While homes are for sale throughout the year, timing can play a big factor for how much you end up spending. The higher the demand, the more likely you are to spend more than you expected.
Demand fluctuates throughout the year. With recent sky-high housing prices in the last couple of years, and mortgage rates now over 7% for a 30-year fixed mortgage, you might be wondering if you should buy a house this year. Is it time?
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When is The Best Time to Buy a Home?
The best time to buy a home depends on a few factors. For instance, winter is usually the cheapest time to buy a home because most people aren’t looking to buy homes during the colder, snowy months.
If sellers have had a home listed for a while, they might suspend listings from Thanksgiving through the New Year because they suspect there won’t be much interest from potential buyers. But of the homes that are available, sellers are very motivated to make a deal quickly. If you find a home you love right now, you might want to snatch it up.
Springtime means more people are getting outside, and it also means more homes go on the market. The abundance of offers means you might pay more compared to other times of the year. While there are more options for you to choose from, you may end up in a bidding war or potentially losing out on a home you want because the sellers got a much better offer than what you gave them. April through the end of Summer is a great time to buy if you want a lot of options to choose from.
The fall months are a little slow for buying, which means sellers who want to offload a property are more willing to work with buyers who are looking for a deal. You might grab a deal from a seller who may still have a property for sale that didn’t go during the spring or summer months. But keep in mind that inventory will start to dwindle, so your options are limited.
Home Prices Are Cooling — And so is Demand
The first couple of years into the pandemic saw record-breaking home sales. But the last few months have seen a slow and steady decline. According to the National Association of Realtors (NAR), existing home sales dropped 3.4% in April 2023, “with all four major U.S. regions registering month-over-month and year-over-year sales declines.”
And home prices also dipped slightly. The median existing-home sales price dropped 1.7% from one year ago, to $388,800. But we can’t talk about home prices without also talking about interest rates. With the Federal Reserve continuing to raise interest rates, mortgage rates are following along. The current average mortgage rate for a 30-year fixed mortgage is now hovering at 8%. (You can check out the best mortgage rates in your zip code here.) This leaves potential homebuyers on the fence, since higher interest rates means higher monthly payments and more interest paid over the total life of the home loan.
Should You Buy a House This Year?
Buying a home has a lot of moving parts, including if you have a top-notch credit score to secure the lowest interest rate available as well as the money to afford your potential home.
If you’re worried about higher interest rates than in previous years, remember that you can refinance when rates drop. The problem with that is there’s no way of predicting when rates will come down, and refinancing isn’t free. With that said, the house you love might not be on the market when interest rates drop again. So you need to go through what’s important to you right now. Can you hold off on buying a home? Perhaps you could rent for a while, or move in with family members temporarily. If that’s the case, you may want to wait. For those who absolutely need to buy a home this year, get one when you find the best one for you. You can always make a plan to pay off your home faster by making just one extra mortgage payment per year. It won’t be too much of a stretch financially, but it can make an enormous difference in the cost of your loan. For example, f you borrowed $200,000 on a 30-year loan at 8 percent, your monthly payment would be $1,468. At the end of your 30-year term, you’d have spent $328,310 in interest, and $528,310 on the total cost of the loan. BUT with just one additional yearly payment of $1,468, you’d spend $237,452 on interest, and $437,452 on the total cost of the loan, reducing your total expenditure by nearly $90,000. That’s huge. You can use the calculator at Bankrate to see how an extra payment would affect your loan.
If you do end up waiting to buy your home, make sure you’ve got all your other needs met. For instance, talk with a mortgage broker about what you’d qualify for if you were to get pre-approved for a home loan today. Get your credit score in tip-top shape and if possible, pay off any outstanding debt before getting that pre-approval. The less debt you owe now, the more money you’ll be able to have towards your home payment. Buying a home is one of the biggest financial decisions you’ll ever make, so the more financially secure you are before you buy a home, the less likely you are to have buyer’s remorse.
Before you explore listings, go on a tour, or even put in an offer, talk to a real estate agent or other professionals to help you navigate your home-buying journey. While it’s not required to have a realtor or agent to buy a home, they follow the ever-evolving market for a living. Having an expert on hand to answer questions or dispel myths can help you as you’re buying a home.
READ MORE ON HERMONEY:
- How To Get A Mortgage
- 14 First-Time Homebuyer Mistakes To Avoid
- A Complete Look at Homebuyer’s New List Of Requirements
- As Virtual Home Buying And Selling Become The New Norm, Here’s How To Do It Right
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