Table of contents
- What is the best time of year to buy?
- Is this the right year and time to buy?
- What is happening in your local market?
- What are your considerations?
- How to take the next step
Deciding to buy a home is one of the biggest decisions you’ll ever make. Like any of life’s big choices, you’ll want to be sure to make this move when the time is right. However, the truth is that the best time to buy a house can vary from person to person. Finding the right time for you is about striking an acceptable balance between a few different economic and personal factors.
If you want to know when the best time to buy a house is, read on below. We’ll examine market trends and how personal factors should play into your decision in order to help you zero in on when may be the right time for you to buy. Armed with this knowledge, you should be able to sort out if you’re ready to enter the housing market.
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What is the best time of year to buy?
According to Good Housekeeping, the best time of year to buy depends on what your goals are. If you want to shop when there’s the most housing selection, the best time to buy is around March to July. However, this is also when there is the most competition.
If you are looking for a good deal, the recommendation is to consider winter months. A study on market seasonality by The National Association of Realtors confirms that the winter months have lower amounts of selling activity. According to the study, the total sales volume was 2.2 million during May 2017 to August 2017 while the number of sales was only 1.5 million during November 2017 to February 2018, with January 2018 being the slowest month overall.
As a buyer, slow selling activity can work to your advantage. It usually indicates that there are less people in the market to buy a home, which means that there is likely less competition for you to worry about. The less competition there is, the more likely it is that you’ll have room to negotiate with the sellers on the price.
Lastly, a recent Realtor.com study points to a potential sweet spot in September, when competition has slowed from the summer, but there is still sufficient inventory compared to the winter months. All in all, there is no definitive answer on the best time of year, as it depends on your personal goals.
After taking a look at seasonality, the next piece of the puzzle to look at is what’s happening in the economy overall. In truth, the 2019 housing market has had its ups and downs and that’s largely due to economic factors. We’ve cited some of the most impactful ones below.
This past July, the U.S. economy broke records for being in the middle of its longest expansion ever. Now, however, it seems as though the past ten years of solid growth could be coming to an end. Recently, some signs have appeared to indicate that the economy is slowing down.
In August, for example, the yield curve inverted. The “yield curve” refers to the relationship between short-term and long-term interest rates. Typically, the return – or yield – on long-term investments is higher because investors assume more risk when investing their money for longer periods of time. However, with an inverted yield curve, short-term investments begin to have a bigger payoff. According to Federal Reserve Bank of San Francisco, the inversion of this curve has correctly predicted every recession since 1955.
Business investment, which is also a general measure of how well the economy is doing, fell by 0.6% in the second quarter of 2019, according to Reuters. That’s the first time that has happened since the first quarter of 2016. The trade war between the U.S. and China is thought to be a cause of this decline.
While these signs aren’t an iron-clad guarantee that a recession is on its way, it’s something to be aware of if you’re considering becoming a homeowner. Typically, during a recession, housing prices tend to fall, which may look like a good thing if your ultimate goal is to score a deal. However, when you’re thinking of buying, you also have to take into account factors like your ability to repay your mortgage in an uncertain job market.
Another thing to look at as you’re examining the economy is interest rates. Though the federal funds rate, the rate at which banks can borrow money, remained relatively flat throughout the first half of 2019, the Federal Reserve cut rates twice this year, as of the middle of September.”
Traditionally, cutting interest rates is done to encourage people to keep buying and stimulate the economy.
The interest rate that you’re given when you apply for a mortgage will have a substantial impact on how much house you can afford (see average 30-year fixed mortgage rates). Where rates are concerned, even a fraction of a percentage point can make a difference in how much you pay each month. That’s why conventional wisdom is to buy when rates are low. According to Forbes, in September 2019 mortgage rates were at a 3-year low.
