the property you can buy either under market value or that will produce the highest cash-flow return on your investment. If I have to choose between cash flow and equity (when buying passive investments), I recommend going for cash flow. If you start with good cash flow, the profits can often outstrip equity build-up — and do it in a few short years.
But it’s possible to find a property that will give you both if you know where to look. Rather than waiting for the market to be right, find the right market and the right deals to buy.
Sure, I’d like the houses to be five minutes from me, but I’d rather buy in better markets as long as I can solve the problems of being an absentee landlord — which is easily accomplished using a competent full-service property management company. Remember what I always say, “Live where you want. Invest where it makes sense!”
About 3 or 4 years before the real estate crash of 2007, some people would ask me, “Is there a real estate bubble?” I had to emphatically tell them that we were already deep into a bubble with some areas having already “popped”. One of the reasons they would ask was because they wanted to know if a particular area was going to appreciate.
Here is the lesson that many investors had to learn the hard way — including myself.
The lesson is this — don’t buy real estate investments with the idea that you are going to make your money through appreciation. It’s a huge mistake and an easy trap to fall into.
Nobody knows the future. Back during the boom, everybody was looking back, using hindsight, and saying, “Boy, what if I’d invested in that city and got the 30% annual increase in value on the house I bought – that would have been great.” But that hindsight doesn’t do us much good. It’s like gambling and is usually based on luck.
Guessing on appreciation is called speculative investing, but what I’m talking about is a much more conservative approach to building wealth with a real estate portfolio.
Build it so you know there is going to be cash flow and equity growth when you're ready to retire. If you’re going to speculate you’ve got to be prepared to lose all of the cash you spent to acquire the property and potentially more.
When is the Best Time to Buy a House in 2023?
The best time to buy a house depends on several factors, including market conditions, personal circumstances, and regional variations. While the traditional wisdom suggests that spring is the best time to buy, other seasons can also offer opportunities for home buyers. Spring is considered the traditional prime buying season as the housing market typically sees a surge in activity during this time.
This is due to the warmer weather and longer days, which make it easier for potential buyers to view homes and move. However, with more people looking to buy, spring can also be a competitive time to make a purchase, leading to higher prices and multiple bidding wars. Fall and winter, on the other hand, can be slower seasons for the housing market, which can work to the advantage of buyers.
With fewer buyers in the market, prices may be lower, and you may have more room to negotiate with sellers. Additionally, as the year comes to a close, some sellers may be eager to close a sale before the end of the year, making it a good time to secure a deal. Ultimately, the best time to buy a house depends on your personal circumstances, including your financial stability, the urgency to move, and the specific housing market in which you are interested.
In 2023, the mortgage rates are indeed higher than in previous years, and this could impact the decision-making process for both investors and first-time home buyers. Here's a closer look at how this might affect the housing market during the spring season.
Best Time to Buy a House For Investors:
High mortgage rates can make real estate investments more expensive, reducing the returns on investment. However, with the current state of the market, some investors may still find opportunities in the spring season. As the housing market becomes more active, there may be more properties available for investment, giving investors a wider pool of options. Additionally, some sellers may be more willing to negotiate on price during the spring season, which can lead to better deals for investors.
Best Time to Buy a House For First-Time Home Buyers:
Higher mortgage rates can make homeownership less affordable for first-time home buyers, especially if they are on a tight budget. However, the spring season can still be a good time for first-time home buyers to enter the market, especially if they are pre-approved for a mortgage and have a clear idea of what they can afford. With a more active market, there may be more properties available, which can increase the chances of finding a suitable home.
It's important to do your research and work with a real estate professional to understand the trends and conditions in your area, so you can make an informed decision.
When Was the Best Time to Buy a House Last Year?
The best time to buy a house this year has probably passed. It was a week in the early fall which represents a balanced view of market conditions favorable for buyers. Nationally, the best time to buy in 2022 was the week of September 25 to October 1. It can still be a good time to buy a home only if you can afford it. Many families are having affordability issues due to rising mortgage rates, and the problem is only likely to worsen if the Federal Reserve continues to raise rates – something that many analysts say is likely to occur again.
