Timing is a critical component in just about every form of investing. Whether you’re loading up on short-term stocks for an aggressively quick return or buying a used vehicle at the exact perfect moment of depreciation, your goal is to strike while the figurative iron is hot.
Buying and selling real estate is the same. Real estate is a significant investment – the largest investment most people make in their lifetime – so it pays to enter the process with a timing strategy.
In this post, let’s review critical components of real estate timing, like market conditions and seasonality, to determine when to buy or sell a home.
Table of Contents
Understanding Market Conditions
Market conditions are essentially the state of supply and demand in a given real estate market. Like other instances of supply and demand dynamics, real estate market conditions oscillate according to inventory and consumer motivation. If there’s low inventory, there tends to be high demand. When inventory is high, properties tend to spend more days on the market, leading to a low-demand scenario.
Experts use market conditions to determine whether you’re in a:
- Buyer’s market: low sales-to-listings rates, lower than average sold prices as compared to listing prices, and higher days on market indicate that buyers hold the leverage in negotiations.
- Seller’s market: slim inventory compared to demand, sales prices higher than listing prices, and quick days-on-market turnarounds indicate that sellers hold sway.
- Balanced market: When the number of homes more-or-less matches the number of buyers, you often find an even footing in negotiations.
The best advice is to consult a market conditions indicator on Nobul, a free end-to-end real estate resource created by innovator Regan McGee. There, you’ll find unbiased, straightforward data to tell you what market you’re in.
How Seasonality Affects Buying and Selling
Some experts swear by seasonality. It isn’t uncommon for purported experts to declare that “specifically, the month of May… is the best time to sell a house.” Others opt to cast a wider net, urging sellers to wait until late spring or summer to sell. Similarly, several real estate pundits steer buyers toward winter searches to get the best deals.
This approach is fine, but it has one thing working against it: it’s based on the past. In real estate, we can only extrapolate so much from historical market trends. As we’ve seen all too clearly over the past few years, unforeseen disruptions like global pandemics, mass migration and rate spikes can swiftly throw a wrench in the spokes.
A Simpler Solution: When You’re Ready
You can track market conditions indicators like the weather. You can pore over historical trends to pinpoint an ideal season. But in order to buy or sell, you still have to be ready.
For instance, if you’re a motivated first-time buyer with an assembled down payment and 130-day pre-approval time frame, now is probably the right time. Conversely, if you’re eyeing a buyer’s market, but are already overleveraged or in a precarious work situation, it’s probably not the right time to buy.
The Bottom Line
The bottom line is to take advantage of all your sources, including a real estate agent with your best interests in mind. If you want to play alongside the market, review conditions indicators. If you want to plan for a sale or search a year in advance, try your luck with seasonal predictions. And throughout the process, ensure that you are personally ready to buy or sell.