What’s happening to the housing market on a national scale may not be the same as what’s occurring in your local market. For your convenience, Opendoor has published a series of local real estate trends for all the cities in which we buy and sell homes. Even if you don’t see your city on this list, you can evaluate how the housing market is faring in your own city with a little research. You’ll want to take a look at the following factors:
When you’re trying to figure out whether your local market is currently geared towards buyers or sellers, the first factor to take a look at is how much housing inventory is available. To learn about what housing inventory is and to get a general sense of inventory in your area, you can check out our local real estate trends report or talk to a trusted local real estate agent.
In general, higher-than-average inventory rates will suggest the presence of a buyer’s market while lower-than-normal rates will suggest a seller’s market.
In addition to the amount of available inventory, you’ll also want to take a look at the average days on market (DOM). This number indicates how long a property was on the market before an offer was accepted. To learn about days on market and to get a general sense of DOM figures in your area, check out our local real estate trends report or talk to a trusted local real estate agent.
In this case, a higher DOM is likely a better sign for buyers who are looking to score a deal on their new home. It can be a sign that the sellers may be getting fatigued with the selling process and, as a result, may be more willing to negotiate on price. However, a low DOM number means that inventory is moving quickly and that the market is likely skewed in the sellers’ favor.
The last factor you’ll want to take a look at is the median list price in your area. Price movement in a zip code will tell you how competitive the area is at the moment. Typically, a lower-than-normal list price signals a buyer’s market while a higher-than-normal list price indicates a seller’s market.
However, keep in mind that, in this instance, we’re talking about the list price rather than the sale price. Often, individual factors can cause a property to sell above or below the list price, however the original price at which the property was listed will likely give you a solid idea of how an area is faring price-wise.
Once you have a handle on how the market is doing, it’s important to understand your considerations. In reality, the best time to buy a house is whenever making a move feels right for you and your family. With that in mind, take a look at the following factors before you decide whether or not now is the right time to buy.
As we said above, buying a home is a huge financial commitment. That’s why it’s important to make sure that you’re financially ready before you take the next step. In order to determine that you’ll need to take some time to determine what you can afford to spend on a new home.
For that, you need to look at your income, debts, assets, and credit score. Start by gathering all of your important financial documents, including tax records, account statements, and debt records. Then, do the math to determine whether or not buying a home is feasible right now.
You’ll also want to get a copy of your credit report. You’re entitled to one free credit report per year from AnnualCreditReport.com. Be sure to review it for any errors and, if necessary, take the time to work on boosting your score since you’ll want it to be in the best shape possible when you’re ready to buy.
Deciding when to buy a home is more than just a numbers game. You’ll also need to make sure that moving into a new home makes sense in terms of your current and future lifestyle needs. For example, many people plan moves around big life events, including:
- Getting a new job
- Moving in with or marrying a significant other
- Bringing a new addition to the family
- Having adult children or aging parents move in with you
As you think about when might be the best time to buy, make sure to consider any major life events that may be on the horizon. Usually, these will dictate your housing needs and can give you a good idea of the types of homes you should look for when you’re ready to begin your search. Take a look at our considerations for buying and selling when you’re getting a new job, starting or growing a family, combining multiple generations or bringing together a blended family.
If you’ve already started looking and you’ve found a house you love, chances are it’s a good time to buy. At that point, you should talk to your lender to ensure that you can comfortably afford to buy that particular home. If you get the green light, it may be the right time to submit an offer.
If you’ve decided that this is the best time for you to buy, you’re ready to take your first official steps toward becoming a homeowner.
After you’ve done your own calculations, you’ll want to bring your financial paperwork to a lender. He or she will take an in-depth look at the specifics of your financial situation in order to determine whether or not you can be approved for a loan. If so, he or she will issue you a pre-approval letter, which you can use to help set your price range when looking at homes. If not, he or she can help you determine the best next steps to take.
Once you’ve talked to a lender and have a pre-approval in-hand, it’s time to decide how you would like to buy a home. Some people, who want all the support that comes with the traditional home buying process, opt to find a real estate agent. Others are taking a less traditional route and using a service like Opendoor to save time and money during their home search.
This article is meant for informational purposes only and is not intended to be construed as financial, tax, legal, or insurance advice. Opendoor always encourages you to reach out to an advisor regarding your own situation.