The Fed has now hiked rates at six straight meetings, something it hasn’t done since 2005. According to an analysis by the real estate listing website Realtor.com, the best time to buy a house was in the last week of September. This was the result of an optimal mix of housing market variables that give buyers the upper hand, such as lower pricing, greater inventory, less competition, and more time to make decisions.
As summer came to an end, inventory increased, price rise slowed, time on the market began to level off, and price reductions increased, indicating that this year's homebuying will follow a more regular pattern, which may be greater than usual given the cyclical rebalancing that is also taking place. Buyers, on the other hand, continue to experience the effects of uncertain economic conditions.
Affordability issues confront potential purchasers, paving the stage for the latest real estate makeover. Regardless, the regular seasonal tendency, along with an already cooling market, will favor persistent, knowledgeable buyers who are ready to buy. Realtor.com had anticipated that the final week of September 2022 might see roughly 50 percent more active listings than the average for the remainder of the year.
In addition, buyers could save more than $20,000 on a median-priced home compared to those who purchased during the housing market's peak in the summer, when a median-priced home cost $450,000. During that period, the demand is normally 8.5% lower than a regular week, and homes remain on the market for approximately one week longer than usual.
Additionally, there are more price reductions than usual. Realtor.com’s experts attribute these changes in the market to seasonal factors. Not only do kids return to school in the fall, but the weather also cools off, making showings and inspections harder to conduct. (Plus, the cold reduces curb appeal.) As a result, demand drops.
According to Redfin's analysis, during the four weeks ending September 4, home-viewing activity plummeted, while the proportion of sellers lowering their prices remained at record levels. As a result of declining demand, fewer homes were sold for more than the asking price since February 2021, and the average sale-to-list price ratio reached its lowest point since March 2021. Hence, that was probably the best time to buy a house this year as the housing market always cools down.
Following a year and a half in which the average property sold for more than its list price, the average home sold for 0.3% less than its list price during the four weeks ending September 4. The winter of 2022 is expected to be colder than usual, with mortgage rates near or even above 7% as of November 17, 2022.
It's no secret that rising mortgage rates have made buying a home more difficult, even as price growth has slowed. The Fed is likely to continue the tightening cycle of raising interest rates, keeping mortgage rates higher. If low home prices are your top priority, consider delaying your purchase until later in the winter, as prices tend to decrease as the holiday season approaches.
Observe mortgage rates to ensure that your patience pays off and that rising mortgage rates do not derail your plan for a lower monthly payment. Whatever your priority, get to know your local market by spending time looking at homes in your desired area and setting up price alerts so you are notified when a home that meets your criteria hits the market.
Why the End of September Was the Best Time to Buy a House?
This week historically favors buyers the most. High inventory, below-peak prices, decreasing demand, and a more controlled market tempo. School and weather schedules contribute to this seasonal slowdown. Families looking to move while kids are out of schoolto look to close on a home before the back-to-school rush.
Families centering house search decisions around school districts and the school calendar, plus warmer weather that makes home showings and inspections simpler and foliage that boosts curb appeal, contributes to an expected rise in activity. As fall approaches and more families bow out due to school, demand wanes and prices drop as leftover inventory stays on the market. Early fall is a good time to buy a house since they have more alternatives at a lower price.
Some of the largest housing markets in the country have their local best time to buy a house. The week of September 11-17 was the best time to buy for New York, Los Angeles, Chicago, Seattle, and Minneapolis metropolitan areas, among others. Each of these strikes a different balance of market factors during this week as it relates to buyers.
In New York and Los Angeles, homes on the market during this time take 30.3% longer to sell, on average, compared to their respective seasonal peaks when homes sell fastest. Buyers who feel intimidated or frustrated by the blistering pace of sales earlier this year may find the market more approachable as autumn approaches.
More Homes for Sale Were Listed
Inventory rises early fall. This year, inventory remained high through the best buying week. In the last week of September, the listings were expected to be 9.5% more than average and 12.9% more than at the start of the year. 2022 is an outlier compared to previous years since higher mortgage rates dampened buyer desire. Adjusting for this trend, the last week in September was expected to see 46% more active listings than this year's average. Around 780,000 listings during that period, which is around 400,000 more than in late February.
