As the saying goes, timing is everything, and this couldn’t be more true than when it comes to investing in the housing market. Figuring out when is the best time to buy a house requires in-depth knowledge of the local market, area, and community. It also requires a good understanding from the buyer of what they want and how they balance their goals when navigating an uncertain market.
Here, we’ll explore the nuances of when is the best time to buy a house using West Hollywood as an example, though much of what we’ll look into will be relevant for many locations. We’ll take a look into the market factors and the more personal considerations to shed light on when would be the best time for you to invest.
Table of Content
The West Hollywood Real Estate Landscape
The West Hollywood real estate market has enjoyed relatively stable growth since 2018. However, although the general trend has been an appreciation of home values, West Hollywood does show considerable levels of fluctuation. In October 2018, the median cost of a home sold in Werst Hollywood was $800,000. In February 2019, a little over a year later, that figure had jumped to over $1.2M, only to dip below $800,000 a couple of months later. With such wild swings in valuations, what can we make of the market?
The picture becomes much clearer when we look at the figures over a longer period and take account of outliers which while certainly are factors, somewhat skew general market conditions.
If we look at January 2019, the median sale price of a home was around the $700,000 mark. A year later in Jan 2020, it had risen to around $900,000. In Jan 2021 it had reached almost $1M. From here we see the continuous appreciation of home values, even with the occasional dip, which is typical of most real estate markets.
At around April 2022, the West Hollywood real estate market began to show signs that it was being affected by the high-interest rates the Federal Bank had imposed on lenders in the hope of cooling what some feared was a US market rapidly overheating. Median house prices began to fluctuate wildly with some months reaching historic highs of over $1.5M and then quickly falling to around the $1M mark again. Still, for every, downturn, there is always a correlating or even stronger resurgence, which continually pushes the market forward. As of October 2023, the median price of a home in West Hollywood stood at $1.3M.
Interest Rates
The whole country has had to contend with high interest since the early part of 2022. This had very serious consequences for everyone in real estate, most specifically buyers, sellers, and homeowners.
Buyers were faced with the prospect of almost historic high interest rates for their loans and many found that they simply were not able to buy. Some of the worst affected were first-time homebuyers, who even if they were in the market for standard homes found they could not afford the interest on loans. Those looking to move home had a strong motivation to stay put with their current fixed interest rates.
This amounted to sellers being unable to sell their homes causing a correction in market prices. To be clear, this does mean that home prices began to drop, as intended by the US Federal Bank, as a means to cool the market. The term correction comes from the idea that market prices were grossly inflated and needed to return to more sustainable levels.
Outlook for 2024 and beyond
There is strong reason to believe that interest rates will continue to drop into 2024 as they have been doing over the last quarter of 2023. The lowering of rates has been breathing life into the real estate market, fueling interest in homebuying and creating a greater sense of confidence in the market.
This will and has resulted in many markets, including West Hollywood reporting record-high spikes in average median prices. An improving economic outlook has also helped buyers venture into the real estate market.
Is it better to wait or buy now?
For those looking to buy, there is a delicate balance between waiting and hoping for interest rates to drop further and buying now and securing a home in a relatively non-competitive market.
The answer is nuanced and personalized to the buyer and one solution will certainly not fit all. However, a good strategy may be to buy now and accept a high interest rate while the market in West Hollywood is tilted toward buyers. You’ll have more bargaining power at the negotiation table and in a market like West Hollywood, your real estate agent may even be able to shave 2% from the asking price. This makes sense in that property traditionally appreciates at much higher levels than interest rates, and in West Hollywood, this is certainly true. From the moment you buy a property, you’ll be accruing equity on your home which means that even though higher interest rates will somewhat eat into your return on investment, you’ll still be much better off in the long run.
The alternative is to wait until interest rates drop even further. However, the problem with this is manifold. First, although it does seem that 2024 will see lower rates, it’s impossible to be certain, and if it does, by how much? You may find that the lowering of interest rates is minimal and that you would have almost certainly lost out on equity, something that becomes truer the longer you wait.
Then there’s the fact that if rates do come down significantly, there will be increased interest in the housing market and this will drive up competition. Not only will the prices of property rise, (they already have been) but also there will be more interest from different bidders, lowering your chance to land the home you want.
