When Is the Right Time to Buy a House – The COMPLETE Guide

Embarking on the homeownership journey is more than just signing papers and picking out paint colors; it’s a mental marathon. Are you ready for it? Mental preparedness for buying a home is like the foundation of your future abode – crucial and often overlooked. This isn’t just about wanting a house; it’s about being ready to manage the responsibilities that come with it. Think long-term maintenance, unexpected repairs, and the joys (and pains) of making a space truly yours. It’s about being mentally equipped to handle the highs and lows of the home-buying process, from bidding wars to closing delays.

Ask yourself: Are you ready to commit? Can you handle the twists and turns? This isn’t meant to scare you off; it’s to ensure you’re stepping in with eyes wide open. Buying a house will test you, and it will change your life in major ways, even if it’s your second or third time through the process.

Jumping the Rental Ship

For those of you living the rental life, are you ready to give up that flexibility and lock yourself into a long term housing position? The “joy of homeownership” is a dichotomous term: it refers to the fulfilment of having a space that’s truly yours, an appreciating personal asset, but it’s also what we say when the toilet brakes and there’s no landlord coming to handle it. You can’t have the yin without the yang.

And what about the investment aspect? Truth be told, many people are better off renting than buying a home in the Seattle area. If you find yourself looking at homes as an investment first and a home second, consider this — you’re likely to get far higher returns on the stock market than on the average Seattle area home. If you can’t stomach the reality that buying a home is an expense, as much as an investment, you may want to stick to renting until your perspective changes.

The Underwear Test

2. Is The Rest of Your Life in Order?

It’s best to space out major life changes. If you’re going through a tough time at work, planning your wedding, or recovering from a major illness, it may not be the best time for you to buy. As exciting as it is to embark on the house hunting journey, it is nonetheless mentally taxing. Take stock of your emotional and physical bandwidth before leaping into the market.

Are you secure in your job?

Buying a house is much, much easier when you know where your paychecks are coming from. You’ll want to be secure in your career, both in terms of job and location (no potential reassignments to another city), before deciding it’s time to buy.

Are you secure in your relationships?

Are you buying with a partner? Perhaps it goes without saying that anyone experiencing significant relationship strain should hesitate before buying a home. Even if you are in a good place in your relationship, we highly advise taking the time to talk to your partner about your homeownership goals and desires. Being on the same page will make the process much more feasible. Buying a home together should strengthen your relationship, not undermine it.

Do you have any health issues that would make moving difficult?

This goes beyond the obvious physical ailments. If you’re experiencing mental health issues, have long term chronic ailments, or other health problems, then consider whether it may be better to wait until these issues resolve or improve before breaking your routine and/or recovery process by purchasing a new home.

3. Assessing Your Financial Position: Savings, Debt, and Income Stability

First up, savings

Do you have saved enough for a down payment (~5-20% of home price), closing costs (~1% of home price), and unexpected incidentals (another 1-2%)? Can you afford these things without depleting your existing assets? It’s not just about scraping together the minimum down payment; it’s about being financially cushioned for the ‘just in cases.’ If you have 6+ months of emergency savings, are contributing a substantial amount to a retirement account, and feel you can purchase a home you want without sacrificing your desired lifestyle, then you may be ready to buy a house.

What about debt

How much do you owe, and how does that debt weigh against your income? A mortgage is a long-term commitment, and you need to ensure your debt-to-income ratio doesn’t tip the scales in a way that could turn your dream house into a financial nightmare. A mortgage lender will be able to help you understand the detailed ins-and-outs of this calculation, but you should enter the process confident that your debt is at least manageable as it stands, because you’re about to take on a lot more.

Speaking of income

Income stability is key. Is your job secure? Are your income streams reliable? Remember, a mortgage isn’t a one-time deal; it’s a monthly commitment that’ll be with you for years. You need to be sure you can keep up, come what may. If you’re buying with a partner, would you be able to afford your monthly payments if one of you lost your job and went unemployed for a few months? If not, it may be time to pump the brakes, or at least take aim at a lower price point.

4. The Risks of Trying to Time the Market

Hoping to time the Seattle housing market is a tricky task. The very idea of ‘timing the market’ suggests that you can predict and leverage market fluctuations to your advantage. Easier said than done.

The market is a complex beast, influenced by a myriad of factors beyond our control – economic shifts, interest rate changes, global existential threats/extinction risks, etc. Waiting for the ‘perfect’ time to buy often leads to missed opportunities. Prices might go down, but interest rates could go up, or vice versa. And let’s not forget, while you’re waiting for the stars to align, you’re still paying rent, missing out on building equity in a home of your own.

This doesn’t mean everyone should drop what they’re doing and BUY A HOME RIGHT THIS SECOND! It merely means that, for those considering and planning to buy in the near future, sooner is often better than later, especially if your reason for waiting is “timing the market.”

A House Is Not a Stock

With stocks, the core mantra of successful investors is “buy low, sell high.” Well, duh! But does this concept apply equally to real estate?

A bad house in a good market is still a bad investment.

Consider this. When you buy a stock, let’s say Microsoft, you’re buying a fungible liquid asset, aka, a widget. A house is not a widget. It takes more than 30 seconds and a few clicks on Robinhood to buy a house. It takes time to find a home (typically one to six months) and time to close once you find it (typically 30 days. If homes were totally fungible, like Microsoft stock, you wouldn’t have this issue, because the element of choice and the friction of the transaction would be nonexistent. But homes aren’t fungible. They’re unique, idiosyncratic creatures, and it takes time to understand them and choose between your many distinct options.

If Microsoft dumps 20% today, you can buy at a discount tomorrow. Compare this to real estate. If the housing market shifts, it’s going to (1) take weeks, months, or even years to reach a meaningful peak or trough, (2) require lots of your time to choose a home and close the deal, and (3) require you to choose the RIGHT house, because a bad house in a good market is still a bad investment.

In sum, timing the housing market is a gamble, and more often than not, it’s a losing game. The key isn’t to wait for the perfect moment but to buy when you’re financially and personally ready. Remember, a home is more than an investment; it’s where your life unfolds. Approach the process with warm-hearted care, not cold-hearted calculation.

How CAN You Time the Market, Then?

Ok, forget everything I just said. There IS a way to (kind of) time the market for real estate here in Seattle. It’s called “seasonality” or “seasonal advantage.” Check out this chart of monthly median prices for King County over the last 20 years.

Understanding the seasonal dynamics of the housing market can provide valuable insights. Traditionally, spring and summer are bustling with activity, marked by a surge in both listings and buyers. This can mean more options but also higher competition and prices. On the other hand, the fall and winter months see a slowdown, with fewer listings but also less competition, potentially leading to better deals for the savvy buyer. But it’s a give and take; there’s no guarantees and no perfect answer.

For a slightly more in-depth explanation of how to make the most of the darker months, check out our blog on the topic[Link].