Timing of the Market

Question: I am considering buying a house within the next two years. How do I “time” the market for the best deal?

Advertising Sales

Debra Wells (CD)

ART + DESIGN

Art Director-Special Projects

Jasmine Smith

Graphic Designer Chelsie Rex

Advertising Design

Marc Hostetter

OPERATIONS

General Manager

Alyssa Garrett

Group Operations & Production Coordinator

Inna Cazares

FINANCE

Accounting & Finance Manager

Tricia Zines

CONTRIBUTORS

Megan Bianco, Jake Howard

San Clemente Times Vol. 18, Issue 5. The SC Times (sanclementetimes.com ) is published weekly by Picket Fence Media, publishers of the Dana Point Times (danapointtimes.com) and The Capistrano Dispatch (thecapistranodispatch.com). Copyright: No articles, illustrations, photographs or other editorial matter or advertisements herein may be reproduced without written permission of the publisher. The publisher assumes no responsibility for return of unsolicited manuscripts, art, photos or negatives. Copyright 2023. All rights reserved. Printed in the USA. San Clemente Times is published weekly by Picket Fence Media, 34932 Calle Del Sol, Suite B, Capistrano Beach, CA 92624. Application to Mail at Periodicals Postage Prices is Pending at San Clemente, CA. POSTMASTER: Send address changes to: San Clemente Times, 34932 Calle Del Sol, Suite B, Capistrano Beach, CA 92624.

Follow San Clemente Times

–Samantha A., San Clemente

Answer: Dear Samantha, everyone would like to “time” the market and purchase “right.” Just like the stock market, there is no secret formula. Here are some key factors to consider.

Seasonality in real estate is the annual cycle where buyer demand fluctuates. Ideally, buy when you have less competition. The best months are January and October-December. December is the premier month, as most buyers are preoccupied from Thanksgiving through the New Year.

It is typically slow through Super Bowl Sunday. The second and third quarters are the most competitive months, with Daylight Savings Time starting in March. The rainy season fades, the flowers bloom, and spring is in the air.

Since March 2022, the Fed started increasing the rates rapidly to combat inflation. Mortgage rates went from 3% to more than 7%. By October, buyer affordability eroded, and demand subsided.

But buyer demand is still strong and increasing steadily.

In a previous column I wrote, I predicted that the mortgage rates will soften to about 5.5% by July. Why? Because the Fed overreacted by increasing rates this past year, which hit the housing market the worst.

The number of homes sold dropped nearly 50% from 2021 to 2022. Real estate is about supply (listings available) and demand (qualified buyer demand). When rates more than doubled within six months, it blocked many buyers’ ability to qualify for a home. As rates subside from over 7% to 5.5-ish%, it will open up the opportunity for buyers to qualify again.

Just as sales fell nearly 50%, so did the number of listings (inventory). Why? Over half of the homeowners took advantage of refinancing their homes to the lowest rates in decades.

Why would owners sell and buy a new home to double the interest rate and double or triple their property taxes? They likely wouldn’t, but there are always exceptions such as divorce, death, and relocating to tax-free states.

Less inventory and buyer demand will keep home prices firm. Many buyers say: “I will wait until the market crashes, then buy.” Numerous economists and so-called “experts” are convinced that home prices will drop 20-30% this year.

I disagree. Their models have little correlation to the reality in our coastal market.

Past experts’ predictions have often been inaccurate. That’s why buyers are confused about timing. A home is a home. It is a commodity, like a stock certificate. Homes hold real value and often are the biggest asset in one’s life, creating wealth, and an enhanced retirement.

Ask your parents what they paid for their house 40 years ago. Now, it’s probably worth at least 10 times more.

Real estate values and interest rates move slowly. Don’t expect interest rates to drop to 4% or less again. That happened because of COVID.

In my more than 40 years of selling homes, I have seen mortgage rates go from 2.5% to 18.5%. Believe it or not, rates below 6% are a relative deal based on historical data. The other benefit is the interest deduction for loans up to $750,000.

As a young family starting out, get serious about buying a house this year. Get pre-approved for a loan. Hire a seasoned realtor and be ready to take the leap in the months ahead. SC

Have a real estate question? Email Phil Immel at phil@realestateguru.com. Visit realestateguru.com. The Guru has more than four decades of experience listing and selling homes in South Orange County. As a licensed real estate broker, Phil majored in Real Estate at San Diego State University and is also an expert in mortgage, title, escrow, appraisal and negotiations.

PLEASE NOTE: In an effort to provide our readers with a wide variety of opinions from our community, the SC Times provides Guest Opinion opportunities in which selected columnists’ opinions are shared. The opinions expressed in these columns are entirely those of the columnist alone and do not reflect those of the SC Times or Picket Fence Media. If you would like to respond to this column, please email us at editorial@sanclementetimes.com.