If you can pay by cash, the answer to “When is the best time to buy a house?” is almost always now. You’ll be able to ignore interest rates while taking advantage of a recovering market.
Buying Seasons
As well as the economic climate and the current interest rates, homebuyers need to be aware that homebuying is seasonal and at different times of the year the market will work under different conditions.
Spring
By spring, the market has begun to reawaken after the lull that often comes in winter. Those looking to get an early deal will certainly be able to find a good selection of homes already being listed. Prices at the beginning of spring start to creep up as the summer approaches and the market heads to the busiest time of the year.
Summer
Part due to tradition, partly from the weather, and partly from the timetables of families with children, summer is often the time when real estate markets are in full swing. Of course, California is fairly warm most of the year even in winter, so when it comes to viewing homes, weather considerations don’t really come into play. However, many parents looking to move will want to have everything done and dusted by the time their children enroll in their new schools. Even though there are more properties listed at this time, there are also a great deal more homebuyers looking for a property. This means if you buy in summer you’re likely to have to pay more than other seasons, sometimes considerably more.
Fall
Fall sees a slight slowing in the market. Homes are not so plentiful and those who are looking to sell may still be holding out to get the best price they can. Sellers at around this time of the month know that there will still be some families looking to secure a property before the school semester starts, so these sellers are banking on a few desperate bids to come their way. The later into the fall, the more likely that family buyers will bid the asking price or even higher in an attempt to move. However, buyers should be aware that by this time most transactions have been made and there are not as many buyers actively looking, so it’s certainly worth bidding for a bargain.
Winter
By this time, most families have secured a property and the market is winding down for the holidays. There are fewer properties listed but ironically, because of the lower demand, prices will also be considerably lower. If you’re looking for the best price and viewing countless homes to find the perfect one is not your style, winter might be when it’s the best time to buy a house. This being said, many winter sellers are looking for quality leads and will not appreciate extremely low-ball offers. You may have some wiggle room when placing a bid but unreasonable offers will likely be rejected outright.
Being in the Right Financial Position
If you’re in the fortunate position to pay for a home in cash, it’s likely that you’re already in a strong enough position to look after all the maintenance and other expenses that homebuying incurs. However, if like most, you need to get a loan, you’ll have to assess the level of financing you’ll be able to accommodate.
Once you’ve budgeted for the deposit, fees, loan repayments, any repairs, and all the other expenses that go into buying a home, will you be left with an amount that will enable you to live in the manner that makes you, if not happy, at least comfortable? Of course, this doesn’t mean living the high life, just enough so that you’re day to day is not a continuous struggle.
If the answer is “it’s tight” then you should look carefully at your budget, or the home you’re aiming for and re-evaluate. You should have at least 6 months buffer money. This means that if you suddenly lost all revenues of income, you’d still be able to make payments on your property for 6 months. If you find that payments would mean being miserable or having an unacceptably limited lifestyle, then you may not be in the financial position to buy the property.
If you’re coming into the venture with a reasonable budget, fully aware of the expenses, and determined to make your investment a success, then you’re part of the way to owning a new property.
Working with a Real Estate Agent
Even experienced homebuyers turn to real estate professionals for help. In fact, it’s probably due to their experience that they understand what a real estate agent can do for them. Good real estate agents can handle all the different processes of buying a home. They can put you in touch with local professionals such as lenders, lawyers, and builders whom they’ve trusted for many years.
The best real estate agents go further. They work with a higher ethical code and will put your interests first even at the expense of their own. They’ll tell you when is the best time to buy a house even if it means suggesting you wait a little longer for the most opportune time. This is what you need in a real estate agent and it benefits them too as they build the trust and reputation only the finest brokerages and agents have.
Partner with Clinton Wade
With more than 20 years of experience in the Los Angeles area, Clinton Wade knows all there is to know about the local market. Intuitive expertise, fierce dedication to his client’s interests, and white glove service are what he brings to his discerning clients.
If you are looking to explore your real estate options in the Los Angeles area, get in touch with Clinton at 310.403.9497 or feel free to leave him a message here and he’ll get back to you as soon as possible.