Best Time to Buy a Home

A home is not a computer or a brand-new dress/suit. It’s not something you save for Black Friday or Cyber Monday, when discounts are common, and prices are cheaper.

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But it can be, because while you won’t find a brand-new home in the Amazon Black Friday sales, there are times of the year when it’s much cheaper to buy, times when first-time home buyers can save big on mortgage rates and closing costs, not to mention the price of the property itself.

Best Time to Buy a Home

A couple years ago, a leading real estate website looked at data collected from several years of real estate analytics, spanning everything from the rate at which new listings were added to the site, to price reductions and sales. 

In most of the markets they determined that the best time to buy a home was during the first week of Fall. During this time, listings are more likely to be discounted and there are far fewer buyers looking to make a purchase.

They found an average discount of 6% across all the markets they tested, which means a house valued at $200,000 would drop by $12,000. However, some of the areas they studied saw discounts of more than 10%, knocking over $20,000 off the value of that hypothetical $200,000 house.

These discounts are a direct result of dwindling competition. Less interest means fewer inquiries and offers, which results in a deluge of discounted homes across the United States.

Why Does the Housing Market Stagnate in the Fall?

So, what’s happening here, why are fewer people buying during the first week of Fall?

It’s hard to predict exactly, but there are likely a few different things at play. Firstly, this is a busy period for people who follow the Jewish faith, as Rosh Hashanah, Yom Kippur, and Sukkot all occur during around this time. The US has the highest Jewish population outside of Israel, and many of these will likely abstain from buying during this period. 

Secondly, it’s also a difficult period for families, as this is when kids go back to school. Many things need to be arranged and few families want to endure the stress of dealing with mortgage rates, movers, and real estate agents when they have a house full of kids to keep in check.

On top of this, you have the fact that this period falls at the end of the summer holidays. Few people want to deal with all those potential issues when they’re already juggling a number of obligations and struggling to stay stress-free.

It’s possible that families are also doing their math and realizing that if they start looking at the beginning of September, they may be ready to move during Christmas, a prospect that few families want to contend with, especially if they’re first-time buyers and haven’t been through this process before.

How Do You Know When to Buy a Home?

You should never force yourself to start shopping for a new home just because you’ve been offered a good fixed-rate mortgage or because a real estate agent offered you a good deal on a property. It’s an expensive and stressful ordeal and if you’re a first-time buyer there maybe aspects of the move that you haven’t considered simply because no one has told you about them.

For instance, the down payment is not the only expense that you need to cover. There are closing costs, property taxes, insurance payments, utility bills, maintenance costs, and moving costs. The average cost of a long-distance move is close to $5,000, while closing costs on a $300,000 home could be as high as $15,000. That’s $20,000 on top of the $60,000 paid toward the down payment, and that’s just the tip of the iceberg.

If you’re a first-time buyer who has spent many years renting and not having to worry about utilities, maintenance, and homeowner’s insurance, it can be a shock to the system. That’s why you need to sit down, run the numbers, and calculate all these things against your affordability before you commit to anything.

Time is on your side, because the longer you leave it, the more time you have to work on building your credit score, getting rid of credit card debt, and ensuring that you’re offered better mortgage rates and can afford a higher down payment.

What Times of Year Should you Avoid Buying a Home?

If the first week of Fall is the best time to buy a new home, then what’s the worst? 

Most homebuyers save their real estate shopping for the Spring. The winter is over, they’re feeling a little less cold and miserable, they don’t have the big expense of Thanksgiving/Christmas/New Year to worry about, and they’re keen to be in their new house by the summer.

In terms of comfort and convenience, this is a great time to buy a house. You don’t have to worry about movers getting caught in the snow, the nights are long and light as opposed to short and cold, and you may even benefit from a little time off work.

Financially speaking, it’s a terrible time. The vast majority of buyers are active in the Spring, which creates a lot of competition and means that discounts are rare, and homeowners are not desperate to sell. It is a seller’s market and that’s bad news if you’re looking for a discounted house.

As for the exact worst day or week, it would likely fall somewhere in May, with many suggesting the last Friday in May as a contender. That’s because many sales are agreed in April and set for a closing date at the end of May, making this a very busy period.

Not only will you struggle to find a discounted home or an enticing mortgage rate, but movers also tend to charge more around this period, so you may have to pay them a premium.

Best Time to Start Shopping for a New Home

Start shopping for a new home towards the end of summer and then, when the Fall breaks, you can benefit from the reduced prices and make a commitment to purchase. 

Speak with a mortgage lender, prepare your down payment, get your finances in check and, if possible, secure a mortgage in principal. This will buy you some time and ensure that you’re ready to make a purchase when the prices start dropping and homeowners get desperate.

Your negotiation power also increases during this time, so don’t be afraid to offer much less. If they refuse to budge on the price, give them a couple more weeks. They may be less reluctant when they realize there are no other interested buyers and the market is quiet.

How Does Time of Year Affect the Process of Shopping for a New Year

House prices change throughout the year as homeowners get more or less desperate to sell. This desperation can be triggered by the market, as discussed above, but they can also be triggered by the seller’s own personal circumstances. One of the things we didn’t account for above is that sometimes a house will come on the market for a greatly reduced price, and the homeowner will be happy to accept any decent offer that comes in.

Maybe they need to move away quickly, maybe they need the money—whatever the reason, if it occurs during a peak time you’ll receive much more competition for your bid than if it were to occur during the beginning of Fall. So, while these exceptions do apply all year long, it’s still best to wait for the Fall before you start bidding and buying.

Current State of the Housing Market

There were some serious concerns about the future of the housing market toward the end of 2018. However, these didn’t really bear fruit in 2019 or 2020 and the market has performed relatively well throughout. Many believe that it still isn’t doing quite as well as it could or should, but it certainly hasn’t collapsed and seems to be on course for some positive changes next year and beyond.

In simple terms, the housing market is doing perfectly well and there are some promising signs that suggest it could experience growth in years to come.

What Factors Affect the Housing Market?

House prices, like any other commodity, are affected by supply and demand. If there is a lot of the latter, then the former will increase to keep up, if it cannot, then existing houses will become more valuable. 

The economy also plays a big role in the housing market. A thriving economy generally triggers a sharp rise in house prices, because it means that people have more opportunities and more money, which means they can afford to purchase their first house or upgrade to a bigger house. This greatly increases demand which, as discussed above, impacts the overall housing market.

If the economy is suffering and unemployment is high, house sales will plummet, which means the demand will decrease. Homeowners and builders will struggle to sell their properties which means they’ll be forced to reduce the prices. 

Tips for Buying a House

Whether you’re buying a family home or an investment property, here are a few tips to ensure you buy at the right time:

  1. Start saving as soon as you can as you’ll need to cover the down payment and other costs.
  2. Explore your options with regards to your down payment and mortgage type, including a VA loan, FHA Loan or conventional mortgage.
  3. Research local assistance programs if you need help.
  4. Determine your affordability by using a mortgage calculator.
  5. Monitor your credit report and try to raise your credit score
  6. Clear as many credit accounts as you can to improve your debt-to-income ratio.
  7. Compare mortgage rates.
  8. Get a preapproval letter from a home loan lender.
  9. Find the right real estate agent to help you in your search.
  10. Look for the ideal neighborhood and area based on the commute, local schools, and amenities.
  11. Prepare to start making offers during the first week of Fall, when the prices and competition decrease.
  12. Stick to your budget and don’t be tempted to increase this, even for the “perfect” house.
  13. Visit as many relevant open houses as you can.

If you need any more help, take a look at our Mortgage Guide, which covers everything you need to know about purchasing a home.