By James McGrath
One question we often get from buyers is, “What’s the best time of the year to buy an apartment?” We usually get it from out of town buyers and for good reason. In most of the country, the housing market has a clear seasonal trend and if you buy when others are not, you can get a good deal.
While there is seasonality in the NYC housing market, it is not as pronounced as the nationwide trends. Let’s take a look.
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In order to understand why seasonality is less pronounced in NYC, you first need to think about what drives the national housing market.
There’s usually a reason someone buys a home and most commonly that's the need for more space, i.e. kids. Those kids need to go to school so most families want to be settled into their new home before the school year starts. If you work backwards from there, it means you need to reach an accepted offer by the end of the spring.
The holidays and weather also drive housing seasonality. It’s hard to find time to house hunt in December and even if you can, you still need to brave winter weather, a tall order in a lot of the country.
For these reasons, you’ll often hear that the housing market officially kicks off Super Bowl weekend. There’s nothing special about the Super Bowl. It just happens to be in early February when the weather gets a little nicer and buyers start thinking about that end of spring deadline.
NYC has kids and winter weather so why wouldn’t seasonality be just as pronounced here? The following is a chart of the annual distribution of transaction volume -
You'll see NYC's blue line is flatter than the national average meaning the number of transactions is more consistent throughout the year. Why is that the case?
We're willing to bet the average household size is smaller in NYC. It's not unusual for a single person to buy an apartment here. Not many families are moving into a studio apartment after all. Conversely, in other markets, that single person will probably wait to buy as they don't need a 2,500 square foot house for themselves. Smaller households means fewer kids, making the school year less of a factor.
Proximity also helps buffer the impact of winter weather. Many buyers focus their search within just one or two neighborhoods so getting around in the cold is not as formidable.
Regardless of the market, the best time to buy is when it makes sense for you. If you currently have a lease or are are waiting for your next bonus to hit, that’s going to be much more material to your buying decision than any seasonality in pricing.
In the chart below, you can see there is a trend in the average discount to ask in NYC -
That's the best proxy for buyer leverage we could think of. You'll notice the the range is only 1.5%. All else equal, you could save a maximum of 1.5% by shifting your timeline. In other words, if you have total flexibility on timing, there is no reason not to buy late in the year. But if there is a cost to adjust your plans, that savings can evaporate very quickly.
Why is there such a tight range? Aren't there very few buyers in December? Yes, but there are also fewer listings. It's only when the balance of buyers and sellers gets out of whack that prices adjust.
Keep in mind these are closings. Since it takes 2-3 months to close, the peak discount to ask is actually on deals accepted in November or December, not February when they actually close. Conversely, the smallest discount to ask is on deals struck in April or May.
So if you are buying an investment property and timing doesn't matter, by all means, get cracking come Thanksgiving. But for most NYC buyers, we recommend buying when it is most convenient for them.