The housing market is said to be one of the economy’s great glacial markets in that it is huge, but it is so large that it changes very slowly. It inches forward, like a glacier and reacts poorly to sudden change.
Seasonal fluctuations — spring, summer, fall and winter — are not thought to be critical in the grand scheme of things, but the problem is that any one particular buyer may not be interested in the grand scheme of things. If you are a house-flipper — those who buy cheap and fix up homes quickly before renting or selling again — then you would certainly be interested in the seasonal ups and downs of a market. One flipper on line says "I would never buy a home in the summer," for the simple reason that prices tend to fall in the winter months.
This prompted one real estate agent — a quote mined from a quick search online — to declare that "November to February" is the time the best time of year to buy a home, because prices are in a slump in those months.
But a more useful metaphor expounds on this simplistic notion. Yes, prices may go down in the winter, but so does the number of listings, which means that buying a home in the winter is kind of like looking for bargains the day after a home has a yard sale. All the good stuff is gone and the only stuff left is marked down or put in a box with "Free" painted on it.
In the winter, you are looking at a market’s “leftovers.”
Of course, this pattern runs counter to expectations. When there are less items on the market, the price is supposed to go up, not down. But this is one market where the buyer has considerable influence. There are so many fewer people willing to go house hunting in the winter than there are in the summer that prices go down, even as the listings go down.
For all that, a neighborhood might spend six months covered in snow, but home hunters often see winter in a negative light. Even a perfect home covered in snow on a freezing day just has less appeal than the same home bedecked with green leaves or a green lawn.
The availability of cash plays a part in this as well, but only indirectly. This is because there were 39.6 million people over age 65 in the United States in 2009, the latest date in which statistics are available, says the U.S. Department of Health and Human Services.
Meanwhile, the California Association of Realtors found the average age for a first-time home buyer was age 31, which means that most home buyers are 31-years old and older. In addition, Bankrate annalists found that three out of five Americans do not want to live in the same city after retiring. That means about 24 million of those elderly citizens are looking for a new place to live.
The elderly bring capital to the market. They are often willing to sell their home and, if not, a lesser known option is to apply for a reverse mortgage, which solves an immediate cash-flow problem for the elderly, allowing them to make payments on a new place. A calculator is a great place to start understanding the structure of this option.
In the summer, just like the landscape, the market opens up considerably. The National Association of Realtors says that home buyers look at an average of 12 homes before buying and only in the comforts of summer can people move around easily enough to make this happen.
Maybe it is our instinct to hunker down and hibernate that closes down the housing market in the winter. Certainly, there are longer days that make house-hunting easier. In various locations, home buyers can also get a look at the neighbors, who might be gardening, cutting lawns, putting hamburgers on a grill or tossing a baseball in a back yard.
While you are looking at the neighborhood, you can also get a quick tour of the outdoor activities in the area. The local parks are open. The jogging and bike paths are busy. The local water holes are in full season.
Economists will tell you that the housing market is also in a long-term slump, as is the automobile industry, brought about by the great recession, which officially ended in the summer of 2009.
But banks have not reversed their tighter lending restrictions fully, showing how sensitive the market is to the wily behavior of the financial market. To some degree, the automobile market can get by with tighter lending. Point of fact, very few customers buy a home by writing one check. There is a banker involved somewhere, and bankers tend to freeze quickly and thaw very slowly, especially after a recession as severe as the most recent one.