Timing the Purchase of a New Home

When purchasing a new home, the time of year you choose to buy your home can make a big difference in terms of the price you pay and/or the incentives you are able to get.

First, consider the impact of seasonality. In normal years, demand for new homes is strongest during the period of time that is referred to as the “spring-selling season”. In the builder world, the spring-selling season is actually longer than just the spring and is commonly considered to start just after the Super Bowl and continue till about early-June. This period is the most popular time to buy due to the warmer weather and families planning moves ahead of the new school year.

During this period, competition among buyers is strongest, and builders are less willing to negotiate. Instead, they aim to increase prices and maximize revenue by capturing as many sales as possible. You are least likely to get a good deal during the “spring” under normal market conditions.

As summer approaches, demand typically tapers off, reaching its lowest point around the Christmas and New Year holidays. With the lower demand, the end of the year is normally the best time to buy to get a good deal if the timing works for your circumstances.

Another important factor to consider is the fiscal quarter and year-end dates for publicly-traded builders. Note that, for many builders, the fiscal year and calendar year are different. Take, for example, Lennar, currently the second largest builder in the country. Lennar has a fiscal year end of November 30. This means that they close their books for the year at the end of November, and their new year begins in December.

Why is this important? Because publicly-traded builders report their earnings to Wall Street on a quarterly schedule after the end of each fiscal quarter and year-end. This means that four times a year, they will be under pressure to meet business plan targets, presenting an opportunity for buyers to get a good deal.

You can quickly determine the fiscal year-end for any builder with a quick Google search.  The earliest fiscal year-ends are at the end of September. The latest fiscal year-ends coincide with the end of the calendar year in December.

Your leverage is normally strongest if you can contract for a home about a month before the end of the fiscal quarter and close it by quarter-end. This allows the builder to log an additional sale and closing for the quarter. The reason it’s important to enter into contract about a month prior to quarter-end is that, if you’re buying with a mortgage, this timeframe allows for all of the necessary steps (e.g., loan approvals, appraisals, disclosures, etc.) to take place to accommodate a quarter-end close.

If you can buy with cash, you can purchase closer to the end of the quarter. Your leverage is probably the strongest in this scenario, so long as you can commit to a quarter-end closing.

The most important quarter for a builder is normally the fourth quarter (i.e., year-end) so applying the above information to Q4 normally yields the best results. Fiscal year-ends also happen to coincide with low demand periods.

Therefore, if you’re looking to buy a home from Lennar, and you have some flexibility on timing, waiting till the end of October to contract for a home that can close by the end of November would usually give you the best opportunity to negotiate a good deal. If you’re buying cash, mid-November would probably be the best time to buy.

In summary, as you consider the best time of year to buy, if you keep seasonality, as well as builder fiscal year-ends, in mind, your opportunity to get a good deal increases significantly.