When it comes to real estate, you may not think seasonal conditions have much significance in the pricing of properties. This is a common mistake shared by homebuyers and sellers alike.
But, the truth of the matter is; in some cases, prices can drop or spike by as much as 10% (depending on the season.)
It’s important for buyers and sellers to understand how seasonality impacts the supply and demand of the housing market.
By becoming more aware of seasonality’s influence on the market, investors can take advantage of seasonal trends and get ahead of the competition.
Understanding Housing Market Seasonality
The real estate market doesn’t hibernate; it does, however, demonstrate seasonal patterns. The supply and demand of every market is largely influenced by the school year as well as the holiday season.
The months between November and January are exceptionally slower for the housing market. The holidays load most people down with seasonal obligations like gift shopping, family gatherings, traveling, preparations… the list goes on.
Adding the logistics of buying or selling property to that list would surely overwhelm almost anyone.
Existing home sales data indicates mobility as well as demand are the highest during the summer. This is largely due to the fact that buyers and sellers with kids generally prefer to wait out the school year to move.
According to the National Association of REALTORS:
- Sales activity from February to March increases by almost 35% (and prices by 3%)
- Sales made from May to August account for close to 40% of the annual sales total
- Sales made from November to February account for over 60% of total activity in the peak season
A market’s seasonality fluctuates depending on its location. For instance, the Northeast and Midwest pick up substantially in the peak season, more so than any other US region.
Seasonal weather conditions vary from location to location and ultimately affect the associated market nuance.
Here are some average regional statistics:
- Northeast – Slow season sales account for 66% of the sales in the peak season
- Midwest – Slow season sales account for 62% of sales in the peak season
- West – Slow season sales account for 71% of sales in the peak season
- South – Slow season sales account for 70% of sales in the peak season
Seasonality and Homebuyers
The real estate market’s supply and demand fluctuate year-round. Being able to identify seasonal patterns could ultimately save you tens of thousands of dollars.
Due to the tremendous amount of people moving during the summer, homebuyers tend to buy more vigorously than in the winter… this limits the number of available properties while also increasing market prices.
On the contrary, winter offers a window of opportunity to those who know where (and when) to look. Competition drops substantially during the winter because the majority of homebuyers prefer to avoid the inconveniences of moving at this time.
Additionally, sellers are more willing to negotiate discounts during the winter. Waiting out the competition is a surefire way to find a good deal.
Seasonality and Home Sellers
Oftentimes, sellers are also buyers. Not being able to sell while buyers are actively buying and not being able to buy while sellers are actively selling can be quite the predicament.
But everyone needs a place to live… this leaves most sellers stuck between a rock and a hard place. Finding a balance between what you’re buying and what you’re selling is an excellent way to maximize the trade.
Sellers will obviously want to sell when buyers are actively searching for properties and pricing and demands are at their peak.
However, if there is no immediate need for the revenue generated from selling your home, then buying during the winter and selling in the spring is more profitable (and wise) route.
Pros & Cons for Real Estate Buyers
- The busiest time of the year
- High inventory
- Easier to spot potential issues with properties
- The school year is coming to an end
- Tons of competition
- High prices
- High inventory
- A second chance for homebuyers
- Potential price drops
- Still a lot of competition
- The school year is around the corner
- Limited inventory
- The school year has begun
· Desperate sellers
· Potential price drops
· Potential price increases
· Limited inventory
· Mid-school year
· Holiday season
Take Advantage of Your Seasonality
Learning the ins and outs of the housing market’s seasonality can be extremely advantageous to homebuyers, home sellers, and investors alike. Utilizing this knowledge allows for the potential to save anywhere from 5% to 10%, or tens of thousands of dollars on your dream home.
Seasonality boils down to basic supply and demand… wait out the competition and take advantage of the deals that real estate seasonality puts on the table.