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In general, there are three ways to evaluate the best time to buy a home:
- Best month: In every real estate market, there’s always a best month to buy a house or best season to buy — even in a hot market.
- Best year for market and economy: Broader market trends, the state of the economy and your local job market can also dictate a better or worse time to buy.
- Best time for you: Market characteristics aside, you should plan to buy when it makes sense for your personal finances and moving timeline.
When is the best month to buy a house?
Since more buyers are shopping in the spring, a home you buy between March and May could cost you more than a similar home bought in November or December. According to an analysis of listing and sales data, in a typical year more buyers paid above list price in April than in November. The window between late fall and early winter is often the best time for buyers on a budget. However in 2020 those numbers flipped upside down and prices are higher now than they were in April.
Keep in mind, fewer homes are for sale in the cold winter months and around the busy holiday season, so the selection of homes may be limited.
Buy in April for more options
On the flipside, if you want more homes to choose from spring and early summer are good times to buy a house, as April typically has the most new listings.
Most listings hit the market in a short window between the months of April and June. If you’re planning to buy in a market with harsh winter weather, May and June typically have twice as many active listings as December or January. However, in temperate markets this springtime pattern is far less noticeable.
Once again, 2020 did not follow this normal pattern and we do not know what 2021 will bring.
Is it a good time to buy a house based on the economy?
Both national and state or local factors can affect the housing market, and your decision to buy. Nationally, things like interest rates, the job market and the overall health of the U.S. economy can impact the housing market. On a more local level, your decision to buy could be affected by buyer demand, the local job market and the local rental market.
If mortgage interest rates are low, home buying is inherently more affordable, and it makes buying a feasible option for more people. Here’s an example:
The current average 30-year fixed mortgage rate is hovering around 3.0% (as of October 2020). Let’s say you want to buy a $400,000 home with 10% down ($40,000). Your monthly mortgage payment (not including taxes, insurance and other costs) can vary by more than $200 a month, just based on a one-point increase in mortgage rates:
- At an interest rate of 3.0%, your monthly mortgage payment (principal + interest) would be $1,517.77 per month.
- At an interest rate of 4.0%, your monthly mortgage payment (principal + interest) would be $1,718.70 per month.
Even though home prices are up in 2020, the drop in interest rates has made homes more affordable in 2020 than last year on a payment basis.
Personal circumstances that dictate when to buy a house
Buying before you’re financially ready or buying a home that’s too expensive could leave you at risk of defaulting on your mortgage down the road, or ultimately losing your home to foreclosure.
Finally, remember that your housing expenses are only one part of your personal financial picture. Affording a mortgage and its related expenses can be a challenge if you’re also in the midst of paying medical bills, kids’ college tuition, if you’re retired or have an unstable source of income.