As you plan for the New Year, you might think of putting off buying a house until the springtime when the weather warms up and the traditional homebuying season arrives. However, the best time to buy a house is actually during the colder weather. A NerdWallet study further pinpoints the exact best month to buy a house – January.
This is something every real estate investor should keep in mind. Paying attention to the timing is one way to get amazing deals and succeed in real estate. Moreover, property investors can benefit in multiple ways by purchasing an investment property this month. Here are the main reasons why January is the best time of the year to buy property for real estate investing.
1) Affordable Home Prices
The first feature of the best time to buy a house is when housing prices are low. The price of investment properties is a major factor in real estate investing. The lower the price of the property, the lower your cash investment will be. Home prices in January typically take a dip and reach their lowest point compared to other months.
In fact, NerdWallet’s study analyzed historical data for 50 of the most populous US metro areas and found that “in January and February, home sales prices were 8.45% lower on average than in June through August.” Moreover, the study also found that there tends to be a large difference between listing prices and sale prices. Properties for sale in January are sold for approximately $7,000 less than the listing price.
Looking back at our real estate data and analytics, we found that the median property price of properties in the Dallas housing market was $469,871 in June 2018 according to Mashvisor’s Investment Property Calculator. Six months later (January 2019), the median property price is now $423,768. Based on these numbers, buying a Dallas investment property in January opposed to the summer can save a real estate investor more than $40,000!
Note: Did you know that the PwC’s Emerging Trends in Real Estate report named Dallas the top market to watch in 2019? To learn more, read: Dallas Real Estate Market: The Best Place to Invest for 2019.
Furthermore, according to our 2019 US housing market predictions, property prices are likely to start increasing more in the spring due to lower levels of inventory. Therefore, January is the best time to buy a house for investing in real estate as prices will only go higher from here.
2) No Bidding Wars
In the springtime, you’ll have to compete against not only other property investors but homebuyers as well. On the other hand, there’s little competition in January – another reason for naming it the best month to buy a house for real estate investors. While the number of houses for sale drops in the winter, the number of buyers also declines even more. Thus, you’ll face less competition for the investment properties that are on the market for sale.
According to NerdWallet’s study, there are almost twice as many people buying properties in June as there are in January. Most people prefer to relax during the holidays and not worry about searching for properties for sale. As a result, property investors can expect fewer multiple-offer situations or facing bidding wars.
This is good news especially for beginner investors who are worried about competing against more experienced investors. In addition, sellers who keep their homes on the housing market during the winter are often more motivated and willing to make a deal. That’s why the month of January is the best time to buy a house.
Do you have a free Mashvisor account? Use our Property Finder to find lucrative investment properties that match your criteria in a matter of minutes!
3) Rising Mortgage Rates
After hitting historic lows, mortgage rates have been rising steadily over the last year. 2018 started with an interest rate of 4.03% in January and ended with a rate of 4.64% in December according to data from Freddie Mac. As for this year, economists expect mortgage rates to increase even more, which will result in higher monthly payments. Some believe that rates could reach 5% by the end of 2019!
Assuming that this actually happens, property investors will see a decline in home sales in the first months of the year. This is another reason why January is the best time to buy a house as an investment property! As we look toward spring and later in 2019, mortgage rates are now probably the lowest they’ll be all year. Combined with lower property prices and little competition, January is an ideal time to make your bid on a house for sale!
To learn more about what to expect from real estate investing this year, read this: US Housing Market Predictions: What’s to Come in 2019
4) It’s a Buyer’s Market in January
Generally, spring is considered a seller’s market while winter, a buyer’s market. Our previously mentioned reasons to buy an investment property in January all point to this fact. Lower home prices, for example, obviously favors buyers. Furthermore, the fact the there are fewer homes for sale is also good for buying an investment property and bad for selling.
Another trend we see in January is that properties for sale this month stay the longest median days on market before closing. Months during which homes take longer to sell make for the best time of the year to buy a house because buyers have the upper hand in negotiations and can get better deals. A seller is also likely to become more desperate the longer the home stays on the real estate market.
In addition, the longer an investment stays on the market for sale, the lower the price is at closing. Thus, since you’ll have prices and days on market working in your favor as a real estate buyer, January is overall the best time to buy a house for a bargain.
Related: The 2019 US Housing Market: A Seller’s Market or Buyer’s Market?
Don’t Forget to Do Your Homework
It’s important to remember that every housing market is different and some cities (like San Francisco, New York, and Los Angeles) are seller’s market all year round. Time is not the only factor for successful real estate investing. So, a real estate investor has to conduct a thorough real estate market analysis in addition to a rental property analysis before buying.
Keep in mind the important metrics for evaluating real estate investments like the cap rate, cash on cash return, rental income, and positive cash flow when doing these analyses. These numbers will give you an estimate of the return on investment you can expect from buying an investment property in a certain market. This will help you decide if it’s truly the best time to buy a house for real estate investing.
To make things easier, faster, and more accurate, consider using an Investment Property Calculator. This is the ultimate investment tool for real estate investors as it does all the necessary calculations needed to make smart investment decisions. It also provides readily-calculated data and analytics, so you don’t have to worry about collecting them yourself!
To give our Investment Property Calculator a try and start analyzing investment properties in your city, start out your 14-day free trial with Mashvisor now.
Take Advantage of the Best Time to Buy a House
If you’re thinking of buying a rental property and making money in real estate, don’t wait too long! Take advantage of the benefits January offers instead of waiting until springtime. Properties are for sale for lower prices, sellers are desperate to sell, and the housing market is in your favor. What more could a real estate investor want? Start your property search with Mashvisor to make sure you find the best investment property to purchase right now during the best time to buy a house!