Every December, consumers are deluged with media stories predicting the economic year ahead and offering financial tips to close out the current year. This expert advice often mentions the benefits of buying a home during the holiday season.
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But are these benefits really all they’re cracked up to be? Let’s take a look.
Lower home prices
Many holiday home buying stories claim home prices are lower at the end of the year, citing national statistics at the time. But national statistics don’t matter for your local decision-making.
The price of any home you buy will depend on price dynamics in your target city, neighborhood and street. Only your real estate agent can advise properly on the right offer price, and a good agent will tell you whether buying before or after the holidays makes any difference.
The national trend is that home affordability has increased as rents keep rising. Conduct local rent-vs.-buy math with your lender and agent to see if that trend holds true for you locally.
Verdict: slightly overblown benefit
You can gain significant home price benefit when working with an eager seller. If anyone selling a home — whether an individual or a large corporate builder — keeps the property listed during the holidays instead of pulling it off the market, it means they’re strongly motivated to sell, and you have negotiating power.
Before writing an offer, you and your real estate agent must discover everything you can about the seller’s motivation. Is their new home purchase contingent on this home selling? How much do they owe on the home? (Your agent can get this data.) Answers to these questions will help you structure a firm and fair offer.
Verdict: big benefit
Less buyer competition
Even though the market is slowing, bidding wars are still common in many markets. However, even motivated buyers do indeed drop out during the holidays. If you and your family are able to manage a home buying transaction during this busy time of year, you will avoid some price competition.
Verdict: real benefit
Home owners can deduct property taxes and mortgage interest every year, so it’s somewhat misleading to say that buying a home during the holidays makes a difference — unless the buyer is specifically concerned about impacting their taxes for the current year.
Buyers can also deduct “discount” or “origination” fees used to buy a rate down in the year they paid these fees. All of these deductions reduce taxable income each year, thereby reducing taxes that homeowners pay each year. So buyers will get their home owner deductions, regardless of when they close.
Verdict: potential benefit
Rates are indeed historically low right now, but claiming low rates as a benefit of holiday home buying is a bit disingenuous — rates have been historically low for years.
Wall Street estimates called for higher rates going into 2011, 2012, 2013 and 2014 — and so far, many 2015 estimates call for the same. Yet the only year rates spiked was 2013 (then dropped again this year).
It’s more important to get a low price on a home. A price can’t be lowered later if home prices drop, but a rate can be refinanced later if rates drop.
Also, if it’s a question of buying in December 2014 or early 2015, there’s little difference. Global economic fundamentals suggest we won’t see a material rate rise to start the year.
Verdict: not a December-only benefit
Easier mortgage process
Holiday buying stories promote easy mortgage closings during the holidays by claiming that lenders’ business is slower. But the reality is quite the contrary, especially this year.
Rates are at 18-month lows, and most lenders in this country will remain at capacity through the end of the year. Loan officers, like real estate agents, are happy to work during holidays. But they can’t help it if their lender and escrow/title team members — those who approve loans, draw documents, and fund and close loans — are on vacation or closed.
If you’re involved in a holiday transaction, double check that your lender and escrow officer can perform on the timeline dictated by your home purchase contract.
Verdict: greatly exaggerated benefit
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