Have you considered selling your home now?

Published 10 months ago at 18 May 2022

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Did you know that in real estate you can save a lot of money by factoring in seasonality? You could even make more profit! 
In fact, seasonally speaking, right now is a good time to start selling real estate.  
But the seasonality of house prices is also very interesting because it has a very strong fundamental reason, and therefore has been stable for many decades.

Here is how easily you can save money when purchasing a home, or earn additional money when selling one! 

The chart below shows the seasonal pattern of US home prices, i.e., the average trend based on the price performance of residential real estate over 64 years. In other words, from this chart you see the average progression of home prices in the course of a year.  

US home prices: seasonal trend, 1953 - 2016 

  Source: Seasonax, data source: Robert J. Shiller 
As can be seen, prices tend to increase most rapidly between springtime and late summer. 
However, there is no visible and distinctive seasonal pattern, such as the trends displayed by listed financial instruments like stocks, currencies, commodities or bonds. This is due to the inertia of real estate price trends. 
Thus, to show the details of the seasonal trend in residential real estate more clearly,  a different method of presenting the data is used.

A de-trended chart shows the seasonal pattern in home prices more clearly

To improve the visibility of the seasonal price pattern in home prices, the following operation is performed: the data is de-trended. To calculate this, firstly the average price increase per year is determined. Then the same pro-rata amount is deducted from every month (except for the first month), so that the year's ending value is equal to the beginning value. The result of this is a de-trended seasonal pattern index.  
Next, the average of these 12 values is calculated, i.e., the de-trended mean is determined. As a final step, the difference between the monthly values of the de-trended seasonal pattern index and the de-trended mean is calculated.  
The chart below shows the seasonal divergence of US home prices from their de-trended mean over 64 years.  
US home prices: seasonal divergence from the de-trended mean, Prices are at their peak in midsummer. 

Source: Seasonax, data source: Robert J. Shiller 
This chart shows the seasonal effects on relatively inert real estate prices much more clearly. Between June and September, home prices reach their highest seasonal levels; between December and March they reach their seasonal lows. As a result of the inertia of real estate price trends, the difference between these levels is relatively small in percentage terms. However, in view of the total absolute value of homes, it represents fairly sizeable amounts of money.  
So just what causes this difference? 

Sunshine makes home purchases more expensive 

 Another well-known curve is clear when looking at the chart above: namely the seasonal pattern of temperatures. In summertime, temperatures are higher; in the winter season, they are lower. The same obviously applies to the number of sunshine hours.  
The seasonal trend in home prices correlates with the weather.  
In the summer, bathed in sunshine, homes appear far more inviting and friendly than they do in the darkness of the winter season. This makes buyers more willing to pay higher prices; it is the other way around in the winter.  
Naturally, properties are more likely to be perceived as drab and colorless in the darkness of the cold season, regardless of when they are actually purchased.  
Nevertheless, at the time of the purchase, when the decision to buy is actually made, buyers are taken in by the perception created by sunshine and are willing to pay higher prices.  

Benefit from seasonal knowledge!  

So you can see that you can earn a lot of money with seasonality! In concrete terms, this means you should start your sales activities now if you plan to sell your real estate. 
But also remember seasonality can be used profitably with stocks, commodities, currencies and other asset classes! 
Yours sincerely,  
Dimitri Speck
Founder of Seasonax and Head Analyst of Seasonal Insights 

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