Is the Second Half of 2018 A Smart Time to Buy or Sell?

Posted by Lindsey Friedman on Monday, September 10th, 2018 at 11:00am.

Lindsey Friedman - Realtor - Colorado Home Realty

As we end the summer season I hear rumblings from folks that the market is “cooling off.”

There is definitely a seasonality to residential real estate. It’s also true that there are both myths and realities that the data supports in connection with this seasonality.

 

One myth is that most resale home transactions occur during the first half of the year. The graphs below tell differently. 

  • On average, the distribution of closings per quarter is 19%, 29%, 29% and 23% over the last six years.
  • Most sales occur in the 2nd and 3rd quarters – 58% of all closings occur in this six-month period.
  • More sales occur in the last half of the year than in the first half of the year – 52% in July through December versus 48% in January through June.

Therefore, the last half of the year is a fine time to be buying and selling real estate. You’ll have plenty of company.

The reality is that most of the price appreciation for a given year will occur in the first six months. A normal pattern for the last five years is to see prices that are 12% to 14% higher in June than they were in January. About 3% to 4% of that appreciation is given back during the last six months, resulting in annual appreciation rates of 8% to 11%.

This mini-retreat of price gains during the last half of the year creates different opportunities for buyers and sellers. Here are some strategies that I am advising my clients to follow:

Buyers Only

The last half of the year is prime time for people that don’t currently own a home and want to jump into the market. The price you pay will, on average, be lower than they were in April, May and June of this year. There is a window of opportunity approaching!

Buy and Sell

You may be getting a bit less for your house in the last half of the year than you would if you had sold during the peak months of April through June. At the same time, the house you are buying will be, on average, at a lower price. It’s a wash. Your net differential will be about the same regardless of when you buy and sell.

Another strategy

Buy now and sell next spring after taking advantage of the early year appreciation in 2019. To do this you need to be able to purchase a new home without the proceeds of your existing home. You can put a short-term renter in your existing property after you’ve bought and moved into the new one to minimize cash flow losses while waiting to sell next year.

Sell Only

Those needing to dispose of a property without replacing it with another one in the metro Denver area have to decide whether to sell now or wait until next spring.

Selling now is not a bad option. While you’ve missed the absolute peak in prices that occurred in the 2nd quarter, you are still getting much more for your place than it was worth when the year began.

If you have the flexibility to wait until next year, you’ll need to hold on until January or February for prices to get back to their April–June 2017 peaks. Waiting until late Spring of 2019 will get you the most bang for your buck. While waiting, it’s a great time to prepare your home for market by making necessary repairs or improvements to maximize your rate of return when you sell next year.

While we don’t have a crystal ball, the strategies mentioned above assume that the predictable patterns that have happened over the last 6 years will continue into the next 12 months. This is likely.

Second, the market patterns identified above are for the market as a whole. Specific geographic areas and particular price ranges may be performing differently from the overall market. For more details on your neighborhoods of interest, reach out and we can explore the activity unique to your part of town. And, enjoy these summer days while they last!

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