The Seasonal Benefit for Fix and Flippers
It is well known that the residential real estate market is highly seasonal, with activity and prices following the heat: warming up in the spring, hot in the summer, then cooling off in the fall, and going into near hibernation in the coldest part of the year.
This chart shows the seasonality in home sales volumes and its consistency across regions by using the National Association of Realtors monthly existing home sales as a percentage of total homes sold in the year.(1)
Buy When Its Cold
Obviously: it is best to buy homes when the competition and prices are lowest. According to realtor.com, the best week of the year in 2019 to purchase a home after considering all factors was the week of September 22.
As summer winds down and kids return to school, many families hit pause on their home search and wait until the next season to start again. With dramatically less competition, persistent buyers will feel the scales tip in their favor as eager sellers begin to cut their prices in an effort to entice a sale. As seasonal inventory builds up and restores itself to more buyerfriendly levels, fall buyers will be in a better position to take advantage of today’s low mortgage rates and increased purchasing power.
Sell When Its Hot
The peak in volumes is confirmed by looking at the busiest days to move, which are June 1st and May 31st. Movers speculate that people are realizing the prices are higher later in the year and enjoy the milder weather.(2) The increased demand means higher prices and fewer days on market.
But This Time Is Different...Or Is It?
Transactions depend on both buyers and sellers showing up, although sometimes in different quantities and with different motivations, leading to some of these seasonal patterns and anomalies. There are more buyers than sellers in the post COVID world at this point and prices have returned to their steady march higher after taking a brief hit. Buyers seem to be motivated to get into their own space, as well as the upward demand represented by millennials entering prime home-buying years. Sellers, on the other hand, continue to hold back and listings are at significantly lower levels than prior to the pandemic.(3) The seasonality effect may be different in Denver, as Chris Hodges (Homesmart Realtor) observes, “COVID has shaken the real estate market by surprise and really created a strong seller market in Denver that I expect to be prolonged into the Winter.”
While local conditions continue to dominate, the seasonality effect seems unimpacted by the unexpectedly moderate changes in the SFR real estate market, with buying in the fall to have a home ready for sale in the spring or summer a plan likely to yield profits.