Holidays are Over, What Should We Expect:
Now that the holiday season has run its course, it’s a good time to review the typical patterns in the housing market we see in January. While December presents a unique case of year-end buyer motivation amid low listings, January offers a clear picture of the slowdown typically associated with winter. Let’s look at historical data below to understand the extent of this effect, as well as examine patterns that begin in January and carry forward into the spring.
These are what we call seasonality trends, patterns we see every year around the same time. They help explain how buyers and sellers typically behave as the year winds down and offer useful insights for planning real estate strategies. Buyers and sellers can use these seasonal trends to understand the broader market as they decide how to time their home purchase or listing.
Supply & Demand
First, let’s look at the average number of existing-home sales in the winter through early spring:
- December: 412,286
- January: 298,286
- February: 312,810
- March: 418,143
Historically, we see a significant decline (27.2%) in January home sales compared to December. In fact, January has the lowest average level of all months in the year, according to NAR data.
The winter season presents various logistical challenges that make it difficult to move. Additionally, buyers no longer have the year-end tax deduction incentive for prorated property taxes and closing costs, which contributes to the lack of motivation among buyers.
Sellers who are also looking to buy and relocate will face similar pressures, however the data suggests this effect may be offset by the motivation to sell now that the busyness of the holiday season has concluded:
- December: 2,213,810
- January: 2,250,476
- February: 2,349,048
- March: 2,363,333
Here we see a slight uptick in inventory of about 0.6%. This small gain may be driven by sellers with a tighter time frame, who are still listing despite the difficulties. While some sellers have entered the market, others are likely deterred by the lack of offers, which can impact their listing price.
Prices typically decrease in January, with a seasonal drop of about 3.6%, reflecting slower market demand during winter. Sellers who list during this period may face slightly softer pricing compared to peak spring months. The 2.9% price rise in March is one of the highest recorded, only beaten by the peak sale times of May and June. Looking back at inventory, we see a spike in sellers entering the market in February (4.5% increase), so it may be beneficial to enter the market early if the seller’s goal is to move as soon as possible while still getting a good price.
Buyers, on the other hand, have a unique opportunity to get a better deal due to the lack of competition if they can overcome the inconveniences associated with moving in winter.
Days on the Market: How Quickly Sellers Can Expect to Find a Buyer
Next, we will look at the number of days a typical home spends on the market in January to get a sense of how quickly a seller can expect to find a buyer in the winter season. Historically, homes are on the market for longer in January than in other months, as shown below:
We see an increase of about 7 days from January to December, resulting in a listing period of nearly 2 months. This suggests that many homes listed in December took longer to sell, likely because buyers took time off from searching during the holidays, among other winter-related delays.
Buyer Characteristics: Who is in the Market in January?
Lastly, we will look at the share of first-time and cash buyers to get a sense of the typical buyer in January.
First-time home buyers account for roughly 30.2% of existing home sales in January, declining about 1.5% from December. First-time home buyers are more likely to be young families, which adds complications associated with moving a child into a new school in the middle of the school year, especially if the second term has already started.
When we look at cash buyers, we see the opposite effect. Cash buyers accounted for 24.2% of the market in January, a 2.5% increase from December and the largest increase among all months. Investors are not constrained by the issues commonly associated with moving a family at an inconvenient time, allowing them to focus on market timing by identifying undervalued homes during the seasonal price drop and purchasing at a discount.
For REALTORS®, the key takeaway is that January presents challenges in finding motivated buyers; however, sellers are beginning to enter the market as there is now time to focus on a planned move or investment property. For buyers who can move in the winter, January can offer opportunities to face fewer competing offers and take advantage of seasonally softer pricing.
Copyright NATIONAL ASSOCIATION OF REALTORS®. Reprinted with permission.
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