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When Is the Best Time to Buy a House?

June 27, 2019 · 4 minute read

We’re here to help! First and foremost, SoFi Learn strives to be a beneficial resource to you as you navigate your financial journey. Read more We develop content that covers a variety of financial topics. Sometimes, that content may include information about products, features, or services that SoFi does not provide. We aim to break down complicated concepts, loop you in on the latest trends, and keep you up-to-date on the stuff you can use to help get your money right. Read less

When Is the Best Time to Buy a House?

There’s swimsuit season, apple season, and a season to be jolly, but is there a right season to buy a house? There are a number of factors that go into deciding when to purchase a home, from buying when interest rates are low to the times of the year you’re likely to get a deal. Ultimately, when you decide to buy will depend on your financial situation and local market factors.

Knowing You’re Ready to Buy

Before even going down the rabbit hole of timing the real estate market or watching the Federal Reserve like a hawk, it can be a good idea to explore if buying a home is right for your personal and financial situation. There are a number of signs that can help you know the answer is “yes.”

First, your budget is bountiful enough to cover any required down payment, closing costs, a mortgage payment and other costs associated with homeownership.

Second, you don’t plan on moving for a while, which may give the home you buy time to appreciate in value (subject to market fluctuations). Also, consider whether you will benefit from itemizing and potentially writing off your home interest.

It’s a good idea to check on your credit, a better overall financial profile may help you secure better financing terms when you purchase a home. And finally, take a look at whether rent in your chosen area is relatively high compared to the cost of home ownership. If you can rent a home in your city for much less than what you would pay in mortgage payments, it may not make sense to make a purchase right now.

If you find that these factors are true—especially that you’re ready to stay put for the long haul and renting is relatively costly—you may be ready to buy a home and can begin looking at other factors to decide when to pull the trigger.

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Watching Interest Rates

One factor to consider when deciding whether to buy is interest rates. Banks charge interest to cover the costs of loaning you money when they offer you a mortgage. The mortgage interest rate banks charge is influenced in part by the Federal Reserve, but mortgage backed securities are considered the main driver.

If interest rates are low, borrowing money is cheaper for you. Borrowing gets more expensive as interest rates increase. So if you think that interest rates are going to rise soon, buying a home now with a fixed-rate mortgage loan may allow you to lock in better terms than you might otherwise get in the future. Conversely, if you think interest rates are high , it may be worth waiting to see if they’ll fall.

Timing the Real Estate Market

The idea behind timing any market is that you buy when prices are low and sell when prices are high. Ideally, you would buy your home when there are more sellers than there are buyers, a situation known as a buyers market.

In a buyers market, the overabundance of housing options drives down the price of homes. Additionally, it may give you leverage to ask for more concessions from sellers desperate to close a deal, such as giving a seller credit towards the buyers closing costs or covering the cost of repairs or new appliances.

In a seller’s market, the opposite is true. More people want to buy than there are houses available for sale and housing prices are driven up.

To identify what times may be beneficial to be a buyer, there are a number of factors you can watch. First, take a look at pricing trends in your area. Use real estate websites like Zillow, RedFin or Trulia to look at what houses have sold for in your chosen area.

If prices are low or seem in line with historic trends, it could be a good time to buy. If prices are much higher than they have been historically, it may not be the ideal time to buy and/or the area may even be experiencing a real estate bubble. Bubbles tend not to be sustainable, but many factors play into real estate market conditions.

You can also take a look at how long houses in your desired area are sitting on the market. If houses in good condition are taking a long time to sell, it could mean demand is low and the market is in your favor.

Additionally, examine larger economic factors such as new construction and months of supply. When fewer houses are being built, demand and prices are higher.

The government keeps track of new residential construction. Visit the U.S. Census Bureau to take a look at current trends.

Months of supply is a measure of how many months it would take to sell the current number of houses on the market in your area at the current rate of sale. If there are 40 houses on the market and they are selling at the rate of 10 per month, there are four months of supply. When this measure creeps above six months of supply, it generally indicates that it’s a buyer’s market.

Understanding Your Local Market

Real estate is generally considered a location driven market, so prices can vary widely from area to area, and general rules of thumb regarding pricing may not be true in every case. The same can be true of particularly desirable neighborhoods within a city.

Local economics can also play a part in housing demand. Say a large company leaves a city sending its manufacturing overseas. That city may experience an economic downturn that puts downward pressure on house prices.

This local variation means that it’s important to pay close attention to economic and housing trends in your chosen area. That way you’ll be more likely to find the best time to get your dream home.

When you’ve found the right house and you’re ready to buy, visit SoFi to learn more about mortgage options with as little as 10% down.


External Websites: The information and analysis provided through hyperlinks to third party websites, while believed to be accurate, cannot be guaranteed by SoFi. Links are provided for informational purposes and should not be viewed as an endorsement.
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