“Numerology” attempts to uncover patterns in the relationship between economic indicators and real estate trends.
Title: Southern California Homebuying Enters Annual “Off” Season Amid Expectations of Price Declines
Source: My extensive data analysis delved into the month-to-month median selling-price data from closed real estate transactions in Southern California dating back to 1988. The objective was to identify any correlations between the calendar and home prices in the six-county region.
Seasonal Factors: Historically, seasonal patterns have consistently influenced homebuying behavior regardless of the broader economic climate.
Key Insights
September to January can be considered the “off season” for Southern California homebuying. During this period, the median selling price has declined 80% of the time, occurring in 28 out of the past 35 years.
On average, the off-season months experience a 3% decrease in home prices. The best off-season performance was a 4% increase in 2013, while the worst was a 24% drop in 2009 amidst the Great Recession.
This stands in stark contrast to the preceding seven months, which can be referred to as the “prime time” for home prices.
-
- MORTGAGE NEWS: Curious about interest rates and lenders? CLICK HERE!
Historically, prices in Southern California have risen during the February-through-August period, occurring in 91% of the years since 1988 (32 out of 35).
During these prime-time months, the median home price has increased by an average of 8% over 35 years. The highest peak was a 21% surge in 2003, while the lowest was a 21% crash during the 2008 financial crisis.
In-Depth Analysis
A significant factor driving this seasonality is the level of sales activity.
During Southern California’s off-season (September, October, November, December, and January), there is a 35% decrease in home purchases compared to the prime-time months.
Life cycles also play a role, as families with children typically prioritize homebuying before the start of the school year. Additionally, sellers often prefer to avoid the hassle of selling during the holidays and the market’s off-season, unless there is an urgent need to move.
Furthermore, industry traditions, such as the annual “spring rush,” contribute to the motivation for buying and selling homes.
Regardless of the causes, seasonal price fluctuations have significant implications. The turning point in the yearly cycle typically occurs in August. Let’s examine recent trends in Southern California:
2018: Median home prices increased by 8% during the prime-time months but decreased by 7% in the off-season. Closings decreased by 44% as volatile mortgage rates affected buyer demand.
2019: A 7% price increase during prime time was followed by a 1% decrease in the off-season. Closings experienced a 33% dip, reflecting a relatively stable market.
-
- ECONOMIC NEWS: Interested in the current economic trends? CLICK HERE!
2020: Despite pandemic lockdowns, the prime-time months saw a 13% surge in home prices, while the off-season experienced a marginal 0.3% dip. Closings only decreased by 8% – the smallest decline since 1988.
2021: The economy reopening led to a 14% price increase during the prime-time months, accompanied by a rare 1% gain in the off-season. Closings decreased by 35%.
2022: Home prices rose by 5% during the prime-time months, but the off-season saw a 7% decline. Closings plummeted by 54% – the largest seasonal dip on record – due to record-setting mortgage-rate increases that cooled the market.
Interestingly, this year started with an above-average 10% increase in home prices during the prime-time period. Now, the question remains: What can we expect during the off-season?
Takeaway
Context is essential when evaluating homebuying trends.
Considering Southern California’s historical data, there is a high likelihood of a 3% price decrease through January. If you are participating in the market, this suggests adopting a less aggressive approach in the autumn, whether you are a buyer or a seller.
-
- REAL ESTATE NEWSLETTER: Stay up to date with our free ‘Home Stretch’ newsletter through email. SUBSCRIBE HERE!
Alternatively, you may be interested in observing the market through a more stable year-over-year price tracking approach. While this eliminates seasonal fluctuations, it also limits your ability to capture short-term movements.
Recent variations in homebuying activity resulted in a below-average 2% increase in Southern California’s median home price in the 12 months leading up to August. This cooling trend can be attributed to interest rate hikes, following a 6% increase in the previous 12-month period.
From a statistical perspective, seasonal patterns are a reasonably predictable aspect of the often unpredictable homebuying cycles. Armed with this knowledge, buyers and sellers may discover unique opportunities to navigate the purportedly less popular off-season.
Contact Jonathan Lansner, the business columnist for the Southern California News Group, at [email protected].
Denial of responsibility! Vigour Times is an automatic aggregator of Global media. In each content, the hyperlink to the primary source is specified. All trademarks belong to their rightful owners, and all materials to their authors. For any complaint, please reach us at – [email protected]. We will take necessary action within 24 hours.
