Best Time to Buy a Home
When you plan to buy a home, timing is not everything. But it is an important factor. Your financial situation and how long you plan to live in a home can impact your decision as well. The broader market and economic factors also play a role when buying a home.
Historically, in spring and summer, there are more houses for sale and in winter the real estate markets cool down. But how these differences affect your purchase options or the price range varies by region. Not only that, but the COVID-19 lockdowns threw historical averages for a loop this year.
Last spring, when you would normally expect to see a flurry of activity, the pandemic drove away some buyers and sellers. Danielle Hale, the chief economist at realtor.com, saw an 18-20% drop in home sales in May 2020, which is normally a very busy time of year. The drop coincided with a decline in homes for sale. And with such economic uncertainty, mortgages are harder to come by as lenders tighten their standards.
So, are you ready to buy a new home? You may think that the best time of year to buy a home is when your finances are at their peak, but experts say there is a time of year when you will have more options and the price range to your advantage. Read on to find out when to start looking and when to consider putting out an offer. As a bonus, once you know the best time to buy a home, you will also have an idea of the best time to sell a home; Ideally, you will be able to schedule it so that you can sell your current home and move into your new one without any fuss.
Best time of year to buy a home
As with everything, supply and demand play an important role in obtaining the best deal on a home. You want to have options (supply), but you don’t want to compete with everyone (demand). You should maintain a balance between the two without having to spend too many resources on timing the housing industry.
That’s why working with a local real estate agent to determine the best time to buy a home can be invaluable. Consider hiring an agent who is specialized in the area in which you want to live. For example, a local professional may be aware of the arrival of a new shopping center or a neighboring house that will soon be for sale.
Here are the general trends in home buying throughout the year.
The real estate market tends to cool down in winter. People are less active (who wants to move in the snow?), So stocks and demand are generally low. Prices may be lower, and you’re less likely to get into a bidding war, but you won’t have a full view of available homes unless you wait a few months.
It is in spring when the houses begin to be marketed again. Many homes will be listed by real estate agents and sites like Redfin, and you’ll have plenty of options to browse through. Based on Zillow’s data, April tends to offer the most options. But keep in mind that other buyers will also be present in the market. Therefore, you will want to prepare all your mortgage application documents in case you find the perfect home.
The hustle and bustle of activity in the spring tends to extend into the summer. You are likely to see high inventory and strong competition in the real estate market. There will still be plenty of homes available, but don’t be afraid to take the plunge if you find your ideal home at an affordable price. Due to fierce competition, the option may not exist tomorrow.
Generally, the best time of year to buy a home is early fall. Families have already moved into new homes before the start of the school year. But the number of properties on the market is still relatively high compared to other times of the year, and sellers may be interested in selling.
Keep in mind that while buyers on average have better deals in September, this may not be the case for you. Factors that affect property prices can be extremely local. You may find more competition for a property half a block from a busy intersection than for a property next door.
Is 2021 a good year to buy a home?
The COVID-19 pandemic has had a major impact on the housing market in 2021, but it did not reduce house prices.
A decline in the supply of housing would normally create a seller’s market, where the number of buyers exceeds the supply of housing and prices rise. But in most markets, this has not happened. In fact, home purchases are on the rise due to historically low mortgage rates. Being able to settle at low rates can save you thousands of dollars over the life of your mortgage. If you have a strong credit profile and a secure job, there are opportunities to qualify for a loan.
But you might have to pay more during the pandemic. The fall in interest rates has brought an influx of new buyers to the market, but the supply of housing has not increased proportionally. This means that you may face stiff competition depending on the local market. A home that would have been easy to buy a year ago can now be inundated with auctions, so you may need to act quickly.
However, lending standards have become stricter. The requirements are not as strict as they were in the spring of 2020, when the pandemic began, but some lenders remain demanding due to high unemployment rates. For example, some banks have increased the FICO score requirements by 100 points for government-guaranteed mortgages, such as FHA loans. This means that fewer home buyers can qualify for a mortgage.
If you have financial security, you may want to take advantage of historically low mortgage rates. Even then, don’t feel rushed as there is no indication that rates will go up anytime soon.
When Is the Right Time for You to Buy a Home?
Ultimately, the right time to buy a home depends on your finances, goals, and personal time frame. The real estate market has its own models and peculiarities, but they are not definitive. You’ll want all of your ducks in a row before you get to the offer stage when buying a home.
Before you begin the home buying process, you should do a little work to get your finances in order. You can’t control the direction mortgage rates or the housing market go, but there are steps you can take to prepare for a successful homebuying experience.
Down Payment and Closing Costs
Taking the time to save for your down payment and closing costs and working to improve your credit score will simplify the entire process. Having a higher FICO score and more money in the bank makes getting a loan much easier. But that is not the only advantage. Lenders offer the lowest interest rates to those with the highest credit scores.
Plus, bringing a larger down payment to the table can help you save money by lowering your loan-to-value (LTV). Your LTV is calculated by comparing the value of your loan to the value of the property you’re willing to buy. So an $ 80,000 loan on a $ 100,000 home would have an LTV of 80%. Having a lower LTV can qualify you for better mortgage rates, and if your LTV is less than 80%, you won’t have to pay for private mortgage insurance (PMI) on conventional loans. On average, PMI costs up to 1% of the total loan value per year. So if you have a bigger loan, you could save hundreds of dollars a month by not having to repay it.
It would also be helpful to take the time to learn about the housing assistance programs available in your area. A housing counselor can help you determine what down payment or closing assistance is available. A HUD-approved housing counseling service can help you with pre-purchase education and counseling services. These agencies may charge a reasonable fee for consulting services prior to purchase, but the fee must be paid in advance. And according to HUD, these services must be provided free of charge if you show that you cannot afford the fees.