Conventional wisdom says that spring is the best time to buy a house. But if you’re in the market for a starter home, you may be better off ignoring that wisdom. A recent report from Trulia.com, an online resource for homebuyers and renters, found that during the autumn months, starter-home inventory actually increases by about 7% compared to the spring. That extra inventory helps push listing prices lower by about 4.8% and 3.1% in the winter and spring, respectively, compared to summer prices. With that in mind, it looks like now may be a good time for first-time homebuyers to step up that house hunt. (For a guide to the whole process, see How to Buy Your First Home: A Step-by-Step Tutorial.)
Peak Season for Inventories
Trulia’s Inventory and Price Watch report examines the supply and affordability of starter, trade-up and premium homes on the market. The most recent edition of the report concludes that fall (which Trulia considers the fourth quarter – Oct. 1 through Dec. 31) is peak season when it comes to starter homes.
Out of the 100 largest metros in the U.S., 70 see peak levels of inventory for starter homes during the fourth quarter of the year (based on Trulia Inventory and Price Watch data from 2012 to 2017). And it’s not just the peak inventory that should interest starter homebuyers: Starter-home listing prices drop each year between January and March, probably in response to the previous quarter’s sharp rise in inventory. See also: Are You Ready to Buy a House?)
Since inventory tends to peak in the fall, that’s a good time of year for starter homebuyers to intensify their hunt – especially in Western markets, as it turns out. According to Trulia, seven of the top 10 metros with the largest seasonal swings in inventory are in the West. The largest inventory swing happens in San Jose, Calif., where starter-home inventory is 42% greater, on average, during the fall than it is during its lowest inventory quarter – typically January through March.
Colorado Springs, Colo.; Portland, Ore.; San Francisco and Phoenix round out the top five metros, with average seasonal inventory swings ranging between 32.8% and 34.7%. All but Phoenix see their inventory peak in the fourth quarter of the year.
Not surprisingly, seven of the top 10 metros with the largest seasonal swings in starter-home listing prices are also out West. Wichita, Kan., tops the list, and median starter-home listing prices there are an average of 18.6% lower during the first quarter than in the third quarter, when prices are at their peak. Rounding out the top five are Seattle; San Jose, Calif.; Oakland, Calif. and Denver, where average seasonal price swings range between 9% and 12%. All of these metros see their lowest starter-home prices in the first quarter of the year.
The Bottom Line
Starter homebuyers are likely to find a better selection of homes at the end of the year. Trulia admits it can’t say for certain why individual markets see large or small seasonal swings for starter-home listing prices, but it has found a “strong and statistically significant correlation between seasonal swings in listing prices and seasonal swings in inventory.”
According to Trulia, “Markets that witness bigger seasonal swings in starter home inventory tend to experience bigger seasonal swings in starter home listing prices.” This suggests that homebuyers in markets with significant inventory seasonality stand to benefit the most by house-hunting during the fall and winter. Still, the majority of markets across the U.S. see higher levels of inventory and lower listing prices during the fall and winter – which means the best time to buy that first home is right now. (You may also want to read: 10 Worst First-Time Homebuyer Mistakes.)