We recently put together some information about how seasonality affects the housing market. The article will show you how seasonality in real estate can work to your advantage or cause significant losses.
How seasonality affects the housing market
With few homes available, sellers are in pole position
Last year, limited inventory dominated the headlines for the real estate industry, and that trend looks to continue this year. According to the National Association of Realtors (NAR), inventory dropped 12.3 percent from November to December, falling to 3.8 percent lower than December 2014. That equated to just a 3.9-month supply of homes.
Generally speaking, a 6-month supply of homes (meaning it would take six months at the current sales pace to sell all the homes on the market) represents a balanced market, one in which there are enough homes to meet demand. For much of 2015, inventory remained well below a 6-month supply, and will likely remain so for 2016.
Why is inventory so constrained? Part of the sharp drop in December is due to the seasonal slow down in many states. Cold weather and holidays keep many buyers out of the market and many sellers waiting for demand to pick back up. Additionally, new home construction came to a standstill when the housing market crashed, so there are fewer new homes available. Existing home inventory is low as well. A combination of factors, such as locked-in low interest rates and a sense that home prices will continue to increase, are keeping current homeowners from listing their homes.
If you’re thinking of selling, this market is very much a seller’s market. When inventory is scarce, buyers are forced to compete over the few homes for sale. Homes are selling faster, and in many markets bidding wars drive home prices up well above asking. At the very least, you’ll be in a strong negotiating position.
If You’re Thinking of Buying, Act Sooner Rather Than Later
If you’re thinking of buying a home, it’s important to act sooner rather than later. As the year goes on, affordability will continue to suffer. With home prices expected to increased around 4 to 5 percent this year and mortgage rates expected to rise to around 4.5 percent, the longer you wait to buy, the less home you’ll be able to afford. Even small increases in mortgage rates and home prices can have a large impact on your future monthly mortgage payment!
If you have any questions about how seasonality impacts any of your real estate related decisions, please don’t hesitate to let us know. Maybe you are just curious about what’s for sale in our local market? Let us know and we will send you automatic updates on what’s on the market and what’s selling directly from our MLS. If you have any questions remember we are always just a call to 813-300-7116 or click here away. To get your free copy of the report simply click the download now button below.
