What I do is research prices and locations and make a non-prepaid, cancellable reservation right away to lock in the maximum price I'll pay. Then I monitor sales and prices so that I know a better deal when I see one. I might even be willing to make a prepaid (but fully refundable) booking a few months in advance, if the price is much better than what I have already booked.

As a personal rule, I avoid making non-refundable hotel bookings more than a month or so in advance, but this timeframe depends entirely how firm your plans are, your tolerance for risk, and how much better the price is over what you've already booked.