In many areas, home prices rise so quickly that it feels as though, when it comes to buying, the sooner the better. Potential homebuyers don't want to be priced out of the market, and they don't mind getting in on some of that rapid price appreciation.
But what about areas that don't experience double-digit percentage growth in home prices? If there's no real hurry to buy - including no pressure such as a job change or baby on the way - is it possible to "time the market" when buying a home?
"Timing the market" is usually a phrase reserved for the stock exchanges. It refers to buying something at the trough of a price cycle and selling at the peak, or as close to one or both as you can get. It's hard to accomplish with stocks, and it's hard to accomplish when buying a home.
Here are some things for homebuyers to consider when trying to decide the right time to buy a home.
It's not just a financial decision
Even if you're not facing a job relocation or have a growing family, deciding the right time to move isn't just a financial decision. If you're not ready to be a homeowner, or are happy in your current neighborhood and not thrilled about leaving, it might not be time to buy.
The prospect of "buying low and selling high" - an elusive achievement anyway - might not be a good enough reason to take on a home you don't love. After all, you have to live in it. Waking up each morning in a home you're not thrilled with, maybe in a neighborhood not as great as your last one, can wear on you.
Making a quality-of-life sacrifice to buy a home now because you think you're getting a great deal and can sell it for much more later might not turn out great in the long run. Buying a home is an emotional decision and not all about the dollars and cents.
Keep an eye on news about interest rates
Mortgage rates in the United States have been at or near historic lows for more than a decade, but rock-bottom rates won't last forever.
On a 30-year fixed-rate mortgage, a half-point difference in the interest rate works out to about $30 per month for each $100,000 borrowed. So a $200,000 mortgage will have a $60 higher monthly payment when rates creep up half-a-point. For some homebuyers, that could be the difference between qualifying and not qualifying for the house they want.
Also, keep in mind that indicators pointing to a rise in rates is likely to result in an increase of buyers in the market. The more buyers out there, the more competition you'll have for homes for sale.
Talk to a professional
Most people these days start their home search online. But there's still something to be said for the local real estate agent, who can often provide homebuyers with information not readily available online, such as average days on market, pricing trends for particular neighborhoods and buyer and seller activity.
It's important to be an educated buyer, and websites can definitely help advance that cause. But trying to time the market as a homebuyer involves picking a time when the number of available homes for sale is higher and the number of competing buyers is lower. That's hyper-local information sometimes, and even though they're not exactly the gatekeepers of information they once were, local real estate pros can provide details that not every website can.
The short answer about timing the market is that you probably can't, at least not very precisely. But there are a few factors that are worthy of your consideration when trying to predict the right time to buy a home.