When is the Best Time to Buy a Home?
One of the most important milestones to embark on in life is when you buy a home. If you’re obtaining a mortgage to purchase it, the process is both strenuous and rewarding. Only when you’ve crossed the finish line of closing can you pat yourself on the back and consider yourself a homeowner. While that sounds great to dream about, you should first ask yourself if you’re ready for homeownership.
As a potential homeowner, you must prepare to provide a down payment, allow access to your bank statements, locate multiple documents, and you must have developed a budget that has room for your monthly mortgage payment and any surprise repairs.
If all the items on the above list are checked with confidence, you may be ready. Even though you’re ready to go, what about the market? Is it the right time to buy? When is homebuying season? In this article, we’ll discuss the right time to buy a home and other factors to consider.
Time Isn’t Always a Factor
Before we go into that, it’s important to note that a home at a great value can be found in any kind of market or season due to key factors such as renovation needs, local market growth trends, or even something as simple as a motivated seller. The trends discussed in this article reflect the big picture, but with patience and the help of a high-quality agent, a unique deal can be found in any market.
If you find a screaming deal during a time of year where housing prices tend to be higher, don’t wait for prices to drop! Great deals are difficult to come by and competition can quickly boot you out of the running.
If you ask a real estate agent when the best time to buy a home is, they’ll likely tell you that right now is the best time to buy a home. That may sound like a sales pitch from the agent, but there’s some truth to it.
For one, if we look at trends throughout history, housing prices have consistently risen year over year. The inflation of high-priced listings has caused some short-term fluctuations in the housing market. While the cost of renting rises alongside the cost of obtaining a mortgage, many people are better off using their money to build equity. They can start paying down a loan as opposed to holding onto their money in hopes of a better deal.
Bottom line, the housing market is unpredictable, but we will go over some of the common annual trends that can play into home prices, something that can be very useful for planning your next home purchase.
The statistic that bests reflects the current state of a local market is housing inventory and demand. Take the number of houses currently for sale and divide that by the average number of homes sold per month in a specific area. The final figure shows how many months-worth of home sales are possible at the current rate of sales if there were zero new listings. This is a common metric used to evaluate how the supply stacks up to the demand.
A low housing inventory (4 months or less) usually means that demand is high. There is more competition between buyers which gives sellers more leverage. This creates a “seller’s market” and subsequently causes a rise in home prices.
On the flip side, a high housing inventory usually means that houses are taking longer to sell. This means more competition between sellers and creates a “buyer’s market” because the borrower now has the upper hand in negotiations. In contrast to a low housing inventory, a high housing inventory usually means decreasing home prices.
Buyers will want to tap into a buyer’s market if they get the chance, which brings us to our next topic.
When Does Housing Inventory Tend to Be Highest?
The housing market has seasons of high and low inventory. Much like standard seasons, these seasons can be more noticeable in some places than others.
For example, places like San Francisco that have a low housing inventory for the entire year don’t see as distinct of a shift throughout the year while places in the Midwest and Northeast have much larger rates of change because their harsh winters keep people in their homes.
For most markets, the ideal season to buy a home is during the spring and summer months with a slight decline comes in the winter months. There are a few different explanations for this.
First off, the winter months are very holiday-heavy, so many people will hold off large undertakings such as buying or selling a house until their schedule is more open. Because of this, winter tends to be a buyer’s market. There is less competition for the homes available on the market, giving the buyer the upper hand in securing a good deal.
Another factor that plays into the home-buying climate is sellers knowing that spring and summer is the ideal time to sell a home. Sellers listing their homes on the market during the winter are usually doing so because of various reasons. They urgently need the money, need to move, or are under other pressing circumstances implying that a seller needs to finish the process as quickly as possible.
With agents, lenders, and other parties in the home buying process having less on their plates, it is likely to receive more personalized service during your transaction. Another benefit of buying in the winter months is the chance to see the house during the harshest period of the year, providing you first-hand experience and a clearer idea of what to expect from the home and location.
Your Local Neighborhood’s School Year
The local school year is one of the highest driving factors, with parents tending to stay in their homes until May or June so that their children don’t have to transfer schools in the middle of the year. This leads to a lower inventory of buyers and sellers during the popular school months. Suburbs are the most heavily affected by this increase in buyers. If you’re a parent who’s in the sweet time spot of buying a home, consider these factors when home shopping to ensure you’re planning a bright future with your family in mind.
Fewer buyers in the market will help sellers take offers more seriously since there is less demand for a property. This can also bring less serious buyers and sellers into the market in the spring and summer since some people just want to explore their options.
Other Factors to Consider
Outside of these annual trends, one of the most significant things that can cause housing inventory to rise is new construction because it adds new homes without introducing new borrowers into the market. In addition, a higher percentage of investors in the market can cause housing inventory to fall when they buy up homes and sit on them to rent them out. If a housing market is slowing down
, investors may also place their homes for sale to capture their profit resulting in extra inventory shifting the marketing back into a buyer’s market.
Those who are planning to buy strategically to get the maximum tax benefit should buy their home as early in the year as possible. Taking out a mortgage earlier in the year will result in more mortgage interest paid for that tax year and can be a tax write-off opportunity for those who are eligible.
Is Now the Right Time to Buy a House?
Buying a home is a substantial financial decision. If you feel you are ready to make the purchase, don’t expect yourself to “hack” the market. Even if you’re not at that point, we offer a homebuying bootcamp to get you up to speed on the homebuying process. However, knowing about home buying seasons and tips can be useful when you’re undergoing long-term planning for buying your home.
If you think it’s the right time for you, contact us today and we’ll discuss your loan options to make your dream of homeownership come true.