Housing market just entered its key seasonal window: What it means

[ResidentialBusiness]

Want more housing market stories from Lance Lambert’s ResiClub in your inbox? Subscribe to the ResiClub newsletter.

Like clockwork, every year, the U.S. housing market experiences a seasonal swing. It happens in both good years and bad. And while the seasonal trend may vary slightly by market (for example, snowbird markets), it remains fairly consistent across most housing markets.

Here are three core components of the U.S. housing market’s seasonal effect—and what it means for buyers and sellers.

1. Existing home sales begin to rise heading into spring

Seasonally speaking, U.S. existing home sales typically bottom out in January, then begin to rise month-over-month until peaking around June. That’s true even in an affordability constrained housing market, such as the current market.

This trend is partly driven by families with children who prefer to buy in the spring so they can move and settle in before the next school year begins.

Another factor is that some buyers wait for their tax refunds in early spring, using them to help with down payments and closing costs.

In Northern and Mountain West markets, the rise in sales is also boosted by the fact that people waited for warmer weather before moving.

Additionally, many home sellers are aware of the seasonal trend and choose to list their homes in spring to attract the largest pool of buyers, which boosts inventory, increases choices, and drives up transaction volume. (More on that below.)

2. New listings rise in the spring

Knowing that many homebuyers begin their home searches in early spring, it’s also when many existing home sellers enter the market.

On a seasonal level, new U.S. house listings typically bottom out in December, then begin to rise month-over-month until peaking around May.

The annual upswing for new U.S. listings usually begins one month before the annual upswing in U.S. existing home sales.

3. U.S. home prices see the most upward pressure in the spring

U.S. home prices experience the most upward seasonal pressure between March and July and the most downward pressure between September and January.

As shown in the chart above, even during the home price crash from late 2006 to early 2012, U.S. home prices remained fairly steady during the spring months—only to resume plunging later in the year once the housing market moved into the seasonally soft fall window.

In appreciating housing markets (like most of the Midwest and Northeast right now), homebuyers typically face higher prices if they wait later into the spring season. In contrast, in correcting housing markets (like pockets of Southwest Florida right now), buyers are often rewarded for waiting until the seasonal slowdown later in the year (when prices dip further) to make their purchase.

View the full article