Is Now the Time To Buy a New Home?

Is Now the Time To Buy a New Home?

There’s an old proverb about timing: the best time to plant a tree was twenty years ago. The second-best time is now. And while that proverb might not apply to every real estate market, it hints at something many investors feel. Sometimes, it’s best to start now, even if the conditions aren’t right. You never know what the market will bring next.

Are we in that situation now, with interest rates trending upward? A recent dip in mortgage rates may hint at a reprieve. In late January, the 30-year fixed-rate mortgage rate dropped to 6.15%, its lowest figure in over four months. While those numbers are far higher than the 3-4% mortgage rates some investors saw only a few short years ago, it hints at a dip that may be good for home buyers.

Taking Advantage of Low-Cost Loans

The only trouble with figuring out when the best time to buy a new home is that no one has a crystal ball. According to Redfin, there’s been a slow drop in the average home prices in the U.S. since their peak in May of 2022. Although there hasn’t been an outright collapse in home prices, this temporary dip may be an advantageous time to buy a home.

The ever-increasing interest rates in the United States and across the world are a contributing factor to the decline in home pricing.

Higher interest rates mean people have reduced buying power as their mortgages are more expensive. Buyers are more reluctant to apply for a loan when they know that their mortgage payment will eat a larger chunk out of their paycheck. The same is true for homeowners who know that if they want to upgrade their home using funds from refinancing or a home equity line of credit (HELOC), their new mortgage will be at higher rates.

Sellers aren’t exempt from the impact of high mortgage rates. Those who have locked in a home mortgage for the reduced rates we saw in 2020-2021 may want to keep those low monthly payments locked in, avoiding moving unless absolutely essential. And if sellers do have to move, they’re finding they need to price correctly, or they may not attract potential buyers. The days of multiple offers above the asking price are over.

Another downside? The result of sellers holding on to their properties means home supply may potentially inch lower, further stressing affordability.

What will be key for the average mortgage applicant in the coming years is finding affordable rates. As CNBC’s statistics note, there’s a temporary dip in mortgage rates going on right now. The question is whether that dip represents a rare opportunity. Or, will mortgage rates continue to decline, potentially making it more advantageous for home buyers to wait until later?

Watching Inflation to Get a Sense of Mortgage Rates

With the Federal Reserve raising interest rates consistently over the past year, it makes sense for home buyers to stay reticent. If inflation continues, the Federal Reserve may keep interest rates high to combat it.

This puts potential first-time home buyers in a tough spot. Rising inflation makes everything more expensive. That means people must get creative to make their paychecks stretch as far as possible, leaving them with less savings and a reduced budget for essentials like housing.

Inflation also has an adverse effect on the mortgage market. When the Federal Reserve keeps rates high, it impacts mortgage rates, making buying a home more expensive. That’s why home buyers who watch the CPI and inflation numbers will likely do a little better when it comes to predicting where home purchase prices may be going. If inflation cools off in 2023, it could mean lower rates. That, in turn, could ease the affordability pressure on home buyers.

How Should Home Buyers Figure Out When to Buy?

There’s no universal answer on when to buy a home. After all, one region or neighborhood may have different prices than the next, so a deal in one location might not be a deal in another. But there are some individual aspects to buying a home that can give home buyers a better sense of when the timing lines up for them:

Having enough saved up for a downpayment. Typically, a downpayment of 10-20% will make it easier to have a lower mortgage payment and improved loan terms. Rather than isolating when there’s a 0.05% interest rate swing, this will dramatically impact the home buyer’s ability to afford a particular home.
Browsing different lenders. It’s important to know what the mortgage interest rates might look like from different lenders. Don’t expect that these will vary wildly enough to make a difficult environment into a bargain, but you can give your future monthly mortgage payments a break by taking the time to shop around. Too often, home buyers get “house fever” and move too quickly on a mortgage when they should take a breath, slow down, and shop around for the best deal possible.

