What do people mean when they say it’s “a good time” or “a bad time” to buy a house?


Bonus question: what IS actually a good time vs. a bad time to buy a house, if that is an actual thing?

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An over-inflated housing market is bad, a depressed one is good.

Low interest rates is good, high interest rates is bad.

So interest rates and housing bubbles (or not) is what most people mean when they say “good or bad”.

When houses are expensive it’s bad and when they are cheap it’s good.

Thats the short eli5 version

When you buy a house, you make an agreement on the price, let’s say $100,000. But, let’s say that in the next year, your area becomes really desirable to live in. Houses comparable to yours start selling for $200,000. You will have bought your house in a “good time”, because you still only have to pay $100,000, but if you choose to sell, you could likely get $100,000 more than you paid for.

In a “bad time” the reverse is true. You bought the house at the peak of hype, and afterwards, prices decrease. Now you’re stuck paying an overpriced mortgage, and can’t sell the house without taking a loss.

Good market time means that the houses are a a low price. Because if the prices were high, and theres a recession, you lose money. Example, You buy a house for 200k. You get a loan for the 200k plus a variable interest of lets say 12%. If a recession hits. Your house value can drop to 60k but guess what? You are fkd because no one is gonna buy the house for that 200k because the current value is 60k. And on top of that, that variable interest can jump from 12-80% in the blink of an eye. So not only are you stuck paying for the house that is no longer at its peak value, if you try to sell it, you are getting no where near what you paid for.

Usually, they’re looking at balance of buyers vs. sellers… when there are more buyers than sellers, it means fewer choices and fiercer competition among buyers. That drives up prices = bad time to buy. When there are more sellers than buyers, then buyers have more choice and more leverage to negotiate the price down = good time to buy. There are also other factors, like mortgage interest rates and how those affect affordability, general affordability (prices relative to incomes), and future prospects for the economy.

In addition to people being interested in buying homes in recent years due to COVID (spending more time at home, work/school from home, etc) the super low interest rates also made homes much more affordable at each price point — a $350k mortgage at 5% interest is same monthly payment as a $450k loan at 3%. So even higher priced homes were still affordable to many buyers… but now we’re seeing a reversal, where interest rates have doubled to 6% as the Fed raises rates to fight inflation, but sellers who’ve heard nothing but tight markets and skyrocketing home values are still often in denial that buyers’ budgets are severely cut by the new higher mortgage rate and there are much fewer buyers at each price point that just 3-4 months ago.