A change in the season
J. is a long-time reader. He sent this to me last week:
… I am looking to buy my first house or condo fairly soon, either by mid-2010 or 2011…
I know that housing sales tend to pick up a lot in the spring and early summer, but I have some questions for you about seasonal shifts in average sale price.
First, remember that I am looking at this from the buyer’s side; that’s what I do. I don’t know the minds of sellers; I only know the history of past seasons and the gossip of listing agents about what is coming up.
Here’s a quick and easy analogy: seasonal house buying is like seasonal clothes shopping. Think: bathing suit. If you go shopping in May or June, there are lots for sale and they are at top price. By September, the pickings are slim or none. But, if you find one that fits, the deal is probably going to be pretty good. It’ll be off in some dark corner of the store, if it is there at all.
So far, 2009 has followed a pretty normal cycle. The presence of short sales and foreclosures is not increasing the supply for my buyers. Many of those homes are too hard to buy, too run down, or still too overpriced for their condition, size and location. I know that in other areas, this is not the case. I write about what I see.
This is what the fall to winter cycle tends to look like:
August: Supply goes down. New listings are rare and some sellers take their homes off the market so that their summer vacations don't get ruined. Many buyers quit to enjoy the summer. Buyers who were looking to move before school starts or to meet end-of-summer lease renewals have given up. Supply and demand are low compared to the spring; so are prices.
September: Sellers put their houses on the market for the fall season. The fall season looks like the spring, but is generally lower in overall volume. Sellers and buyers are both back from vacations and serious about selling and buying. Prices go up slightly.
October: Supply is mostly properties that have been on through September. Demand is moderate. However, demand goes down when it gets dark earlier and it gets cold. Sellers who must sell, think about reducing prices before they get stuck with an empty house through the winter months.
November: Supply and demand both decline. Only sellers who really need to sell are putting their homes on the market. Only buyers who really need to buy bother to go out in the cold weather to look at homes.
December: By mid-December the rate of new homes for sale goes way down until late winter or early spring. Later if we have a snowy winter. Buyers are still buying if the prices are right, but there are fewer of them. Houses on the market are mostly older listings that didn’t sell in the fall market.
January: Most properties for sale are leftovers, or estate sales, or relocation sales, or divorce sales. Most buyers are waiting for the new listings in the spring. Supply down, demand down, prices down.
February: Like January, except that some properties may come on toward the end of the month in order to "get a jump" on the spring market. This is especially true if we are having a mild winter season and there is no snow on the ground. Sellers who are trading up and must sell first will market their properties early so that they are financially ready for the spring market. There are few buyers out looking. Prices still tend to be depressed, but some properties will sell high to buyers who have been waiting for something new.
How much of a discount do winter buyers get?
These discounts are spotty; sometimes they are on properties that are something like a pink and yellow guy’s Speedo bathing suit, size XXL.
In my experience, if the seller has to sell and can sell, I see the discount off of the real market value of a property (this is not asking price!) of $10,000 to $30,000, in middle price ranges ($250-450,000.) J., the average sale price means nothing. You need to look at the sale price you can get in the winter compared to what you could have gotten for a similar house last May.This year, I am seeing a lot of sellers who stick to their prices, because they have to (think: The standoff.) This winter will also see some increased demand because of the tax credit, which expires on November 30th.
What do you predict for this winter? Do you think J. should house-hunt this winter?
