We are at that stage of the year when attention flows from turkey, pumpkin pies, cranberries, Black Friday, Cyber Monday, to gifts, bows, decorations and holiday parties and events. Each has a distinct, and for some, short and narrow high season.
The same applies to housing sales. Depending on where the house is at (and perhaps the type of home i.e. condo-townhouses versus single family home), sales and values vary across the year. In real estate we don’t sing ‘Tis the Season to be Jolly,’ but rather “Tis the Season to Buy a Home (or sell)’, But not necessarily today.
The impact of monthly seasonality on U.S. existing home sales (monthly closings) as reported by the National Association of Realtors® (NAR), were taken for each of the past five years (2013-2017), with the results shown in the following graph.
June remains the peak month for the year, with one-in-10 (10.5 percent) of all annual closings taking place during the month. This same analysis two years ago saw June with 10.3 percent of all annual sales, but still the high month. May, July and August all slightly trailed the June peak. In comparison, January and February have approximately one-in-20 of the annual closings (5.6 percent and 5.8 percent, respectively). December benefits some from the End-of-the-Year Effect in which people just get it closed before the year end, making up 8 percent or one-out-of-every-12 closings.
This pattern, however, does not hold for all markets. As usual I invoke the TINSTAANREM axiom — There Is No Such Thing As A National Real Estate Market or a National Economy. The same is true when it comes to the seasonality of home sales and prices. The seasonality of home sales were calculated for 10 markets across the country and are summarized in the following table. Also included for Miami was a comparison between the seasonality of single family home sales and condo-townhouses – hence 12 total seasonality summaries including the U.S. While this is not a systematic representative random sample, it does show the variability in seasonality across the country. Highlighted are the maximum and minimums in housing sales by year. In addition, the Coefficient of Variation (C.V.) is calculated (defined as the standard deviation divided by the mean). It shows the relative variability, with a larger C.V. indicating greater unevenness in sales throughout the year. Miami’s condo and townhouse sales had the least variability and Minneapolis the most. Given the weather and demographics of buyers, this makes sense.
While there is also seasonality in median prices, it is somewhat different from sales. The following graph looks at the monthly median existing home price for the same period across the 12 markets. The graph shows the 100 percent month, and looks at the monthly variance from that peak for each month. June was the peak month in median price each of the five years for the U.S., but the same did not apply to all the markets. Unlike the End-of-the-Year Effect in sales volume, December home prices in the five years averaged just 0.4 percent more than November.
The following table shows the summary statistics for median price for the 12 markets. The U.S. overall shows more variability than any of the other 11 markets based on the C.V. Lowest variability in price is seen in Miami’s condo-townhouse prices – just as with sales seasonality. Unlike all the other markets, Miami’s townhouse-condo prices peaked in December.
So what causes the variation in median prices across the year? It well could be that growing families needing larger space and added bedrooms purchase a greater number of homes in the summer months (when schools are not in session) that cost more and thus skew the data. It also could be a function of supply and demand, with buyers bidding up prices in peak months. It may well be an interaction of the two factors.
Individual graphs for each of the markets are available in a PDF. Click here. The data source for each market is noted in the lower left had corner of each graph.
What this does say is that now is a great time to sign a contract to purchase a home closing in the lowest price months of January and February. For those selling, the best months to close are June through August due to greater seasonal prices.
Tis the Season – at least now for homebuyers when it comes to selection and price (except condos and townhouses in Miami. For sellers, get it on the market for the viewing during spring break and close in the summer months – unless it is a townhouse-condo in Miami.
Local knowledge is essential in making the best informed decisions.