When is the Best Time to Purchase a House?

If you're the type of person who follows the housing market and mortgage lending practices, you've probably discovered that for the last several years, now is the best time to purchase a house. It seems that news agencies, government officials, bankers, and real estate agents have been saying for the longest time that it's always best to buy a house right now. But is that always true? When is the best time to purchase a house? Asking that question is like asking what is the best thing to have for supper. It all depends on your “yardstick.”

Home Buying Based on the Seasons

If your yardstick is the calendar, the best time to purchase a home is in the late fall or early winter. From the perspective of the buyer, you want to look for homes when supply is higher than demand. This scenario gives you more buying power and greater negotiating room. If you purchase when supply is low and demand is high, you are at a decided disadvantage.

It is normally the case that home buyers are not much in the mood for moving the closer we get to the holiday season. For that reason home sales tend to see a decline after Labor Day. If the purchase and closing process takes three months to complete, and the house is purchased after Labor Day, the new homeowner could end up with a move-in date right around Christmas. That's too much stress for many home buyers. On the other hand, if that prospect does not frighten you, buying a house in late September through early November may offer you a wider selection of houses at prices you can afford.

In the late fall and early winter scenario, homeowners may not be so willing to sell because they also don't want to move during the holidays. But if your real estate agent is able to find houses that have been on the market six months or longer, you may get lucky and find a weary seller who just wants to be done with the deal. Any way you look at it, if you're looking for the best time to purchase a house based on the seasons, you can't do better than late fall or early winter.

At the opposite end of the spectrum, late winter through early summer is the worst times to purchase a home. Toward the end of February, with a hint of spring just around the corner, for-sale signs start popping up in ever-increasing numbers. The winter is ending and sellers want to get the house on the market as soon as possible. Likewise, buyers begin contacting real estate agents during the spring so you'll have more competition for the house you want.

Home Buying Based on Financial Conditions

If you base your home buying experience on current financial conditions, the best time to purchase a home is when interest rates are low and the supply of houses is high. The housing collapse of 2008 has prompted interest rates as low as they've ever been in America, as well as increasing the supply of available homes.

For now the interest rate climate is good for the buyer because the government is artificially keeping rates low in order to stimulate spending. But as inflation increases, we're more likely to start seeing interest rates rise. For this reason, if you can afford to purchase your first home and secure the financing, the sooner you get started the better. Financial conditions dictate that we may start seeing a rise in inflation within the next six to twelve months.

Something to look out for regarding financial conditions is the willingness of mortgage lenders to lend. In an environment where lenders are being more restrictive in their mortgage lending practices, financing becomes difficult to say the least. Right now in the U.S., that's the case. When banks are encouraged and financial conditions are improving, they will begin to loosen the purse strings and make mortgage financing easier. When this condition exists, the home buyers who can get their financing first will be better off. The longer one waits, and the more money the bank has in the system, the tighter the credit market will become.

Home Buying Based on Life Stages

If your yardstick's the stage of life you find yourself in, then the word “wait” is the most important word in your vocabulary. The American perspective of home buying has shifted in the last 30 years to the point where young people think they need to be in a home of their own while they're still in their twenties. This "I've got to have it now" attitude causes many home buyers to get in over their head. This is no way to start your adult life.

It is much wiser to rent an apartment or house until such time as your life is stabilized. Finish your education, get started on your career, and even wait until you're married if that's something you plan to do in the future. It is statistically proven that home buyers with stable marriages and jobs are much more likely to be financially responsible and hold on to their houses for an extended period of time. Owning a home is a big responsibility that does not need to be rushed. Purchasing a home too soon can cause future financial and relationship issues which can be hard to overcome.

Home Buying Based on Family Need

Finally, the last criteria for determining the best time to purchase a home are based on family need. For example, let's say a married couple currently has two children and are living in a 1,200 sf. ranch. They know they plan to have at least two or three more kids, and possibly more. Knowing that their small ranch will not accommodate such a large family, it is wise to begin planning the purchase of a new home before the fourth or fifth child is born. That planning may involve setting aside money for a down payment, checking on schools and neighborhoods, and planning a future budget to accommodate mortgage payments.

Couples who wait until they are definitely out of space before attempting to purchase, often find themselves making decisions based on current circumstances; a practice that can lead to unwise decisions which could have been avoided had the planning began a couple of years earlier.

Likewise, for older couples who are planning to sell their current home and downsize when the children are gone, planning should begin in the last year that the remaining children are still at home. Such planning will force adult children to understand that their time at home is coming to an end and they need to begin their own life. It also gives the parents a goal to work toward in planning their financial future, deciding where they want to live during their retirement years, and reducing their monthly expenses by living in a cheaper home.

The best time to purchase a home depends upon your viewpoint. But by taking into consideration all the things discussed in this article, the home buyer should be able determine what is right for him or her. Regardless of your choice, your real estate agent will be able to help you make the best of the current housing market when you're ready to purchase.