Less Competition From Other Buyers
During the best time to buy a house, homebuyers will have less competition. Pre-pandemic, July had peak homebuyer demand, as indicated by Realtor.com views. As buyers rushed to beat rising prices and borrowing rates, the 2021 housing market peaked in the spring. Spring and summer have the most home buyers, which means more competition for buyers.
Historically, demand is 26.9% lower during the Best Week to Buy and 8.5% lower than the average week. The advantage for home buyers during that time was likely to be at least as good this year as high prices and mortgage rates continue to reduce buyer purchasing power. The best week to buy a house also helps people who need extra time to decide.
The year's best week slowed by 21.1% from its peak. With a peak market pace of just 31 days in May, based on seasonal trends and a cooling market, the end of September was added about a week to the time a typical home spent on the market this year, and more than two weeks more than the peak this May.
More Price Reductions Were Expected
The best time to buy a house is also one of the busiest weeks for price reductions throughout the year, with an average of 5.2% of houses experiencing price reductions that week in the past. However, due to the recent market change, 2022's Best Week was expected to see more than 6.0% of properties with lowered prices. Based on inventory projections, it was expected to result in approximately 48,000 price decreases this week across the country.
It translates to a monthly price reduction share of approximately 24.8% caused by a combination of buyers exiting the market, which reduces demand, as well as a buildup of inventory over the year. This year, the number of purchasers exiting the market is significantly more than in previous years, which means that even more sellers lowered their house prices to attract buyer attention.
Housing Markets Where the Best Time to Buy was Sept 11-17
| Metro | Active Listings vs Avg | Views Per Property vs Peak | Days on Market vs Peak | Median Listing Price vs Peak | New Listings vs Avg | Price Reductions vs Avg |
| New York-Newark-Jersey City, NY-NJ-PA | 8.2% | -25.6% | +15 days | -4.3% | 12.8% | 0.4% |
| Los Angeles-Long Beach-Anaheim, CA | 14.4% | -31.4% | +10 days | -6.2% | -3.0% | 0.9% |
| Chicago-Naperville-Elgin, IL-IN-WI | 16.6% | -32.3% | +9 days | -6.5% | 1.1% | 1.2% |
| Seattle-Tacoma-Bellevue, WA | 32.0% | -47.6% | +21 days | -7.0% | 12.5% | 1.9% |
| Minneapolis-S. Paul-Bloomington, MN-WI | 27.2% | -34.2% | +7 days | -9.9% | 12.4% | 2.2% |
| St. Louis, MO-IL | 12.2% | -24.6% | +10 days | -5.1% | 5.4% | 1.5% |
| Charlotte-Concord-Gastonia, NC-SC | 9.5% | -29.3% | +8 days | -4.2% | 0.2% | 1.2% |
| San Antonio-New Braunfels, TX | 14.0% | -35.1% | +13 days | -3.3% | -5.9% | 1.2% |
| Memphis, TN-MS-AR | 7.6% | -25.6% | +10 days | -3.8% | -4.9% | 0.4% |
How to Find the Best Time to Buy: Realtor.com
To determine the best time to buy, Realtor.com examines multiple housing market metrics. These include: 1) listing prices, 2) inventory levels, 3) new “fresh” listings, 4) time the on market, 5) homebuyer demand (realtor.com listing views), and 6) price reductions. They score each week of the year from 0-100 based on the number of active listings.
A given week will score highly if it has more listings compared to other weeks of the year. They score the other metrics, in the same way, so each week has six different scores for active listings, new listings, listing prices, days on market, price reductions, and views per property. (In the case of prices, lower prices score higher. Same with views per property). They then rank each week by the average of those scores. The week with the highest overall score is the best time to buy. The best week to buy a house represents a balanced view of market conditions favorable for buyers.
Sources:
- https://www.noradarealestate.com/blog/when-is-the-best-time-to-buy/
- https://www.realtor.com/research/best-time-to-buy-2022/
- https://www.redfin.com/news/housing-market-update-surging-rates-slow-buying-and-selling/
