Real Estate Tips: Seasonality of the Real Estate Market

Cooling weather can mean a cooling real estate market, depending on where you live. Whether you are purchasing or selling a property, the supply and demand of housing matters.

One of the factors impacting housing supply and demand is the seasonality of your market. While you might not think the seasons of the year influence the price you are paying or asking for your home, it makes a big difference—in some cases, as much as 10%.1 How’s that for a seasonal discount?

Know Your Real Estate Market 

The seasonality of a market varies from location to location. Each market has its nuance. For example, cities like Phoenix experience a snowbird effect, wherein winter months are popular due to an influx of people coming from different regions like the Northeast—people are relocating or buying a second home. Alternatively, in cities like Denver, the cold weather climate plays a part in the seasonality of the market by slowing down the typically brisk pace of home sales.

It’s important to be able to identify the factors that influence your region so you can understand the impact of seasonality trends on the housing market.

Key Factors in Seasonal Real Estate 

While the weather is something that will differ in each market, some nationwide considerations contribute to seasonal trends in real estate. The holiday season and school year both hugely influence the supply and demand of any given market.

Buyers and sellers with children typically do not want to uproot their family in the middle of the school year and will wait until its end so they have more free time for moving and the chance for a fresh start once the next school year begins. Studies have shown the busiest moving times of the year occur during the summer, with June being one of the busiest months and July 31 the single busiest day, meaning people are likely shopping the housing market at the end of the school year and as the summer draws to a close.2

Additionally, you will likely find fewer people moving during the holidays, which essentially eliminates the period between November and January. At this time of year, people do not want to add the logistics of moving to an already hectic holiday season filled with family obligations, end-of-year deadlines, unpredictable weather conditions, and more.

How Seasonality Works for Home Buyers 

Due to the fluctuations in supply and demand, it’s during this identified "seasonal pattern" that you’ll find you don’t have as much competition from the average homebuyer. With summer being the busiest moving time of the year, people buy more aggressively than in the winter, limiting the number of available houses and raising market prices.

In the winter, however, since nobody wants to deal with the inconvenience of moving during this time, these low-demand periods are perfect for those who are looking for a good deal. Because sellers aren’t necessarily getting a lot of interest or offers from others, they’re more willing to negotiate and you’re able to obtain a substantial discount on pricing.

Approaching Seasonality as a Home Seller 

If you’re a seller, it usually means you’re a buyer. For a lot of people, this means you do not have the luxury of selling when everyone else is buying and buying when everyone is selling because you need a home to live in during that gap.

Additionally, as a seller, you want to be able to sell in a peak market when everyone’s getting eyes on your property and demand and pricing are high. However, if you don’t immediately need the proceeds from selling your home to go into the purchase of your next, then buying in the winter, setting up a short-term living arrangement—whether that be leasing, temporarily moving in with others, or something else—and then selling in the spring can be a great way to maximize the trade between what you’re selling and what you’re buying.

Make the Most of Your Seasonality 

For homebuyers, one of the best ways to determine how the seasons impact your specific market is to talk to your broker or agent. They should be able to provide you with the market metrics for your area, allowing you to monitor the patterns and fluctuations of the average sales price for each month in the city where you are considering buying your new home. By comparing different months and years, you’ll be able to identify where there are significant peaks and valleys and determine when there are substantial discounts on housing prices in your market.

Once you’ve defined the seasonality of your market, don’t let the idea of inconvenience keep you sitting on the sidelines. By not buying when everyone else is buying, you can find the house of your dreams and save money. Not only will you face less competition for the homes you are interested in, but sellers will be more motivated and any offer you submit on a home will stand a better chance simply because there are fewer buyers, meaning it’s unlikely you’ll have to deal with the aspects of multiple offers or going above asking price.

As with your groceries or clothes, when you’re able to get a discount it doesn’t make sense to skip the discount and pay full price. With real estate seasonality, it’s the same. You can save anywhere between 5%–10%, or tens of thousands of dollars, and have a better equity position in your home.1 Seasonality is simple supply and demand: Don’t try and buy when everyone else is.

Source: Investopedia