Is the housing market still seasonal? The market has been so up and down recently that the answer can depend on whom you ask, and the market that you're talking about. But, historically, residential real estate sees a lull in the winter holiday season and beginning of the new year -- when everyone seems a bit crunched for time, not to mention money. And in most markets it doesn't pick up again until the end of January. There's a reason that data on home prices, mortgage rates, etc., are "seasonally adjusted."
There are compelling signs, though, that as 2013 winds to a close, serious home shoppers should ignore this convention and instead turn it to their advantage. Here are key things that prospective homebuyers might want to consider before putting their quest on winter hiatus.
Mortgage rates have fallen: Primary among the reasons to move now has been the fluctuation in mortgage rates. After having taken a sharp bump up in the late spring, as the housing market re-energized and demand for mortgages surged, mortgage rates have dropped for the second straight week. And at an average of 4.10 percent for a 30-year-fixed loan, they're at their lowest in six months. It might be true true that with the Federal Reserve apparently committed for the near term to keep interest rates low by buying bonds, that borrowers have some wiggle room. But there are other reasons not to delay.
The ceiling will drop on loan amounts: If you're seeking a government-backed mortgage -- as most mortgages are -- you're already restricted to getting a loan that's based on the median home prices in your desired area ($417,000 in most housing markets). And the acting head of the Federal Housing Finance Agency, Edward DeMarco, has announced that these limits will go lower next year. While DeMarco assured the public in October that the change wouldn't be sudden, and that financial markets would have at least six months to adjust, why would you want to wait until then? Home prices in the U.S., meanwhile, have continued to rise.
Loans might be tougher to qualify for, or at least require more paperwork: Starting in January 2014, in order to get a "qualified mortgage" -- a loan that's insured by the Federal Housing Administration, prospective homebuyers will have to make a stronger case for their credit-worthiness. Along with documents spelling out the terms of the loan, mortgage seekers will be supplying proof of current income and assets, credit history, and other debts. And then they'll have to prove that the annual amount of debt they carry is no more than 43 percent of annual income. The changes, required under the Dodd-Frank Wall Street Reform and Consumer Protection Act, also mandate that the loans carry a fixed-rate and be paid over a term not longer than 30 years.
Investors appear to have taken a breather: Those real estate speculators who were driving up housing prices, and swooping in to snatch away the bargains by making higher bids and cash offers, now seem less smitten with the residential market. A recent poll of investors found that only around 1 in 5 are still interested in buying more homes -- about half the number from a year ago. That means less competition.
Average homebuyers seem discouraged: Speaking of the competition, applications for new mortgages have been ebbing in recent months, along with consumer confidence. That should improve the chances of those willing to stay in the hunt, even if it means slogging through the winter weather.
Sellers might be more motivated: Just as it can show a bit more commitment to shop for a home in November and December, the same might be said for sellers, especially those who might be seeking a tax advantage by selling before the year is out, or who have grown impatient after seeing their properties fail to sell during the market's peak season.
What better time to see a home?: Sure, it might be a little tough to judge a house's curb appeal through the gloom and slush of late autumn and early winter, not to mention under the holiday lights and tinsel. But what better time to see what a home can stand up to?
It's true that there are some key areas that probably can't be inspected or tested if it's cold or snow is on the ground, such as air conditioning units (which could be damaged in operated at temperatures below 60 degrees) and in-ground sprinklers. On the other hand, it's a prime time to see how the heater works and how well-insulated the home is. Some other things that might be much more evident include: roof leaks, a basement that floods, pipes that freeze, and inadequate lighting. And how easy is it to get to and from the property during bad weather? If it's in a rural area, are you likely to get snowed in, see a road washed out or be trapped by a mudslide?
And as for those uninspectable areas: If you can't wait until the weather warms to have those checked, explore a contingency built into the contract that takes care of any possible repairs.
More about homebuying in the slow season:
Keys to Negotiating the Autumn Housing Market
Peak Season for House Hunting in Each State
Buying a House in the Fall? Avoid These Pitfalls
WHERE HOME LISTINGS SURGED OVER THE SUMMER:
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