Buying a Home? Here’s What You Need to Do First

A brief guide for potential homebuyers, part 1

A reader asked me about the housing market. She’s young, has a steady job, and she wants to buy a house in the next year or two.

She asked, “what should I do? What about interest rates? What about prices?”

All very good questions, leading up to the question of timing.

“Is this a good time?”

The very best time to buy a house, if you have a job, is during a recession. During a recession, home prices often fall. The Federal Reserve puts more money into the system to stimulate buying so interest rates fall.

But what if you can’t wait?

If you look at my post, But That’s the Lowest Interest Rate I Ever Had, you’ll know that my husband (Mark) and I have never bought a house during a recession. [1] The first two came attached with interest rates that would make the current homebuyer faint!

We had to pay attention to interest rates, because they affected how much house we could buy. Our first house was a condo that took 15 years to sell after we moved out. We were reluctant landlords. But our tenant was an elderly woman we couldn’t evict.

When our family grew, we bought a new home. We bought as much house as we afford. It was a traditional five-over-four-and-a-door home with 1800 square feet. And we stayed there for 18 years.

But then, we only had two real must-haves: three bedrooms and two full baths.

We bought our third home in 2007. Interest rates were lower, at 6 percent for our first mortgage, 8 percent for our second one. Our must-have: closer to work.

We were still paying for our second home for 16 months until we could fix it up and sell it.

That meant three mortgages and scrimping on everything.

Our needs had changed when we went house hunting in 2021. We waited as long as we could.

It was the worst possible time to buy a house. Even though interest rates were very low, inventory was being snapped up faster than we could respond. [2]

That time I needed to move to accommodate my disability. That time I had a plan.

Determine your must-haves

Our last house had to have a master-on-main with a bathroom that had a walk-in shower. No stairs anywhere, if it were possible.

And after two big remodels, we wanted something that was move-in ready and didn’t need work. We had some other must-haves, but these were the big ones.

We also needed to be close to our grandson, so visiting wouldn’t be a hardship.

So, what does your house need?

· Are you a gourmet cook who needs the perfect kitchen?

· Do you have or anticipate having small children and need a large area for play?

· Do you need a dedicated home office or would a quiet place for a desk do?

· Do you need to be near a family member?

· Do you need space to garden?

Most importantly, choose your ideal location.

Make a list of these must-haves. If your household has more than one person, you’ll need to compromise. [3]

This list needs to be short. No more than five items. Fewer if you can.

These items need to be important. The list needs to include what you can’t live without.

Because you’re not going to find the perfect house at the price you’re willing to pay.

Don’t worry about prices or interest rates yet.

In part 2 of this post, we’ll look at two more pieces of the home buying puzzle.

If you’re following my GDP posts, new home construction goes into Investment. We’ll look at that soon.

Thank you for reading.

Nikki

[1] You can hear about my house on Marketplace.org’s segment on Adventures in Housing here: https://www.marketplace.org/2022/04/07/looking-for-accessible-home-will-make-your-search-even-harder

[2] I started in 2019 and gave up by June 2020. During the lockdown there were those who bought homes without seeing them. We weren’t willing to do that.

[3] I admit, we got more of what I wanted in this last move. The next move will be different.