Is a new home on your holiday shopping list?
Few people are contemplating buying a new home this time of year. Most thoughts -- and bank accounts -- are turned elsewhere. The focus is on celebrating the holidays: buying presents for family and friends, keeping warm, shoveling any preseason snow and, if you're so inclined, watching football on the flat screen.
The traditional wisdom is that the home-buying season doesn't start in earnest until the Sunday after Super Bowl Sunday, when you've exhausted all excuses to not go house-hunting.
So for the next month, the housing market is likely to be at a standstill. But that could present an opportunity to get a new place to live, said real estate expert Donna Bradford, who handles mortgages for Navy Federal, the world's largest credit union. "If someone has their house up for sale now, there won't be much competition to buy it," she said.
Previously, open houses generated what real estate agents call "dual and triple contract presentations" -- at the asking price, said Bradford. This gave the seller and realtor the power to play bidders off against each other, often initiating a final sale worth thousand more than the asking price.
"Sellers realized a median equity gain of $47,500," said the National Association of Realtors in its 2017 profile of buyers and sellers, "a 26 percent increase over the original purchase price."
But the land rush that spiked these multiple offers has subsided as turkeys take center place on the table and Christmas trees are lined up in gas station parking lots. While prices edge higher, "the rate of monthly appreciation continues to slow," said Black Knight's housing price index, which shows prices rising just a quarter of a percent month-over-month. Black Knight's index has seen five consecutive months of slowing growth.
Those who have a house to sell and really want to sell -- what the industry terms a "motivated seller" -- are more likely to take an initial offer at or near their asking price, according to real estate experts. That's particularly advantageous for millennials looking to buy their first home.
"Think spring is the home-buying season?" asked Trulia, a national online real estate site for home buyers and professionals in its blog. "Starter home buyers should think again." Trulia said starter home inventory (generally the low end of the market) increases by 7 percent in the fall compared to the spring, and prices are almost 5 percent lower in the winter.
Housing prices nationwide have soared in the past few years, posting annual growth of more than 6 percent as of August, according to research firm Capital Economics. The main obstacle to even further increases was attributable largely to the lack of homes for sale.
But the overheated housing market has started to cool with the coming of snowflakes. "House price expectations [are] easing back," said the firm. "There is every chance annual house price inflation has now peaked."
So should you start your home-buying search now to lock in a price prior to Christmas? One rationale: Interest rates are still on your side. The Federal Reserve, which delayed an increase after the onslaught of hurricanes that hit Houston, Florida and Puerto Rico, is expected to raise rates in December and twice next year.
That will filter down to the interest rates banks charge for mortgages. Navy Federal's Bradford said very few home buyers in her universe -- composed largely of both active military and veterans and their families -- are asking for "floating rate" mortgages, which can move with the market. Instead, "they don't wait and are locking in fixed rates now."
But the big question: Where to move? The lowest-priced homes are located in places you might not want or be able to live in, such as Idaho and Montana, where hiring for oil and gas jobs has dropped off, said Bradford.
The highest-priced homes are found in metropolitan areas buoyed by technology, gaming and government hiring. CoreLogic, which provides financial and property analytics, said in September almost half of the country's 50 largest metro areas were "overvalued," including Denver, Las Vegas, Los Angeles and Washington, D.C.
Bradford warned that looking for a home now also has downsides. You may not see all the negatives, particularly on a home's exterior, because leaves and snow can hide imperfections. It's also unlikely that, unless you're a professional, you'll want to grab a ladder and go up on the roof to check out the shingles and gutters.
And your bank may move more slowly as employees take time off for the holidays. Spring and summer probably will remain the most popular time for families to move because children are ending their school year.
Still, it can't hurt to look for that new home right now and, perhaps, give yourself a gift that keeps on giving.
