Every winter, as the temperatures drop, the housing market cools. Let’s explore what happens to the housing market in the winter based on the data. Then we’ll look at factors that drive these seasonal changes.
Prices Temporarily Dip Slightly
While home values generally appreciate over time, the growth isn’t linear. Values grow fastest in warmer months than in others. And, during the winter months, it’s common to see prices dip slightly before rebounding a month or two later.
Median prices peak each year in the spring and summer. Then they dip a bit each winter
before seeing additional growth the following spring.
You may ask, ‘Why Is the Winter Market so Different from the Summer Market?’
We’ve seen what happens to the housing market in the winter, but why is this the case? There are a few reasons for the seasonal housing market slump:
1. Families with kids don’t want to move during the school year. So sellers with kids are
less likely to list their homes, and buyers with kids are less likely to look for new homes.
2. We’re busy with other things during the holiday season. December is usually a
whirlwind of holiday parties and preparations. People don’t typically have time to get
their homes market-ready or start a home search in December.
3. Shorter daylight hours and bad weather take some of the fun out of house hunting.
Buyers typically prefer to look at homes during the daylight in good weather.
Thus the winter season often results in a retreat from real estate activity, with many buyers and sellers lying dormant until after the holidays are over and the weather has thawed. But there are still deals to be had by determined home shoppers, and opportunities for sellers to capitalize on motivated purchasers over the coming weeks.
Home prices and mortgage rates are both expected to remain higher this winter, which will see a continuance in certain challenges for buyers.
There remains a shortage of homes for sale, but the good news is there may be some slight improvement due to less buyers this time of year. Even so if you are financially prepared to purchase a home, or even unsure if you are prepared don’t be shy or let what you hear about the market conditions stop you, buying a home on sale in the winter can be a smart investment, because you will most likely pay less and have the advantage of a Seller willing to negotiate more readily.
It pays to do your homework before jumping into the chilly market. Will mortgage rates drop by spring? Re there enough buyers out there to make listing your home worthwhile? Will the housing market shortage improve anytime soon?
“The housing market continues to be dragged down by high mortgage rates,” says Selma
Hepp, chief economist for CoreLogic. “Since mortgage rates surged earlier this year, home sales activity has been trending along the lowest level since 2007. A combination of increased costs of homeownership and a lack of inventory is keeping potential home buyers on the sidelines.”.
Home Qualified president Ralph DiBugnara, who is also a vice president at mortgage lender Cardinal Financial, agrees that current market conditions are surprising, making the future more difficult to predict. “This may be a different market than we have ever experienced in real estate, There is still a massive shortage nationally of homes available for sale, which is continuing to keep prices higher in most major markets. That, combined with high inflation, high interest rates and a continued strong demand to purchase, is a combination we have not dealt with in the past.”
Buyers can’t control home prices or mortgage rates, but one thing they can control is their credit score. When it comes time to apply for a mortgage, borrowers with higher scores will be eligible for the best available rates. The minimum credit score you need will depend on the type of home loan you’re getting. But if your credit score is less-than-stellar, take some time to improve it before you dive into house-hunting. It could save you thousands. Traditionally in winter, buyer interest wanes and many sellers wait to list until closer to spring, But, even a seasonal slowdown probably won’t adjust prices a great deal. We could see a slight drop in the average home price, but I believe the inventory shortage will prevent any large trend toward downward prices. I anticipate home prices, on average, to remain steady over the next few months.
The recent surge in mortgage rates will likely lead to some small home price declines this winter, an average increase of about 3.5 percent is expected in 2024.
It is predicted that Mortgage rates won’t drop much
Mortgage rates for the 30-year fixed-rate mortgage will likely average about 7.5 percent for the remainder of 2023.
Inflation has moderated but is still not at the 2 percent target level the Federal Reserve has established is necessary so, Interest rates will continue to rise this winter until the 2 percent target level is reached and maintained for a while, rates are likelier to reach or stay steady 8 percent rather than drop to 6 percent over the next 12 months.
Inventory of existing homes for sale should increase a bit in 2024, as more sellers grow
accustomed to higher mortgage rates and decide to list their homes anyway, due to changes in circumstances like a marriage, a divorce or a new job. Also, given that over 40 percent of baby boomers own their homes free and clear, their decision to retire and move to other markets will help improve inventory levels in some markets.
Should you buy a home this winter?
Even though the market is far from buyer-friendly right now, your finances and life
circumstances may matter more than market conditions. If you are ready and able, you should start looking. Even with low inventories, it’s taking buyers longer now to find the right home.
With fewer buyers in the market, competition and bidding wars have waned.
No one can predict the bottom of declining market so the best option is to purchase if the market is flat you are seeing a decreasing market.
Buying a home is like timing a soufflé, if you have ever attempted it. You pull it out of the
oven at the highest point only to see fall as the temperature decrease, It is hard to hit the spot exactly right. In the current market, if you are ready and find the home of your dreams, I say go for it, because waiting might result in even higher mortgage rates and prices. Just be ready to act fast and have your finances in order. If mortgage rates go down, you can always consider refinancing.
Zillow shows that the US housing market is starting to cool down, and that could usher in a good opportunity for homebuyers as prices get reduced.
Though the housing market typically cools off during the fall/winter months, more homes are seeing price cuts this year than they have in the past,
Home prices have been pushed higher over the past year due to a shortage of inventory. Demand has also been a factor keeping prices elevated, but buyers have started to pull back slightly due to pressure from higher mortgage rates. The average 30-year fixed mortgage rate notched 8 % last week, Freddie Mac data indicated — the highest level in nearly 23 years.
Weekly mortgage applications meanwhile fell 2.1%, the latest Mortgage Bankers Association survey suggested.
For determined buyers, with enough budget room to accommodate the recent jump in
mortgage rates, this is looking like a sweet spot: There are more motivated sellers and more active listings overall than any time since last December, improving buyers' chance to find the right fit.
Improved affordability provides a small relief to homebuyers who've been slammed by one of the most unaffordable housing markets ever.
But affordability conditions are unlikely to improve significantly until mortgage rates dial back, which probably isn't happening anytime soon.
Zillow economists, meanwhile, previously forecast home price increases through the first half of 2024 despite the current cooldown. Home prices could jump as much as 5% by August 2024, the firm's research team said.