Seasonality in Real Estate

(Does it still exist?)

Over the past three weeks, I’ve had sellers (and buyers) ask me how this real estate market will perform over the holiday period. Historically, the number of listings and transactions slows to a crawl during this time of year, and then the market picks back up after New Year’s for the “spring selling season.” But in the COVID era, the overall real estate market has been performing at a nonstop, blistering pace since October 2020. While the market isn’t putting 400 units into contract every week like it was in the Spring, there is still plenty of action. Take November, for example. There were over 2,000 listings put into contract that single month — a month with only three full weeks due to Thanksgiving. Past Novembers have typically seen about half that many units going into contract.

Currently, buyers are still out in droves, putting listings (that are priced right) into contract, and many more are starved for new inventory, which brings me to the seasonality of the listing supply. Instead of the typical seasonality, where supply subsides because demand subsides, this year, we’re seeing demand stay hungry and supply come off anyway. This is happening for two main reasons: either the listing goes into contract or the seller doesn't get their price. This is setting up an interesting dichotomy between prices and inventory and supply and demand. Sellers are taking their property off the market now in the hope that prices and demand will be strong this spring … but the demand is there now!

There’s no seasonality to the buyers who are out now. They want to take advantage of low interest rates and hedge inflation. Their companies did great last year, and they’re getting incredibly large bonuses and “good” prices. Prices are still relatively low and competitive compared to the peaks of 2015. But sellers think that seasonality will drive prices and interest higher this spring, which could be the case, but it's a gamble.

The overall listing supply has been diminishing since October 2020, but recently, over the last 30 days really, inventory is taking a particularly hard nosedive. Sellers are not taking their product off for the usual reason of seasonality or because their prices are too high for this market. They are taking them off because they think that prices will rise by this spring. In fact, the current overall inventory is dropping so fast that three out of the last four weeks saw more units being put into contract than are coming onto the market. This is really putting a strong damper on overall supply, but it’s not lowering buyer demand, yet.

Generally, the industry doesn't like there to be little to no supply. It’s then that buyers as a whole might withdraw and pull back. Although, we haven’t seen that yet. Markets will perform at their peaks when there is a healthy balance of inventory coming on and listings going into contract. Sellers are hoping (praying) that buyers will react by bidding on low inventory and push prices up if demand remains high while inventory drops, but that’s not what we’re experiencing now. We’re seeing low inventory and buyers still attracted to correctly priced homes.

We will see a market that performs solidly if prices are preserved correctly. A market like this does not see signs of seasonality; it’s just busy all the time. Listings will sell no matter the time of year if the property is listed for the right price. This is why I think seasonality comes into and out of play for sellers, but it’ll boil down to pricing, not the season anymore for the near future. If you list at the right price the day before Christmas, you will still get offers because buyers are starved for listings at the right price, no matter what time of the year it is.

So, seasonality has become a thing of the past (so far). I believe it will come back at some point when the market balances out. But for now… It’s a 24 hours a day, 7 days a week, 365 days a year market. There’s been no seasonality to this point in 2021, just a strong price-driven, highly transactional, year-round market.