Typically, September is the end of the peak spring and summer homebuying season. But last year, the pandemic fueled an unusually strong fall housing market.
“As we turn to fall once again, the question remains: Will the housing market’s traditional seasonality return once pandemic-related disruptions wane, or is there reason to believe that housing market seasonality is weakening for reasons not directly tied to the pandemic?” First American Deputy Chief Economist Odeta Kushi asked in a recent commentary piece.
Homebuying normally follows a predictable seasonal pattern, with buyers overwhelmingly acting in the spring and early summer.
“Between 2013 and 2019, home sales were on average 75 percent higher during the peak (which usually occurs in June) compared with the trough of the previous winter (which usually occurs in January),” Kushi said. “During the same period, median home sale prices followed a similar seasonal pattern and were 13 percent higher on average during the annual seasonal peak compared with the trough.”
In the fall and winter, the market usually cools, home sales slow and the median home sale price declines, she said, resulting in fewer homes for sale. Available homes tend to stay on the market for longer.
Last year, the pandemic disrupted the seasonal pattern.
“First, the housing market froze in the early spring of 2020 as mandated lockdowns and social distancing measures made it difficult to buy and sell homes. Then, in June 2020, the housing market rebounded,” Kushi said. “The pause in April and May extended the summer home-buying season into the fall and winter of 2020. Both home sales and home price growth were uncharacteristically strong. Home sales in the fourth quarter of 2020 were 16 percent higher than a year before and prices were 15 percent higher.”
Kushi said that housing market seasonality may be less defined moving forward, even once the acute effects of the pandemic end.
“One reason is that investor activity doesn’t typically follow the same seasonal trends as the rest of the market,” she said. “For investors and second-home buyers, movements in mortgage rates are more consequential. Markets with a higher or growing share of investor activity should expect less seasonality.
Another effect on seasonality is demographic trends. Combined with the continued housing supply shortage, that may lengthen the homebuying season.
“Millennials make up the largest share of first-time home buyers today, and that is expected to remain so as the generation ages into its prime homebuying years. The lack of inventory and resulting intense bidding wars throughout the spring of 2021 left many potential millennial homebuyers unable to find something to purchase, and many of them may find a home to buy in the fall or winter rather than walk away from the market until the following spring,” Kushi said.
“The pandemic led to numerous disruptions in the housing market, resulting in unseasonably strong homebuying activity in the fall and winter months of 2020. However, it is possible that seasonality will be less pronounced than in the past, even after the acute disruptions caused by COVID-19 moderate,” she concluded.