According to the National Association of Realtors, LGBTQ buyers are more likely than other groups to be first-time homeowners, which often means that they have many questions for their real estate agent and lender about the process. NAR also notes that BIPOC home buyers are on the rise, a very positive sign that suggests reduced racial barriers. At the same time, it means that these borrowers may be unfamiliar with the typical trends in home buying.
When you’re getting ready to buy a house, you may have a variety of key considerations to balance. How much can you afford for a down payment? What will your credit score and debt-to-income ratio qualify you for? What is an acceptable interest rate? Where should you move, and what type of home is best?
One of the biggest questions you will face is when to buy your home. Knowing when to pull the trigger if you plan to buy a house must play a key role in the decision-making process. After all, wouldn’t it make the most sense to buy a house when home prices are at their lowest? Let’s talk about when the best time to buy a house is; it’s time to learn what factors should play a role in your timeline.
Buying Houses Per Season of The Year
In terms of the timeline for buying a house, many buyers want to look at the season of the year in which they plan to purchase a home. The housing market fluctuates from season to season, and some times of the year see far more real estate transactions than others. Here are some of the common characteristics of each season as they relate to the home-buying process.
Spring
Spring is the time of year when inventory for listed houses tends to increase the most. Selling in the winter is challenging, so many homeowners will start looking for new homes once things warm up, which means more houses are put on the market. This leads to greater competition among both buyers and sellers, especially after months of pent-up demand. After all, homes look better in pictures with natural light from the sun.
With increased inventory, there will be more choices for homes. However, the competition will likely drive home prices up, making it harder to afford them.
Summer
Summer is the peak buying season in most real estate markets. The purchase price of any given home is likely to be at its highest at this time of year. Homes tend to show better in warmer weather, so demand for homes is increased and open houses are frequent. Also, many sellers will be motivated to sell fast before the next school year starts and the colder weather returns.
The advantage of buying in the early summer is a wide range of choices for your next home. However, you are going to spend the most money on the home since the local real estate market is probably at its most competitive. Late summer typically sees a drop off in sales as lenders process fewer applications.
Fall
Once early fall hits, the housing market trends downward. The market slows down as many of the homes have already been sold. With it, home values are also likely to drop a bit. With falling supply and demand, the housing market enters a unique time that some buyers will love and others will hate. Cold weather is also one of the reasons sales inventory decreases at this time of year since moving is easier when it is warm.
Buyers can get great deals in the fall because sellers may be desperate to move out of their homes if they fail to sell during the summer. However, the variety of choices and the conditions of the homes you can get may fall off a bit.
Winter
The winter months are the slowest time of the year for home buyers and sellers alike. Unlike peak real estate season in the summer, there is far less inventory on the market and fewer buyers who want to move.
This is great news if you are one of the few buyers on the market in early winter. More motivated sellers will be more willing to negotiate so that you can get a very favorable purchase price. Unfortunately, your options will be extremely limited, and moving can be more difficult if you live in snowy areas.
Real Estate Market Impacting House Buying
The real estate market on a macro level is another factor to consider when deciding the best time to buy a house. This takes larger indicators into account, such as national economic conditions, the actions of the Federal Reserve when they change the federal funds rate, and the condition of markets across the country. Here are some market conditions that you should be aware of when buying a house.
Mortgage Rates
Mortgage rates, also called interest rates, are a huge indicator of the health of the economy and the real estate industry. When rates are high, fewer homes are being bought because owners want to hang onto their initial lower rates. When mortgage rates fall, homes become more affordable, and more buyers enter the market.
How mortgage rates are determined is a complex subject, but it includes factors like the greater economy, supply and demand, the profit margins of individual lenders, inflation, and borrower-specific factors. Learning to track interest rates through the cycles they experience can help you know exactly what time to buy.
Economic Cycles
The state of the greater economy is another crucial factor in real estate buying trends. During a boom, people are making more money and can afford homes easily. If the economy is in a mild recession, the buying power of consumers is decreased, so they are less likely to seek out homes. Recovery phases after an economic downturn are often the busiest times for the housing industry as many first-time buyers enter the market.
Signs of market shifts are important to monitor when you are looking to buy a house. Look for indicators, like changes in the number of days a home spends on the market or a rising number of expiring listings. You can also keep track of other economic indicators like job growth, unemployment, or even GDP.
Inventory Levels
Inventory in the real estate market will have a dramatic impact on home prices and existing home sales. There are three types of market conditions for any given real estate area; a seller’s market, a buyer’s market, and a balanced market. Evaluating your current housing market to determine which condition it is in should inform your timeline for buying a house.
A seller’s market occurs when there are more buyers than homes. This increases competition for the few homes on the market, leading to bidding wars and higher prices. A buyer’s market is when there are few home buyers but plenty of homes, so sellers may have to lower their prices to entice buyers. In this case, buyers have more negotiating power. A balanced market is when there are similar numbers of buyers and sellers in a given area.
