It is a common theory that the real estate market has, what some call, “seasons”, but do they really exist?
Many people think that the real estate market has good and bad months to sell based on the time of year. It is true that sales often take a dip October-January each year, but is this attributed to the lack of buyers during the holiday season? There are 3 charts below showing the trends in 92101 over the last 5 years. They explain what happens throughout the year.
As you can see from the chart, the number of sales tends to drop drastically midway throughout the year. Last year we saw one of the most drastic curves over the last 5 years. It appears the number of sales are following a very similar trend this year as well, with the most growth in Quarter 2 and decline as we go into the holiday season. This chart simply does not tell the whole story. To get an accurate idea of the market, we need to take into consideration a couple of other factors.
One of the most consistent trends over the last 5 years has been the number of new listings to hit the market. Year after year, we can see a drastic decline in the number of new listings hitting the market beginning around September. We then see that number begin to shoot up in Quarter 1 of the following year. With less options, it would make sense that there are less sales. What does this mean as a seller?
Inventory is one of the most important principles when analyzing a market. It is the basic principle of supply and demand. When demand is high and supply is low, the price is driven up. As supply exceeds demand, it has the reverse effect. Inventory is calculated by taking the number of available listings on the market and then dividing it by the number of sales in a time period (# of sales per month in this situation). If you look at this chart, you can clearly see a trend that shows inventory drops during the so called slow months. The lower the inventory, the more the market favors sellers.
So What Does All Of This Mean?
In my opinion, the “slow season” is a common misconception. There are buyers year round, but many people choose to not sell during the holidays because they do not want to go through the process at an inconvenient time. As a result, the months of October-December may be some of the best months to sell your home or investment.
Inventory is at a 10 year low. In September, Downtown San Diego hit the highest average price per square foot since October 2006 (Click Here to see the full Quarter 3 market update). The market is extremely hot, so do not let the theory of a “slow season” stop you from moving on to the next chapter of your life!
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