If you’re reading this, you’ve probably heard the rumors about how much cheaper it is to a buy home in the winter as opposed to in the summer. Of course, this begs the question: is there truth to these rumors?
Before we dig too deep, it’s important to remember: for the most part (and yes, there are exceptions— think the housing bubble burst in 2008) the housing market is relatively stable. This is to say, if you’re delaying your purchase of a home in hopes of a massive seasonal price drop, you may be waiting in vain. On the flipside, if you’re looking to save a few thousand bucks (who isn’t?), there is some data that suggests some perks of holding out until the snow falls. However, even savings come with a price.
Average Sales Price In The Winter
Here is the situation: buying a home in the winter will save you money, but your selection will be limited. According to a study by Nerd Wallet, in which 50 U.S. metro areas were analyzed, the amount a buyer actually paid was typically at its peak during the heart of the summer (June and July). While the listing price doesn’t always fall come autumn, the actual sale prices dropped about 2.96% from September through November.
Statistically, home sales prices are usually lowest in the winter. Come January or February, homes cost about 8.45% less than they do in the summer time. So what exactly is causing this drop in price?
There are many factors at play here. One of the most well documented of these elements is the seasonal adjustment for house prices. To calculate these seasonal price swings, the U.S. Census Bureau uses a software called the X13ARIMA-SEATS Seasonal Adjustment Program.
But as we all might know, the listing price isn’t always indicative of the sales price. There is a psychological component to buying and selling a home in the winter.
For instance, in Erie, PA, houses stayed on the market for an average of 96 days in January and a mere 60 days during June 2017. As homes stay on the market longer, buyers can use this lengthy listing time as a leveraging tool to get the sellers to decrease the price.
However, there are significantly fewer options on the market during the winter. Shopping for a home from December to February is like shopping for a home in the bargain bin: you only save on what didn’t already sell.
Number of Sales from Summer to Winter
There are a number of good reasons to buy a home in the summer: better weather for house hunting, the kids are out of school, and moving when it’s dry and sunny is simply more pleasant. But there is one reason that is at the heart of higher sales volumes for May, June, July, and August.
Buyers like to have options. In a study done in the UK (where seasonal price swings are even more drastic than in the U.S.) by Ngai and Tenreyro from the London School of Economics, they refer to this as the “thick-market effect.” While the study was done in the UK, the point stands true for U.S. markets as well. In fact, in the U.S. 40% of the average year’s total home selling volume happens during the summer, according to research by Housing Wire.
Essentially, buyers prefer to purchase houses in the summer because there are options. While one might think that this would lower the demand and actually drop the price, the opposite is true: Because more sellers are attracted to the market, they can increase the price of their home to match the season.
A Home That Fits Your Needs
Everyone wants a home that fits their unique needs, be it their lifestyle, the size of their family, and of course the location. Alas, the market dictates that buyers are willing to pay more in the warming months not only for convenience, but to find a home that meets all the criteria on their wishlist.
So is it better to buy in the winter or the summer? If you’re looking for savings, winter is your season. On the other hand, if you’re looking for options, the summer is prime time. So here is the bottom line: waiting to buy a home for a lesser prices is not always a better deal. After all, if the home doesn’t suit your needs, you’re going to be back on the hunting in no time.