For first-time or repeat homebuyers, one of the most important decisions is when the best time is to buy their dream home. Is it best to buy during the peak summer season or wait until after Labor Day? These are only two of the many ideas that homebuyers think through when deciding to buy. Ultimately, only you can confirm that you are buying at the right time for you, which means you need to take your personal financial situation into account as well.
At Stem Lending, we are here to help you think through each of these decisions, with our experts by your side.
Can you Time the Market? Not Likely.
Ask your real estate agent when the best time is to buy a home, and they will invariably tell you “Right Now!” As a potential homebuyer, you will repeatedly hear phrases from lenders or loan officers like “Buy now before prices go up” or “Buy now before mortgage rates go up.”
Are any of the above statements true?
It is true that you need to be aware of the economic cycle we are in when assessing home prices. In competitive real estate markets like San Francisco, Seattle, Philadelphia, or Denver, homes only stay on the market for days. Prices in these areas may be going up as a result of a bidding war, and the final sale price could trade significantly above fair value. However, it is unlikely you will be successful at trying to “time the market.”
Tips For Knowing When To Buy a Home
Buy in the Offseason
Full disclosure, my wife & I bought our house in November, but we have spoken with multiple real estate agents and noticed this trend. The months of October, November, and December are the best times to find deals on homes. This timeframe is after the school year has begun, so many of the potential homebuyers you bumped into during the summer, either are waiting until next season or already made their choice so their children are ready for school after Labor Day. Additionally, home sellers are far more likely to take their home off the market when the holiday season (Thanksgiving, Christmas, etc.) is in full effect. As a result, if you still see homes on the market during the holidays, they may be very motivated to sell, or be flexible on other negotiation items. From October – December each year, home inventory in the US rises by 7-8%, according to a report from real estate company Trulia.
Spring starts in January
For those homeowners who took their home off the market after Labor Day, they will be waiting until right after the New Year to re-list their property. This could be an opportunity for any potential homebuyer, as most of the market will be snowed in (in the East Coast) or waiting until April/May to actively start looking. Of course, listings will continue to ramp-up through Memorial Day Weekend (end of May), which is when most people are listing for sale. You’ll see new listings trail off in August through early September.
Once You're Pre-Approved, You Can Start Seriously Looking
Don't put off getting pre-approved for your mortgage. You can get pre-approved quickly at Stem Lending within 24hrs. Sellers & real estate agents know there’s a big difference between a buyer being pre-qualified vs. one who is pre-approved. Getting pre-approved means a lender or broker has already verified all of your financial information. As you go through the process, you'll also be able to research various lenders. It's important to learn which lenders are transparent about all of their fees as early as you can, in order to minimize surprises at closing.
After You've Stalked the Neighborhood
If you stick with our strategy of buying in the off-season, you can spend the summer months getting the lay of the land. Even if you don’t have kids yet (we didn't), research the schools and ask local realtors for their perspective. Buying in a competitive and strong school district vs. lackluster school district can affect the value of your home by 15-20%!
Take a drive down each block. When you're buying a home in a great neighborhood, there can be noticeable differences block vs. block that you won't appreciate at first. Drive by the home in the morning, afternoon and night. A place that seems like a great deal when it's buzzing with 30 people during an open house may have a different feel when you're by yourself on a Sunday evening, standing outside. Many homebuyers find the perfect home, only to later realize that the neighborhood wasn’t for them.
Find out how close the home(s) you are scanning are to bus stations, trains, grocery stores and main retail hub of your town. Lastly, we recommend that you do your regular commute from the house, just to make sure it is something you're willing to deal with every single day; a quick drive Saturday morning could be a terrible drive at 5pm on a Tuesday.