When’s the Best Time of Year to Buy a House?

There are many factors to consider when you’re buying a new home. It’s a big investment and there are no do-overs, so it needs to be done right the first time. One of the most important factors is the best time of year to buy a house. The time of year could easily influence whether you get the home you want and the price you end up paying for it. This is your guide to figuring out when is the best time of year to buy a house.

First Time Home Buyer

The housing market is even scarier when you’re a first time home buyer. You may be wondering where to start. There are a few aspects of the market that you should understand so you can get a better handle on the best time to buy your new home.

Timing the Real Estate Market

The first thing to remember is that the best time to buy a house will always be when housing prices are low. You want to look for what’s called a buyer’s market – this is when prices are low and there are fewer buyers than sellers. This means there will be little competition for the home you want, rather than the market being inundated with other buyers. In a buyer’s market, you can find your “perfect home” rather than settling, pay a much lower price for it, and ask for concessions from the homeowner, since they don’t have a lot of buyers and are likely eager to sell.

Here are a few signs that will indicate a buyer’s market:

• Pricing trends: Check out home prices in your area and compare them with past sales. Redfin, Zillow, and Case-Shiller indexes can all provide information on pricing trends in various areas.
• Months of supply: The inventory of homes for sale and how long it would take to sell them is called months of supply. As a metric, it is based on current demand and assumes no new homes are being put up for sale.
• How long it takes a home to sell: A buyer’s market will be indicated by homes that are on the market for a long time, while a seller’s market is indicated by homes that sell very quickly and for a higher price.

Interest Rates

Another factor that is difficult to predict, but very important to keep in mind, is interest rates. You’ll want to buy during a time when interest rates are low, so that your mortgage payments will be smaller. You can find information for projections in several places, including the Congressional Budget Office, Federal Reserve, and Freddie Mac.

The Best Time of Year to Buy

Once you have a grasp on these important aspects of the housing market, it’s time to decide on the best time of year to buy your new home. Just like the market can fluctuate between buyers’ and sellers’ markets, it also changes from one season to the next. These changes are usually linked to supply and demand. Here are some considerations to take into account in regards to seasonal market changes:

• Summer is popular with both buyers and sellers. Lots of people are putting their homes on the market, and lots of people are moving into new homes. However, prices are higher due to the demand, so the summer season is not the best time to buy.
• During the winter months, demand is lower, and so are prices. However, because of the limited inventory, you may find it difficult to find your dream home.

How a First Time Home Buyer Can Determine When to Purchase a New Home

The following action steps will help first time home buyers use the market to their advantage when purchasing a new home:

Evaluate Your Goals

Evaluate both your short- and long-term goals. Are you planning to settle down in one place for a while, or do you plan to travel? Do you work in an industry that may require you to relocate at any time? If your future plans include travel, you may want to hold off on buying a home just yet. A house appreciates in value over time and can help you cover the costs of the purchase, but only if you live in it for at least two to five years. The longer you live in the house, the more value it will accumulate. You should also consider the fact that selling a house is an expensive, time-consuming, and lengthy process, and not something you can do last-minute before a move.

Evaluate Your Personal Finances

If you’re going to stay in one place for a long time and are ready for a home of your own, you now need to look at your personal finances. You’ll need to determine if you are financially ready for a home purchase. Some factors you need to consider are:

• Income: Housing costs should be restricted to 30 percent of your income or less. These housing costs should include mortgage, property taxes, and insurance.
• Credit score: It’s important to be completely aware of your credit score and everything on your credit report. Credit scores will impact your ability to obtain a mortgage loan, as well as the rate you can receive.
• Down payment: The average down payment for a home is 10 percent of its price. However, you should know that if your down payment is below 20 percent, you will also need to purchase private mortgage insurance.
• Savings: In addition to the mortgage loan and down payment, you’ll need to have savings in place to cover closing costs, typically two to five percent of the home’s value, and emergency funds, which can help you cover home repairs and mortgage payments in the event of financial hardship.
• Other debts: You want to stay on top of other debts you may owe, such as credit card bills, student loans, and personal loans.

Check Out Pricing Trends in Your Area

Once you’ve decided that you are ready to buy, you next need to decide where you want to live. Are you going to stay in the same area or move somewhere else? Wherever you want to settle, make sure to check pricing trends for that area.

Determine Whether Your Area is Currently in a Buyer’s or Seller’s Market

If your chosen area is in a seller’s market right now, you might want to wait until things calm down, so you don’t have to deal with high prices and bidding wars with other buyers.

Research Interest Rates

Make sure you’re saving money on the mortgage loan as well. Check interest rates in your area for several different lenders to get an idea of whether to buy now or later.

Decide on the Best Season for You to Buy

The final consideration is the time of year you will buy. If you can find a house you like during the winter season when prices are lower, this may be the ideal time to buy. If you feel you need to buy during a time when there is more inventory, you will want to wait until the summer or at least the spring.

These tips will help you decide the right time for you to buy your new home. In the end, though, the best time is when you’re ready.