A recent dip in mortgage interest rates is an encouraging sign. The question is whether this trend will continue throughout 2023, making it better for home buyers to wait. If interest rates keep going down, you may be able to refinance later. But if they spike up along with housing prices down the line, you may find that you’re glad you could lock the rate in when you did. But if you can find a great deal in your budget, there’s no time like the present.

Frequently Asked Questions About Is It A Good Time To Buy A House

What time of year is the cheapest to buy a house?

The cheapest time of year to buy a house is often during the late fall and winter months, particularly November through January. During this period, the real estate market slows, as sellers who list their homes are often more motivated to negotiate due to reduced demand and fewer prospective buyers. Additionally, first-time homebuyers may benefit from less competition, enhancing their purchasing power.

However, considering timing alone might not be the best approach when you decide to buy a home. What’s considered a “bad time” for one home buyer may be the ideal time for another. It’s a matter of several other factors, including but not limited to market conditions, personal finances, credit scores, and overall readiness.

For first-time homebuyers, consulting with a real estate professional can be very helpful in determining the right time to make a move based on individual needs and market trends.

What’s a good mortgage rate?

A good mortgage rate depends on market conditions, your financial position, and the type of loan. As of 2024, a good rate for a conventional loan is generally between 6% and 7%, but this varies based on factors like your credit score, down payment, and debt-to-income ratio. Real estate agents recommend working with a lender to find a rate that fits your monthly income and overall financial position. Lower rates help reduce your monthly payments and can make homeownership more affordable.

What age do most people buy a house?

Most people buy their first home between the ages of 33 and 36, according to the National Association of Realtors (NAR). This age range balances financial stability, career progression, and family planning. During this stage of life, potential homebuyers are often ready to invest in homes for sale and navigate the housing market with greater confidence. However, house hunting can happen earlier or later depending on individual financial situations and goals.

What time of year are mortgage rates lowest?

Mortgage rates tend to be lowest during the beginning of the year, particularly in January and February. This trend occurs because the housing market slows during winter, and mortgage lenders may offer lower rates to stimulate borrowing. The average rate for a conventional loan in this period reflects these seasonal adjustments. Keeping an eye on economic indicators and lender promotions can help secure the lowest mortgage rates.

What are interest rates today?

Current mortgage rates depend on a mix of factors, like the type of loan you’re getting, the lender you choose, and what’s happening in the economy. Right now, in November 2024, the average rate for a 30-year fixed mortgage is about 7.3%, while a 15-year fixed loan is closer to 6.5%. Things like how many homes are on the market, typical sale prices, and decisions from the Federal Reserve all influence where these rates land. Always check with local lenders for real-time rates tailored to your profile.

How much house can I afford if I make $70,000 a year?

With a salary of $70,000 annually, you can typically afford a house priced between $280,000 and $350,000, assuming a 20% down payment, minimal debt, and a 30-year fixed mortgage with a 7% interest rate. Your exact affordability depends on house prices in your area, current median home prices, and your debt-to-income ratio. Tools like mortgage calculators can help fine-tune your budget for homebuying.

What’s the best age to buy a house?

The best age to buy a house depends on your financial stability and goals. For many first-time buyers, the median age is around 35. Potential homebuyers should focus on financial decisions, such as building savings for a down payment, maintaining a low debt-to-income ratio, and understanding the supply of homes and median sale prices in their target area. The ideal time is when you’re financially ready, and the housing market works in your favor.

Preston Guyton Founder @ ez Home Search

Preston Guyton has spent 20+ years helping people find the right home—and helping them avoid the costly mistakes that often come from not knowing their options. As the founder of ez Home Search, he’s leading the charge to build a better way to discover real estate—one that puts your privacy first, delivers accurate information, and gives you the confidence to make informed decisions. Preston has assembled a powerhouse team—made up of the innovators behind many of the technologies people use every day—to build the tools and transparency that deliver on a single mission: A Better Way To Discover Real Estate.