As a home buyer, one of the main things you need to consider is the best time to buy a house. You can buy when the interest rates are low. Some home buyers also wait for a time in the year when the market has a wide selection of homes and favorable deals.
However, when buying a house, you’ll need to ensure that timing is right for you. You might have to consider your personal circumstances when making such a huge decision.
Are you unsure whether you are ready to become a home buyer? Or do you feel like exploring the best time of the year to buy a house? Well, keep reading to find answers to these and more questions.
Timing the Real Estate Market
The real estate market falls into 3 basic categories when you ignore variations. These categories are the buyers, sellers, and, neutral market.
- Buyer’s market A buyer’s market exists when there are more houses in the market than potential buyers. The basic laws of supply and demand apply. As you may note, house prices fall when there are too many options in the market. You can take advantage of such a market if you can afford to wait for the best deal to come along. Sellers are usually eager to wheel and deal. This is because they might not receive better offers if they pass on yours.
- Seller’s marketIn a seller’s market, there are more buyers than available houses. If you are in a rush to get a house, this might not be the ideal time to buy one. A seller may be looking at various offers and may have a reluctance to sort out any closing costs or inspection fees. Most sellers are also unlikely to wiggle as there are more buyers lined up if your deal falls through.
- Neutral market This is a more balanced market. During such times, there’s an equal number of buyers and sellers. The interest rates are also more affordable. If you choose to buy a house at such a time, you can expect less volatile shifts in price and demand.
Comparing Renting Vs. Buying
Should I rent or buy a home? This is a common question that plagues every potential home buyer. It’s often so because your finances are at the core of this question and whatever decision you reach. Having an exit strategy can be the perfect point to start.
Ask yourself questions like, “When do I expect to move out?” If it’s within some months or a couple of years, consider renting instead of buying. Why? Because it makes sense to buy a home only if you plan to live in it for more than 2 years. Renting in such circumstances allows you to move to a new house whenever you need it.
Home-ownership comes with many responsibilities and maintenance costs. You also have to commit to a neighborhood by being part of their community. If you feel unprepared for such duties, renting an apartment will suit you better than buying a house.
The local real estate market can also help to guide your decision. For instance, owning a home costs more than renting in some cities. But, you should note that a house’s value appreciates with time. Thus, buyers get the financial benefits as the house gains equity. Buying a house is a more beneficial way to spend your hard-earned money as opposed to handing it over to a landlord each month.
Evaluating Interest Rates
Many home buyers try to time their purchase by looking at the current mortgage rates. Such buyers hope to pounce on low-interest rates. But, like the stock market, it’s hard to predict how far mortgage rates can rise or fall.
Mortgage rates reached their highest rate at 18.45 percent in 1981. They further decreased during the ’90s and 2000s. Today’s interest rates are lower than they were 30 years ago.
Additionally, a reasonable interest rate is relative to each buyer’s financial situation. They are one part of the puzzle. If you are seeking financing from a lender, they will look at your credit score to determine what interest rate to apply.
Considering the Total Monthly Payment
Although many homeowners are concerned about the interest rate, that is just one part of your total monthly payment.
Your total monthly payment can be broken down into three main components: the principal portion, the interest portion, and the escrow amount for property taxes and homeowners insurance.
- The principal portion goes toward paying down the balance of the loan.
- The interest amount is the cost paid to the lender for borrowing the money.
- The escrow amount covers your property taxes and homeowners insurance premium. This portion is the amount that your lender uses to hold the money that’s used to pay your property taxes and insurance premiums. Some lenders require an escrow account while others allow you to pay the property taxes and homeowners insurance on your own. If you choose to maintain an escrow account with the lender, you do not have to worry about paying your property taxes or insurance premium since your lender will pay that for you from your escrow account.
So remember, you also have to factor in fluctuating property taxes, home-owners insurance, and home-owning costs even with changes to interest rates. When you consider all these things, interest rates are a small part of home-ownership.
Choosing the Right Time of the Year
The late months of summer and the fall season make the best time to buy a house. There’s an abundant choice of houses and less competition for them from other buyers. As such, you are likely to find better bargains during this period as opposed to early summer and spring.
Sellers are nervous as back-to-school, and the cold weather approaches. At this time, they are more willing to cut their prices before their buyers get back to work or hibernate for the winter. You can find more listings with price reductions during August and September.
As for days of the year, December 26 is perfect since almost nobody shops for a house on the day after Christmas. Sellers give an average discount of up to 1.3 percent below the market value. This figure may sound insignificant, but it can result in thousands of saved dollars.
Monday is usually the best day to seal a deal since buyers can get an average discount of 2.3 percent below the prevailing market rate. Friday came as a second-best with an average discount of up to 2 percent.
The worst time to buy a house is around spring and early summer, especially in June. For one, there are more buyers in the market. This means that houses move faster and you get less legroom to bargain. Midweek days also make the worst days to buy a home, Thursday in particular. You will be lucky to get a 1 percent discount on such a day.
Making Sure Your Personal Financial Life Is in Order
How is my credit score? Can I afford to make monthly mortgage payments? Do I have enough cash for a down payment? Such are the questions you need to answer before buying a house. Having a sit-down with mortgage financiers can help you ease some of these worries.
If you have a stable job or steady source of income, buying a house can reduce your monthly expenses. But, if your income is not stable enough to cover monthly mortgage payments, it may not be the best time to buy a house.
You’ll also need to cater to home maintenance costs and other home ownership expenses. One strategy is for homeowners to set aside 1 to 3 percent of the house’s price for repairs and maintenance each year.
Think About Your Short-Term and Long-Term Goals
There’s no ideal or recommended stage of life or age for you to buy a house. With that, identifying your short and long-term goals can help you budget and save.
Short-term financial goals include things like weddings, personal expenses, and credit card payments. Fulfilling such goals requires some planning. However, you can fulfill such goals within months or a few years.
It can take several years to decades to meet your long-term goals. It’s all part of having a bigger picture instead of planning out your life by the day. Therefore, you’ll need to commit more time, energy, and attention compared to short term goals.
Buying a house comes within the gray area that lies between your short and long-term goals. Owning a house can be part of the big picture hence a long-term goal. However, it’s the little steps in the form of short-term goals that propel you into reaching your long-term goals.
If you want to buy a house, it’s important to know what goals to focus on. You can start by meeting your basic needs i.e. food, shelter, and clothing. Then you can focus on maintaining your lifestyle and reducing your debts. Each person has a unique situation and needs. Therefore, you should take some time to plan it all out.
As you can see, buying a house is a unique venture for each buyer. You have to consider your finances then leverage them against your goals for the future. It’s also wise to look at the real estate market so you can make an educated choice at the best time for you to buy a house.
Bottom Line
The fact is, buying a house is not mealy a financial investment, but it’s also a chance for you to build links and set up roots. A home can make a valid purchase if you go about it responsibly.
Here at LemonBrew, we are committed to ensuring that our clients get the best homes at the right value. Still wondering when to buy a home? Get in touch with us today or use our free and powerful custom matching technology that connects interested home buyers with vetted, caring, expert local realtors in a transparent process that makes everyone feel good and saves you money.