There is a seasonality to residential real estate sales and there are both myths and realities in connection with this phenomenon.
One myth is that most resale home transactions occur during the first half of the year. That is dispelled by the chart shown here.
- On average, the distribution of closings per quarter is 19%, 29%, 29% and 23% over the last six years.
- Most sales occur in the 2nd and 3rd quarters – 58% of all closings occur in this six-month period.
- More sales occur in the last half of the year than in the first half of the year – 52% in July through December versus 48% in January through June.
Therefore, the last half of the year is slightly more active than the first half. If you choose to do a real estate transaction then, you’ll have plenty of company.
A little appreciated reality is that most of the price appreciation for a given year will occur in the first six months. A normal pattern for the last five years is to see prices that are 12% to 14% higher in June than they were in January. About 3% to 4% of that appreciation is given back during the last six months, resulting in annual appreciation rates of 8% to 11%.
THIS MINI-RETREAT OF PRICE GAINS DURING THE LAST HALF OF THE YEAR CREATES DIFFERENT OPPORTUNITIES FOR BUYERS AND SELLERS. HERE ARE STRATEGIES TO FOLLOW:
- IF YOU ARE ONLY BUYING A HOME:
The last half of the year is prime time for people that don’t currently own a home and want to jump into the market. The price you pay will, on average, be lower than they were in April, May and June of this year. Get with your agent now to capitalize on this window of opportunity.
- IF YOU ARE BUYING AND SELLING A HOME:
You may be getting a bit less for your house in the last half of the year than you would if you had sold during the peak months of April through June. At the same time, the house you are buying will be, on average, at a lower price. It’s a wash. Your net differential will be about the same regardless of when you buy and sell.Another strategy is available to those replacing one home with another: Buy now while prices are a bit lower than mid-2018 peak levels and then sell next spring after taking advantage of the early year appreciation in 2019. To take advantage of this approach, you need to be able to purchase now without your current property being sold. This only makes sense if the costs you incur in holding on to your current place for a few months is more than offset by the gain in value it is likely to see next spring. Again, get with your agent to analyze these variables.
- IF YOU ARE ONLY SELLING A HOME:
Those needing to dispose of a property without replacing it with another one in the metro Denver area have to decide whether to sell now or wait until next spring.
Selling now is not a bad option. While you’ve missed the absolute peak in prices that occurred in the 2nd quarter, you are still getting much more for your place than it was worth when the year began.
If you have the flexibility to wait until next year, history says you’ll need to hold on until January or February for prices to get back to their April – June 2017 peaks. Waiting until late Spring of 2019 will get you the most bang for your buck as values will be setting a new high level by then (again, if the market follows patterns it has established over the last few years). If waiting, it’s wise to get with your agent now to see what repairs or improvements you can be making to your home so as to maximize your rate of return when you sell next year.
TWO MORE FACTS WORTH NOTING:
1) The strategies outlined above assume that predictable patterns established over the last six years will continue for the next 12 months. We think that likely, but nothing is guaranteed.
2) The market patterns identified above are for the market as a whole. Specific geographic areas and particular price ranges may be performing differently from the overall market. You and your agent will have to see if the market’s general patterns apply to your situation and how the market realities in your area might change the general recommendations offered in this article.