Spring is peak home sales season across the nation: Four out of 10 closings occur in April, May and June, according to Freddie Mac. The warming weather lends itself to being out-side. ln snow country, the house and yard are visible again. People are feeling upbeat.
“ln spring, people who have been cooped up over the winter are ready to bust loose, get out and sample the sunshine, “according to Mary Umberger, New Home Source website: “And for many, a potential address change at that time fits nicely with the school calendar.”
But, what if you live in an area without dramatic weather changes from month to month? Does your seasonal real estate market act the same way it does in snowier climes?
Even without the harsh winter climates of some parts of the country, the seasonal trends are similar across the board with respect to both the relative number of sales and inventory.
Let’s ﬁrst take a look at the general seasonal trends most of the country can expect in a normal market.
The Sales Year in Brief
The sales year actually kicks off in January, says Jonathan Smoke, chief economist for the National Association of Realtors (NAB). “Flight after the first of the year, there’s a burst of activity from people who have been waiting for the holiday to be over. It ramps up to about mid-May, which is when most people are listing for sale. and that continues pretty strongly through the summer.”
Listings decline in September and continue to fall through autumn. In December, adds Smoke, “they fall off a cliff.”
In the off months, there are generally fewer homes on the market, and fewer buyers are looking. Those circumstances however, can be positives for buyers, because sellers in the winter and fall are often willing to show some flexibility on both price and terms. With the help of a knowledgeable Realtor, off-season buyers may be able to cut a favorable deal.
Motivated Seller, Motivated Buyer
Spring is generally the season when the highest number of homes is on the market. That means optimal choice, one of the most desirable traits in a housing market, if you’re a buyer.
Spring has obvious advantages, according to writer Craig Donofrio in Realtor.com. First, there’s more inventory. “You’re more likely to find a dream home for sale when more homes are on the market. lf you’re looking for the perfect fit for you and your family, you’ll have to shop during the on-season, when you’ll have more choices.”
Also, in spring, it’s easier to spot potential problems in a home when the ground and the roof are not covered in snow. And, it’s easier to move an entire family during the summer, when school is out.
For the spring buyer there can also be a downside: In a seller’s market, there’s more competition and asking prices tend not to budge. in addition, “the potential for bidding wars can be greater during the busy spring and summer seasons, too, so you may not be able to get the bargain you were hoping for,” according to Donofrio. RealtyTrac found April to be the most expensive month to close on a home in much of the country, because buyers pay an average of 1.2% premium above the asking price.
The spring sales boom declines only slightly during summer months. Much of the spring dynamic remains in place, with many buyers competing for a limited number of homes. With the pressure on for families with school-age children to find a home and get settled before the start of the school year, however, competition may remain high until Labor Day.
Typically, the market undergoes a shift toward a buyer’s market in September. The number of listings begins to fall off and fewer buyers are looking for homes. School has started and families are settling into their routines.
After the spring-summer blitz, autumn is the most active season. Recent research by RealtyTrac confirms that October is the best month to buy because there are usually plenty of homes and less competition among buyers.
Racing the End-of-Year Deadline
RealtyTrac also notes, rather surprisingly, that out of 109 metro areas in the data set, nearly one out of four reported their best sales days in the months of September, October and November. Why might this be? If school registration is a deadline date for people who are home shopping in the spring and summer, the last three months of the year are the deadline for many buyers who are motivated, in part, to get the benefit of deductible mortgage interest before year’s end. (Property taxes and some closing costs are also deductible.)
INVESTORS VS. FIRST-TIME BUYERS
“Look out, first—time buyers. Your biggest competition is not other real estate newbies like yourselves, but mom and pop investors looking to establish a stream of rental income… A recent report shows that these deep-pocketed investors are focusing on the most affordable segments of the market: smaller homes in both suburban and urban areas… Not surprisingly, investor buyers have substantially higher incomes than both median—income households and primary residence buyers: The typical buyer of an investment home in 2015 had a median household income of $95,800. So part of the secret of their success is simple: They have the cash and credit to make it happen.” Realtor.com
Winter Not So Cold, Actually
But does anyone want to buy a house if you have to endure bad weather? As it turns out, a surprising number of people do. Of the home markets surveyed by RealtyTrac, one out of three reported their best sales in January and February.
lf inventory is low during winter months, motivation runs high for both buyer and seller. People who are obliged to list their homes during the off-season tend to be motivated sellers: Death, divorce, financial hardship or some other necessity is forcing the sale. That means that people are often in the mood to make a deal and get on with life.