However, buyer’s and seller’s markets don’t tell the full story. There is also the fact that different types of homes may be on the market, some of which won’t meet your needs. For example, LGBTQ+ borrowers are more likely than non-LGBTQ+ borrowers to be one-person households, meaning that they will likely be searching for smaller homes. Single female homebuyers make up about 29% of Black buyers, and these individuals may also be looking for something cozy to make their own.
Depending on the specific market, these homes may be plentiful as people trade up for larger houses, or they may be in short supply due to a large population of retirees seeking to downsize.
On the flip side, about a quarter of Black, Asian, and Hispanic homebuyers are looking for multi-generational households, compared to just 12% of White buyers. These larger homes may be more challenging to find in certain areas, making it more difficult to find a home that meets your needs.
Personal Finances
While larger real estate trends affect factors like mortgage rates and the volume of house or condo sales, this is not the only thing to consider. Your decision to buy a house also comes down to your personal financial situation. There are times when it makes sense to invest in a home just as there are times when you have to wait on taking the leap. Here are a few personal finance indicators that would demonstrate your readiness to purchase a house.
Financial Preparedness
Lenders look at many different metrics to assess your ability to pay back a mortgage. Important factors that they will evaluate include credit scores, debt-to-income (DTI) ratio, and cash assets. To prepare for your purchase, it is a good idea to ensure that these aspects of your finances are in good standing.
Lucky for some, a higher credit score in the 700s will make you eligible for more home loan options. However, a lower DTI will signal to lenders that you can afford mortgage payments. Cash assets can be used to make a larger down payment, reduce mortgage interest rates, and cover larger closing costs.
The down payment is often the most daunting component of purchasing a home, especially for certain groups. For example, Black households typically have a net worth of just $44,100 compared to $284,310 for White households. Over half of LGBTQ+ individuals have less than $50,000 in net worth compared to only 43% of non-LGBTQ+ individuals, which can make it difficult to put a lot of money down on a home.
While you can access loans with just 3% down with some programs, this means that you will have private mortgage insurance that can raise your expenses per month. Having a down payment of 20% or more can also help you access the best possible rates.
Thankfully, Pride Lending has access to local, state, and national down payment assistance programs that will help you provide a larger upfront investment, sometimes eliminating PMI entirely and getting you the best rates. We’ll search for programs that meet your specific needs, including by loan type, so that you’re fully prepared.
Choosing when to buy a house should be reliant on when you are financially healthy and have these concerns addressed.
Job Security and Income Stability
Income is another measuring stick for homeownership preparedness - it isn’t just about making a good down payment or affording the monthly payment. You also must consider other costs such as utilities, taxes, and insurance. Job and income stability should both be settled when you start looking into home buying. Lenders want to see that you have a steady and reliable income to avoid the issue of default. Just like how credit scores affect your mortgage, income levels can impact lender approval and your interest rate.
Life Events and Goals
Is it the right time in your life to buy a house? This is another important question to answer. Some people choose to buy homes simply because they can afford it. However, life events and goals should weigh heavily on your decision to buy a house.
For example, if you are getting married or starting to have kids, then it may be necessary to move into a bigger space. If this is true, house hunting would make sense. Furthermore, if you are approaching retirement age and want to downsize to a single-story home, this is another great time to seek out new options. Perhaps you have been promoted or started a new job that has better pay, so you can now afford a down payment and the closing costs of a home purchase. These are just some of the ways that the timing of your life events and personal goals can play an important role in your homeownership timeline.
Local Market Trends
Analyzing the local market for an extended period can also help you get the best deal for your home. You can identify the cheapest time in that specific community to buy a house, whether that occurs during the cold weather of the winter months or the warm weather of summer. Look at how mortgage rates have changed on homes in the area over the past few years to identify seasonal changes. Even the holiday season can look dramatically different than other winter months. When is there less competition for buyers, and how many real estate agents are in the area to help you with the closing process?
The more time you spend researching your area’s housing market, the easier it will be to determine when conditions favor you as a buyer. Real estate professionals are an important resource that you can lean on for market research.
Summary
There is a long list of factors that should influence when you choose to buy a house. Everything from the Federal Reserve Bank to the summer selling seasons can impact home sales and the range of prices you can find. Even if you find the right time with less competition, a buyer’s market, and a lower market value on most homes, you still have to be stable financially to afford a house, fair number or not.
At Pride Lending, we have the experience you need to navigate the mortgage process.
Pride Lending’s team of experienced mortgage brokers is composed of allies and members of marginalized communities, including LGBTQ+ and BIPOC individuals. We’re familiar with the challenges that many prospective buyers face when buying a house and are committed to helping everyone, regardless of their identity, find their dream property with the right loan.
Our team will assist you in finding the right mortgage product for you, whether that is FHA, VA, USDA, conventional, or investment loans. We assist people from all walks of life with helpful advice and attention to your individual goals.
Call our team today at 725-231-0192 and speak about the many options you have when purchasing property.
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