When it comes to buying a home, timing isn’t everything. But it’s a big factor. Your financial situation and how long you plan on living in a home can drive your decision, too. Broader market and economic factors also play a role in timing a home purchase. Historically in The Villages, during the winter, more homes are for sale, and in spring and summer, the real estate market cools down somewhat. Not only that, but the COVID-19 shutdowns have thrown the historical averages for a loop. Last April and May, when you’d normally expect to see a flurry of activity, the pandemic pushed some buyers and sellers to the sidelines. Nationally, we saw an 18 to 20% drop in home sales in May, which is normally a busy time of year across the Country. The drop coincided with a decrease in homes listed for sale. And with so much economic uncertainty, mortgages have become a bit harder to qualify for, as lenders have started tightening their standards.
The Best Time of Year to Buy a House
Like with anything, supply and demand play a big part in getting the best deal on a home. You want to have choices (supply), but you don’t want to have to compete with everyone else (demand). Typically, the best time of year to buy a home in The Villages is in the early Spring, just after the season. The Snow Birds have finished their yearly migration and have returned north for the summer and those who have decided not to maintain a dual residency any longer have put their properties on the market. That translates into a relatively high number of homes on the market but with fewer buyers to chase them as most of the Snow Birds are gone until fall. Keep in mind that while some buyers are, on average, picking up better deals in April and May, this might not hold true for you. The factors affecting real estate prices can be extremely local. You may find more competition for a property half a block farther away from a busy intersection than one right next to it. That’s why it can be invaluable to work with a local real estate agent when determining the best time to buy. Marietta Rodriguez, president and CEO of the nonprofit housing counseling network NeighborWorks America, suggests buyers find a real estate agent specialized in the area they are looking to live. “If they specialize in a community, they may know facts that can be really helpful to the borrower,” says Rodriguez. For example, a local pro might be aware of a new shopping center coming in or a nearby home going on the market soon. More importantly, in The Villages is to be aware of how the “yellow line” can impact your purchase.
Is 2021 a Good Year to Buy a House?
The COVID-19 pandemic has had a big impact on the housing market, but it hasn’t caused home prices to drop, in fact, prices have been increasing. The supply of homes is still relatively limited in the overall housing market, and I think it’s a surprise to some people, but home prices have remained strong and stable. A shrinking of the housing supply would normally create a seller’s market, where the number of buyers outpaces the supply of homes and prices increase noticeably. But in most markets, including The Villages, this hasn’t happened yet. With so much economic uncertainty, lenders have become more risk-averse and are tightening up their lending guidelines. That means fewer home buyers will be able to qualify for a mortgage. Chase, for example, increased the minimum credit score and down payment standards for many of its home loans last April, requiring a FICO score of 700 with a 20% down payment for certain mortgages. And other banks have raised FICO score requirements by 100 points for government-backed mortgages like FHA loans. These tighter loan standards, combined with stunning unemployment, mean fewer people will be able to make a home purchase. Even though home prices have remained strong, mortgage rates have remained low. Being able to lock in low rates can save you thousands of dollars over the life of your mortgage. There are opportunities out there if you have a solid credit profile and a secure job to qualify for a loan. Certainly, now is a great time to sell a home with strong demand and stable prices in spite of economic uncertainty for the rest of this year at least.
Real estate is local. Working with a real estate agent who knows the ins and outs of your market is vital to getting your timing right. If you have a secure financial situation, you may want to take advantage of historically low mortgage rates. Even then, you shouldn’t feel rushed, as there’s no indication that rates will be going up soon.
When Is the Right Time for You to Buy a House?
Before you start the home-buying process, you should work to get your finances in order. You can’t control what direction mortgage rates are headed, or the housing market, but you can take steps to set yourself up for a successful home-buying experience. If you take the time to save for a down payment and closing costs and work to improve your credit score, you’ll make the entire process much easier. Having a higher FICO score and more cash in the bank makes it much easier to qualify for a loan. But that’s not the only benefit. Lenders offer the lowest interest rates to those with the highest credit scores.
Also, bringing a bigger down payment to the table can help you save money by lowering your loan-to-value (LTV) ratio. Your LTV is calculated by comparing the value of the mortgage to the value of the property. So an $80,000 loan on a $100,000 home would have an LTV of 80%. Having a lower LTV can qualify you for better mortgage rates, and if your LTV is lower than 80%, you won’t need to pay for private mortgage insurance (PMI) on conventional loans. On average, PMI costs up to 1% of the total loan value annually. So if you’ve got a bigger loan, you could save hundreds of dollars a month by not having to pay it.
I hope you have found this information helpful and as always feel free to email me with any of your questions or comments.
Until next time,