“Let’s face it,” says Guy Cecala, publisher of Inside Mortgage Finance, in an interview with US News. “Anybody who is trying to sell a house going into the winter months has to be flexible, and you should be able to get good deals.”
Rules for Off-Season Buyers
Every market has its off-season, however, and that’s important, because that’s when buyers and investors can both find value. Investors, in fact, often prefer the off-season to avoid paying premium prices. Those wise buyers who are considering buying off-season may wish to review these helpful suggestions from Luke Mullins in U.5. News.” (Admittedly, several of these points would be smart at any time of year.)
- Make sure your job is secure. “Buyers need to be confident in their income stream before jumping into the real estate market,” says Mullins.
PRICES FLOATING OUT OF REACH
“While the vast majority of housing markets are still affordable by their own historic standards, home prices are floating out of reach for average wage earners in a growing number of U.S housing markets. The recent drop in interest rates has helped to soften the blow of high-flying price appreciation in some markets, but the affordability equation could change quickly if interest rates trend higher and home prices continue to rise faster than wages.” – Daren Blomquist, Senior Vice President, RealtyTrac
- “Spit-shine your credit, ‘says Mullin, so you can qualify for an interest late you can afford. A higher interest rate may force you into a lower price bracket for a home.
- Have enough cash on hand for the down payment, at least 3.5% to 5%
- Educate yourself about the local market: What are prevailing prices? What kind of homes tends to sell the quickest? Again. working with a Realtor who knows the particular market is key.
- Familiarize yourself with your target neighborhood. Drive around and check out the houses. Are they well maintained? Also, if schools are a priority. Prospective buyers should visit them, rather than rely on published test scores alone.
- Pay attention to Interest rates. Obviously, they can rise and fail, and rates can affect what kind of home you can afford.
- Check out the foreclosure stock, with the help of an expert. While the inventory of foreclosed homes has fallen sharply to less than 10% of the market, it’s not impossible that one may work for you.
- Beware of rising taxes: Buyers should pay close attention to real estate tax rates in the community they are considering. Property taxes can have a big impact on affordability.
- Get those concessions: Owners who list their homes during the offseason tend to be more willing to bargain about price and other terms than sellers in April or May.
- Don’t feel pressured to act immediately. ls it worth your while to list your home during the off-season months? Every community is different.
FORECAST FOR WDRLD ECONOMY IMPROVES
“…Financial markets in advanced economies have. at this writing, partially reversed their swoon of the ﬁrst weeks of 2016. Some improved data releases. a ﬁrming of oil prices, lower capital outﬂows from China. and decisions by major central banks have all contributed to improved sentiment. These developments are consistent with our central projection that growth over the next two years, while lower than we believed likely just a few months ago, will still be slightly higher than in 2015….” — International Monetary Fund, World Economic Outlook
“Here Comes the Sun”
While weather doesn’t play as large a role in the real estate market when you live in a state with milder climate, the general trends still apply in the sunnier states. More people put their homes on the market in the spring, there is still the school year to take into consideration, and the attractive tax advantages of owning a home still motivate people to purchase by year-end. But the seasonal affects of the more northern states aren’t as pronounced in the sunnier climes. Supply and demand and economic conditions are the main driver of the market there.
In California, “a frenzied start to the spring home selling season has been driven by a death of homes for sale, low mortgage rates and steady job growth.” says Jay L. Clendenin, Los Angeles Times. But seasonal pent-up demand slammed head-on into an inventory-considered market. This is especially true in most of Northern and Southern California.
Florida may be a special case because of the high volume of “snow birds” who seek to buy vacation home is the land of palm trees and Art Deco Buildings. Those out-of-towners pack the roads, restaurants, shops, and keep the real estate brokerage business extremely busy during these months. In fact, October through April is the high season for much of Florida.
When It’s Time…
So whether you live in a colder or warmer climate, when is the best time to buy a home? When you want or need to buy. And the best time to sell? When you want or need to sell. The market may be tricky to maneuver depending on inventory, price point, and demand. So, give us a call. We know the neighborhoods and the markets, and can help you get into a house that you’ll love-and can afford.