When do Home Sales Pick Up?

Home sales have basically two cycles. One is on a yearly basis where there are typical swells and ebbs during the calendar year which for the most part remain consistent year to year. Home buying and selling trends increase dramatically during the spring and summer months and decline in the fall and winter.

Seasonal housing generally starts to pick up in February with the heaviest selling months being May, June, July, and August which on average accounts for 40% of the year's home selling volume. Sales then start to slide again in September reaching a low in November. The months from November through February account for only 27% of the year's total volume of home sales.

The advantage to buyers who look during high volume months is that there are much more options to choose from which give them a greater likelihood of finding the right property for them. Knowing that more buyers will be starting their search for a new home as winter draws to a close and the end of the school year approaches, more sellers list their homes hoping to take advantage of shorter marking times and increasing their chances of finding a buyer. While there are no definitive answers as to why sales pick up in the spring, it is generally assumed that it coincides with the ending of the school year. In regions where cold weather and snow is an issue, some homeowners feel that their home will show better and so wait until the weather warms up before listing their home. For buyers, it is easier to see issues with the home and property if it is not covered with snow.

When buying a home during the peak season buyers will find a larger inventory than they will in the winter months, but prices may be higher and bargains fewer than buying between November and February. If saving money is of greater importance than other reasons for buying, the slower months may be the time to buy. Because there are fewer buyers, sellers may be more willing to negotiate. The other cycle is not consistent and is impacted by factors not necessarily associated with the real estate market itself, although as we saw during the housing crisis of the last decade, it may be primarily affected by what is going on in the housing market. Sales may be impacted by the economics of a particular region. If an area is economically challenged the amount of product (homes for sale) on the market will increase no matter what the season as people leave the area in search of other employment. The reverse is also true- in regions where the economy is sound and/or growing, housing tends to be less plentiful, sells faster and is more expensive. Often in these busy markets, buyers will find themselves in bidding wars as multiple offers are made on the same home, driving up the sales price of the home.

For the same reasons, when the nation, as a whole, experiences a recession or depression, home sales will also decline. Unless a buyer needs to buy a home because of a job change that takes the buyer to a different location, or for other reasons they are less likely to buy a new home and are more likely to fix up or remodel the home they are in. Those who have the funds or the ability to get a loan can use a downturn to get a great deal on a home as prices decrease and inventory increases.

Interest rates also affect the rate of home sales. When interest rates go up, people have a tendency to sit tight and wait to move, hoping that rates will go down. Higher interest rates increase the monthly payment on a home loan thus decreasing the overall loan amount that a buyer could qualify for.

The political atmosphere in the country can also play a part in the real estate market. New policymakers mean new policies and those new policies can affect how secure people with their finances. Investors may invest more or less depending on what they think is happening in Washington. Policies may change interest rates and new laws can change the tax rates that are paid on real estate investments whether the buyer is planning on living in the home or using it as an investment property. Whether or not to privatize or even abolish the government-sponsored conservatorships of Fannie Mae and Freddie Mac are being discussed in Washington. What impact that will have on home loans is yet to be seen. Some say that privatizing them will enable them to purchase more loans from lenders as they are infused with more cash and as a result stabilizing or even lowering interest rates. 

The type of homes being sold can also be affected by changes in the marketplace. For a while, creative financing by lenders allowed buyers to buy larger homes than they would normally have been able to purchase, thus driving up the building and sales of so-called "McMansions". After the bubble burst and banks changed their practices, tightening up their requirements for obtaining a loan there began to be a glut on the market of these huge homes. Homeowners were then required to either drop their prices to sell. If they owed more than they could sell it for they were forced to do a short sale on the home or foreclose in order to get out from under the payments. For those in a position to buy at that time they could pick up these homes for many thousands less than they would have sold for in better times. Even with the option of getting these homes for less, the market for large homes remained sluggish for many years.

As we see, there is no one answer to when home sales pick up but savvy buyers will keep an eye on the real estate market and buy when it suits them best.