The decision to buy a home is a big one. Making the best decision on buying a home has a lot to do with timing.

But when is the best time to buy a home? There are several factors that will affect the answer for you specifically, but this article should set some background and context for when is considered to be the best time to buy a home.

Best Time to Buy a House

Best Time of the Year to Buy a House

It is well known in the real estate industry nationwide that when you don’t have to compete with so many buyers, you’re in a better position to negotiate and get a deal on a home. The winter months, specifically December through February, are typically the best times of the year to purchase a home if you’re looking for a good deal. Buying during these times of the year can save you thousands of dollars.

On the other hand, if you’re looking for a wide selection of inventory and not as concerned about getting the best deal on a home, then the spring is the best time to buy a home, as that’s when the greatest number of homes are being listed for sale.

Real Estate Market Timing

On a larger scale is the overall trend of the real estate market, which has followed a cycle that follows this pattern:

  1. Phase 1: Recovery
  2. Phase 2: Expansion
  3. Phase 3: Hypersupply 
  4. Phase 4: Recession

After a real estate correction takes place (phase 4), the real estate market experiences a recovery. During the start of the recovery period, there are far too many homes available for the number of buyers who are interested in purchasing. In this phase, construction slows significantly.

During this recovery phase is when the price of homes is at its relative minimum, which makes this the best time to purchase a home.

Real Estate Market Cycle Phases

The trick for knowing if it’s a good time to buy a home is understanding where in this real estate market cycle we currently are. Economists and other experts often vary in their predictions of when the next correction will happen. Potential homebuyers who have any flexibility in their timeline for purchasing would do well to understand this real estate cycle and use it together with data and input from local professionals from the market their considering to determine when is the best time to buy a house.

In collecting data about when is a good time to buy a house in a market area, you should be careful to make sure you’re getting as much objective input as possible. Real estate agents naturally tend to lean positively in their predictions of what’s happening with the market, since that attitude motivates more transactions than if they were pessimistic in their assessment of the current market.

Home Loan Financing Rates and Lending Environment

This factor in determining what is the best time to buy a house is critical to anyone who isn’t paying cash (most homebuyers), because it affects ultimately how much you’ll be paying for your home.

Home loan rates and programs vary consistently. When they are favorable to borrowers, it is usually a better time to buy a home. Lower interest rates and other favorable lending terms make it attractive for you to buy a home. However, a scenario where interest rates are lower and lending terms favorable usually tends to raise the prices of homes.

As with the real estate market itself, predicting home loan rates and favorability of terms is impossible to predict. That scenario is dependent upon government regulations (including the prime rate set by the Federal Reserve) and a bunch of other factors.

In order to best understand the lending environment, it’s useful to become educated on how loans work and get some input from an expert in the lending industry. You can do so by talking to a mortgage broker or reading up on the latest news about the home lending industry.

Personal Circumstance and Financial Preparation

Just as important as timing in regards to seasons of the year or what part of the real estate market cycle you’re in when considering a home purchase are your personal circumstances and financial preparation.

Job and Life Stability

Soon after I purchased my first home, I lost my job. That scenario caused a ton of stress and ended up costing me a lot financially.

If you are thinking about moving soon, if you aren’t certain about your job, or if there are other things in your life would likely require you to be flexible about where you live or how much you can afford to pay for living expenses, it’s not a good time to be buy a home. In too many cases, people underestimate the ultimate cost of home ownership, including fees associated with buying a home and other costs associated with financing and maintaining a home.

Regardless of whether the timing is right based on the season or your assessment of the current real estate market, if you aren’t prepared to buy a home financially, it’s simply not a good time to buy. The only exception to this principle might be a situation where you have found a home that’s so under-valued that it would be an obvious bad decision not purchase it.

Down Payment, Savings, and Financial Health

Your financial health is comprised of a number of factors that include how much money you have saved, your commitment to being disciplined financially, and other related factors.

If you are currently in debt, it’s most likely not the best time for you to buy a home. If you don’t have substantial savings, it’s most likely not a good time to buy a home.

Time to Buy a Home - Save Money

Dave Ramsey, one of the most prominent and well-respected financial advisers in the country, recommends this list of three things to prepare someone financially to buy a house. You’ll notice a trend with these recommendations: save money, save money, save money!

  1. Get out of debt
  2. Prepare for the unexpected
  3. Save for a down payment

You can read more detail about each of these recommendations by reading the original “Are You Ready to Buy a Home?” article on Dave Ramsey’s blog.

Essentially, money in the bank acts as a buffer protecting you against many of the things that could go wrong once you’ve made the commitment, because home ownership is indeed a big commitment.