September Q&A: The Seasonal Cool Down

You can set your watch by it. Or at least your calendar.

As the leaves on trees start to change color and the morning weather is brisk, headlines declare the home sales market is cooling. This year, perhaps more than ever, there has been a pronounced contrast between the frenzied home sales in spring to the fall, especially in hot markets like Colorado and the Bay Area.

The seasonality of the real estate market is the subject of this month’s question and answer session between Lane Hornung, CEO of 8z Real Estate, and John Rebchook of Denver Real Estate Watch.

The Q&A is part of 8z’s Real Estate 101 series.

John: Lane, what would you say about the slowdown the home market experienced in August, following multiple offers and bidding wars in the spring and early summer in hot markets such as Denver and in the Bay Area?

Lane: I would say it is normal. The slow down in the fall is as predictable as the sun coming up in the morning.

John: Why does the market cool this time of the year?

Lane: The real estate market is seasonal. The market cools off in the fall and the winter. If you look across the country, as the temperature drops, so does the housing market.

John: Is there a geographic element to it?

Lane: I think so. If you look at a place like Chicago and other parts of the Midwest that get really cold in the winter, the slowdowns are more pronounced. As you go west, to places with milder winters like Denver and San Francisco, it is less so.

John: Is part of the real estate slowdown that many consumers aren’t motivated to make the biggest purchase of their life when the days are shorter and colder?

Lane: I think that is a factor. It is human nature to want to hunker down when it gets dark earlier and it is colder. People often want to lay low from Thanksgiving to Super Bowl Sunday.

John: And, of course, some people feel an urgency to buy a home before the school year starts, so they have already moved into their new home.

Lane: That is true for some people. Some homebuyers, of course, don’t have kids, so that is not an issue. And some parents are willing to buy a home later and switch their kids to a new school after the Christmas vacation.

John: So I guess the bottom line is that consumers shouldn’t become alarmed by the seasonal slowdown. It doesn’t mean the sky is falling.

Lane: The month-to-month changes are interesting, but not that important for measuring the temperature of the market. What is far more telling is the year-over-year change.

John: Of course, the market doesn’t come to a complete standstill in the fall.

Lane: Absolutely not. In fact, there is a bit more supply on the market now than we had during the bidding wars and true frenzy in the spring and early summer. That is bringing out more buyers, who may have been out-bid earlier in the year. Interest rates are still low, and while it is still trending toward a seller’s market, the added supply takes a bit of the edge off the need to make an offer on the spot.

It’s actually a great time to be a buyer.

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