Outside of price, perhaps the most talked-about issue in real estate investment is when to buy and sell. We don’t present an answer here. That depends on lots of factors. What is presented here is a case study of selling and buying by month. Meaning, which months are the best to buy, and which are the best to sell. We have no special connection to Utah outside of it being a fast-growing, booming economy. Thereby, it represents a case study in a real estate market that used to be linear but has quickly moved to a hybrid market.
First, some background on when to buy and when to sell. This figure is the median sale price of a listing on Utah’s Multiple Listing Service (MLS) from 1996 through November 2018. (For those that want a refresher, the median is the middle of homes sold. Half of the homes sold were above this price and half were below). There are four periods identified by the colored sections.
The first section, in green, is the “Linear Period.” The linear period lasted from January 1996 to January 2005. Over this time, the median home price grew from $116,000 to $149,900. That is an average of $491 made every month for the home owner over 9 years. Consistently decent.
The second period, in yellow, is the “Global Housing Boom.” From February 2005 to June 2007, prices expanded by $70,100 in just 28 months. In these 28 months, the median home owner saw their homes appreciate by $2,504 every month! If you were not in, you missed out. That is, until the recession reared its ugly head.
The third period, in dark gray, is the aftermath of the housing price run-up. From June 2007 to January 2012, housing wealth plummeted. The median home owner saw prices drop by $53,000. That’s a loss of $954 every month over four and a half years! Unless you like losing money, it wasn’t a pleasant experience.
The recession finally ended. From January 2012 through November 2018, the median home price has grown to $300,000. Over the past almost seven years, a typical home owner has increased their wealth by $133,000, an excellent return. This is a gain of $1,602 every month. No wonder the housing market still has some love.
So, When to Buy and When to Sell?
With the background established, let’s go back to the question at hand regarding real estate investment: when to buy and when to sell? Is it December, right before the dead winter months? Perhaps it’s June, when kids get out of school?
Here is a look at the month-over-month (M/M) change in median home price by month. Each bar represents the average of each month. Go take a look.
Are you surprised?
If you’re a seller, the best month to sell is May. That is, unless you can hold out through June. If you can make it another month, you’ll get another $3,056, on average.
When’s the best time to buy? The month with the largest decrease in median price is September. This might stem from kids starting school and families having already settled down.
If you can buy in January, you generally get a healthy gain in wealth for the next six months.
Does the Business Cycle Matter?
Seasonality is all fine and good, but does it matter if you’re concerned about the business cycle?
What if it is January and you’re thinking about selling your home? If the average holds, you’d be better off waiting through the summer and gaining, on average, $11,000 in wealth for the typical home. But what if you worry a recession is on the horizon? Then what?
Here’s a look at the M/M change in home prices across each year.
Fascinatingly, the answer is that the business cycle doesn’t affect when to sell your home. Even in the housing bust years of 2008 through 2012, the median home price typically increased heading into the summer. Sellers consistently seek higher prices in the summer — even during a recession!
In a look at the seasonality of home price movements, summer is almost always the best time to sell. And if you can hold out, the end of summer is best. This result holds even if you’re worried about a recession. Prices typically rose during the summer even during recessions. Consistency, consistency.
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