Alongside the perks and benefits that go alongside it, owning a home is an indicator of proficient money management. Closing on a loan during the best time of year to buy a house or when mortgage rate predictions are low only makes things better. Having the income, credit score, and downpayment for it, even before getting an estimate mortgage payment or offer from a lender, is a financial accomplishment. Yet miscalculating your timing can wipe plenty of that hard work away.
Firstly, it is difficult for aspiring homebuyers to define a specific timeline because the process may take months. Equally as important, while you are shopping around and filling out applications, keeping up with property value trends and mortgage rate predictions can slip your mind.
The reality is that, as time-consuming as the process is, the lender’s estimate mortgage payment is locked in long before you start moving. Above all else, if you plan on closing in the near future, the winter months have the lowest property prices.
The Best Time of Year to Buy a House
If you close during the summer, property values will be near their annual peaks. Subsequently, your monthly loan payments will be relatively high.
In fact, homebuyers can save thousands per year if they buy during the winter, which is the best time of year to buy a house.
Seasonal Changes and Mortgage Rate Predictions
Home values tend to fluctuate throughout the year. During the summer, when demand is at its highest, property prices follow suit. The late fall or early spring, meanwhile, is the best time of year to buy a house if you’re looking for cheap properties.
To illustrate, we looked at data from Zillow that outlined the monthly house values during the last five years. On average, prices climbed by 1.53% and 1.6% during the fourth and first quarter of each year, respectively.
As homes start to get more expensive, this growth slows down to 1.42% by May. After that, between July and October, property values only increase by an average of 0.84%.
In other words, when you buy a home during the last and first three months of the year, you will be able to lock in a desirably low rate. If you wait until the late spring or early summer, on the other hand, houses will be at their annually highest level after they appreciate during the winter.
For example, consumers that closed between October 2018 and March 2019 purchased their new home, on average, for just over $235,000. Those who waited until June, meanwhile, had to pay over $240,000.
Demand Trends and Property Prices
Most households get a mortgage in the summer for several reasons. Firstly, it is easier for them to start moving when the weather is sunny and warm, much more so than when it’s cold and snowy during the winter.
Secondly, more people get married in the summer months for the exact same reason. This is important because most newly weds tend to start looking for houses after they tie the knot.
For instance, almost 80% of people have their wedding during the six months period from May to October. As a result, this plays a key role in driving up the demand for real estate.
About 68% of Americans only purchased a home when they met their current spouse. Just over a half of them (55%) close on a mortgage within four years after their wedding. Moreover, over one-third (35%) do so within two years or, at times, even before they get married.
In short, when the demand for houses reaches its annual peak during the summer, realtors and lenders will charge a higher estimate mortgage payment and interest rate. They can do so because there are a lot of buyers.
After that, when demand goes down as the weather gets cooler, sellers become desperate and, therefore, lower their prices. Most future mortgage rate predictions further confirm this trend.
Property Taxes: Reviewing Your Estimate Mortgage Payment
During 2018 alone, state and local governments collected four percent more in property taxes due to soaring values.
To clarify, if you buy a home for $200,000 (as an example) and your county or municipal tax rate is one percent, you would owe $2,000 for that year, which is almost $170 per month.
That amount should require you to revise any estimate mortgage payment calculations, whether its from a lender or a personal expectation.
Closing during January or February gives you a lot of time to make those changes, review mortgage rate predictions, and, perhaps even more importantly, start saving.
After all, the tax payment wouldn’t be due until April of the following year.
In other words, if you purchase a home in the first three months of 2020, you will have until April 2021 before paying any property taxes.
Interest Rates and Lending Rules
The current real estate market is very advantageous for two main reasons. Firstly, during 2019, the Federal Reserve cut interest rates, on all types of loans, down to their lowest level since early 2018.
Secondly, recent changes to banking regulations gave lenders more flexibility and made it easier to get applications approved.
When those two factors are combined with property values at their yearly low levels, the savings you will get from a lower rate and estimate mortgage payment may have the same value as credit score points that take years to accumulate.
Critics of winter home-shopping will point out that, because of the lower demand, buyers don’t have many options. Therefore, they may have to settle for a less than ideal house.
However, the savings may be worth it. Firstly, you are unlikely to find a much nicer or bigger home in the summer, except when you change your price range.
To clarify, if you wanted to buy a house for $235,000 in late 2018 or early 2019, the same home would cost $240,000 or more by June. Even though you may find more options by then, the extra bedroom or nicer flooring wouldn’t be worth the additional $5,000.
Unless you’re willing to raise your budget to $300,000 or more, the additional summer options are not going to be very different than any houses you see in the winter.
The winter is the best time of year to buy a house because nobody else does. Because of the low demand, buyers can negotiate a much lower estimate mortgage payment between October and March.
Furthermore, due to interest rate cuts and regulatory changes, the real estate market is even more accessible, especially during the winter.
Above all else, when you purchase property in March or beforehand, you will get plenty of time to start saving property taxes. You can also review your mortgage rate predictions and the payment amount.
How close are you to qualifying for a mortgage? If you’re more or less there, a few extra steps may save you thousands of dollars. Similarly, if you’re waiting for the right time to buy, the immediate future is the best time of year to buy a house.
Shopping for homes and locking in a price should be a piece of cake. After all, getting to the point where you have the credit score and finances to get a mortgage, in itself, is hard enough.