As a real estate investor, it is important to understand the best times of the year to buy and sell your properties the fastest and for the best price.
But on the flip side, what is the slowest months for real estate? Typically, winter time is the slowest of the year to sell a property, specifically November, December, and January. However, there are some exceptions because there are several conditions that affect the housing market.
What is Seasonality in Real Estate
Seasonal trends in real estate have become a reliable pattern. Typically, the house prices will go down in winter months because there are less buyers on the market. On the other hand, there typically are more sellers than buyers in winter months.
Based on nar.ealtor.com, the sales activity and home prices follow the same trend each year. The number of homes sold usually increase in the spring season. The sales of houses between February and March increase 24%, followed by the busiest months of May, June, July and August.
In contrast, the slowest months are November, December, January and February. So we can tell that the demand is the highest in the summer and lowest in winter.
What Are the Reasons for Seasonality in Real Estate?
As we’ve talked about, the summer months are busiest for real estate and they usually have the highest units sold on the market. The sale prices are the highest in the summertime and the house prices start to go down in fall and pick back up in the next spring.
Why will this trend happen?
Generally, people are more willing to move in summer time due to the nice weather, so the demand for buying a home is higher. Especially for households with kids, summer is usually a good time to move so kids can start the year in a new school district.
With holiday seasons in November and December, people are busy with family, vacations, and taking breaks. In addition, fewer people are willing to move in the cold weather so the demand for house purchases lowers.
Exceptions because of Covid-19 this year
Although the seasonal trend is similar each year, 2020 seems different because of the Covid-19 pandemic. So far, I haven’t seen the house market slow down in the fall and winter months, and the house market is busier than previous years. This winter, it can even be as busy as summertime.
Historical low interest rate
One of the reasons that the real estate market is still busy in fall and winter is because of the historically low interest rate. More people are interested in buying houses to take advantage of the low interest rate. As of November 2020, the average interest rate for a 30-year conventional fixed rate is about 2.83%, while it was about 4.83% in 2018. In just two years, the interest rate decreased by 2 percentage points!
Higher demand for larger homes.
As the number of people working from home increases, the need for a larger house increases. People need an extra room as an office, or extra space so they can be more comfortable staying home.
Stalled Market Starting up again
When the pandemic first hit, the real estate market virtually stopped. People weren’t ready to go outside, and many others wanted to save their money. Then as restrictions lifted, jobs started coming back, and people grew tired of being stagnant, they became more likely to buy a house. We’re seeing all those people who waited several months now getting into the market. Expect this to continue.
Those three reasons helped the demand for houses increase significantly while the supply stayed the same. That’s why the real estate market is still busy even in fall or winter time.
Market Conditions that Affect the Real Estate Market
The exception happens when the market condition changes. There are some market conditions we need to consider when talking about the house market.
Unemployment rate or economy
The economy is an important factor that affects house demand. Some aspects of the economy that affect housing are the unemployment rate, GDP, and prices of goods. Typically, the economy will affect not only the demand of houses, but also the types of properties that are needed. For example, if the economy is good and the unemployment rate is low, more people will feel secure and have the ability to buy a house instead of an apartment, increasing the demand for houses.
With COVID-19, the unemployment rate increased significantly. If we see high unemployment rates come next spring, housing prices may not be as good as the previous spring. However, if things continue to improve, unemployment decreases, and if we get effective vaccines, we will see a continued positive impact on the real estate market.
Changes in interest rate can affect how much interest you’ll pay on your mortgage, as well as a person’s ability to buy a property. The lower the interest rate is, the lower the cost to buy a house. If other conditions remain the same, you can expect the lower the interest rate is, the higher the housing market demand.
What Will Happen If I Sell my House in Winter?
Expect a price adjustment
If you buy a house in spring and plan to flip it in the winter time, you should work in a 5% price adjustment so you have some room to negotiate when selling the property, especially if you don’t want your house to stay on market for very long.
Need to pay more interest for better price
If you don’t want to decrease your house price, you can plan to keep the house but you have to pay more interest in order to wait and sell it next spring. For example, if you want to sell the property in the summer, you need to plan to pay the interest for another 5 months.
Time on the market increases
When you sell a property, you should pay attention to the time on the market, which means how long it takes to sell the property. If you sell your property in winter, you may expect a longer time on market than in summer.
Differences of selling houses in different seasons
If you sell the property in different seasons, you may not see the difference in price, but you will see the difference for how long it takes to sell the property. Maybe it takes you 60 to 90 days to sell a house in summer, but it will take you 120 days to sell it in winter with the same price. Or maybe you’ll see a 3% decrease of the house price, and you’ll see the time on market increase as well. Those are both things you need to be thinking about when you plan to sell your house.
When is the best time to invest in real estate
Does this all mean as a real estate investor you should not be investing in winter? When is the best time to invest in real estate? My experience is, there is no best time and you should always invest.
But it’s better to plan your real estate investment schedule for best profit. For me, the best time to buy a property is in the fall. I can fix those properties and they are ready for sale next spring. So you can buy a property in December or January because the prices are relatively lower, and then get the property fixed up and resold in the spring
In summary, you can make money by investing in real estate regardless, no matter if it’s winter, summer, or the spring. You just need to understand the market so you can prepare to invest during any time of the year.