Seasonality in Real Estate

While you might not think the seasons of the year have an influence on the price you are paying or asking for your home, it can make a big difference – in some cases, as much as 10%.

Seasonality of Real Estate—What are the Key Factors?

1. Weather-Weather impacts the seasonality of real estate differently, depending on the climate your home is in. For example, in some popular ski resort towns, homes prices can skyrocket during the winter months, while winter impacts the market in other areas negatively. Understanding how the weather and its seasons impacts real estate value is an important consideration both for buying and selling.

 2. School Year- Studies have shown the busiest moving times of the year occur during the summer, with June being one of the busiest months and July 31 the single busiest moving day.  This data means that people are most likely to shop the housing market from the beginning of May through the summer months.

 3. Holidays- Many people do not want to move or uproot their family during the holidays, which essentially eliminates the period between November and January.  Many people do not want to add a move on top of all the extra obligations of the holiday season.  However, as a buyer, the holidays would be a good time to leverage a lower priced market combined with some holiday vacation days! 

What Does Seasonality Mean for Home Buyers? 

For a home buyer, it’s better to buy in an “off season.”   As a buyer in off season, you will have more negotiating room, less competition, and overall lower prices for the houses on the market during the off season. In addition, sellers may be more willing to give more concessions such as money for repairs or a longer closing period in order to firm up a contract on a house during the leaner selling months.

What Does Seasonality Mean for Home Sellers? 

If you are a seller, you want to obviously sell during those summer months, when the competition is fierce and the market is hot.   Multiple offers and bidding wars are your friend as a seller.  However, the downside is that when you are a seller, it usually means that you are also a buyer.   In an ideal world, sell in the spring/summer months to make the most profit on the home that you are selling. Then find a 4-6 month temporary living arrangement that would allow you to wait to buy until the winter or holiday months when seasonality and lower prices are typically on your side as a buyer.

I’m Thinking of Buying/Selling. What Are My Next Steps?

If you are working with a real estate agent, they should be able to provide you with the market metrics for different seasons in your area. By comparing different months and years, you’ll be able to identify where there are significant peaks and lows in your current market and determine when your areas ideal periods for both selling and buying. Interested in the Austin area? Contact me today 512-817-0855. I would be happy to provide you with market trends of any area in Austin and a seasonal analysis of the best time to buy or sell!

The Four Keys To a Successful Inspection

As a prospective home owner, what key items should you look for when the inspection report comes back?  How do you know what items might be potential deal breakers and which are simple repairs? I recommend you start by looking into these 4 categories of major home repairs.

1.     Roof- How old is the roof?  Has it had any previous repair? Have there been any leaks due to problems with the roof? 

A standard roof life is 15-18 years and can cost between $6,000 and $16,000 to repair, depending on the size of the home and on insurance coverage.

2.     Foundation- Has there been any significant shifting or cracks along non-natural seam lines?  Does the floor dip or shift in some parts?

You are looking for the inspection report to say that there has not been any standard significant movement of the foundation.

3.     Electrical- Is the wiring aluminum or copper? Copper wiring is more widely used in homes today due to its greater conductivity and heat resistance.   Aluminum wiring can still be found in some older homes.  Aluminum is much harder to repair than copper wiring, does not conduct energy as well, can tend to overheat and cause damage, and greater care has to be taken to install it properly in the home.  

Ideally you are looking for the inspection report to say that the home uses copper wiring and that no significant electrical issues were detected.

4.     Plumbing- Is the plumbing cast iron or PVC?

Cast iron plumbing will eventually rust from the inside out and should be cleaned out annually to remove build up.  Cast iron was used heavily in construction during the WWII era, so many older homes might have cast iron plumbing in use.  Cast iron is not a deal breaker, but it requires more upkeep and maintenance and can require contractors to dig underground through the slab to get to the pipes. 

Look for the use of PVC piping in the inspection report. If cast iron is used, make sure you understand how it can be accessed for future inspection and repairs and get the inspector to give you a status report on the integrity and lifespan of the cast iron used.

Part 2 - 33.3% Return on Renovation

If you missed Part 1, click HERE to read about a 46.7% return on renovation of a condo.

As previously mentioned, I have been fortunate to work with sellers who want to maximize their return on their home. In doing so, we put together a plan to renovate their home, then list their property for sale. This approach is risky, takes capital, and patience from the home owners. But in the right urban situation, with the right team, the opportunity can create a ROR (return on renovation) of 30-100%.

A key to this equation is who will do the renovation? My wife, Diana Skellenger, is a female general contractor in Austin. For all my sellers, the only contractor I trust is Diana and her team at skellyhome.com. Skelly Home continues to lead the pack in quality, affordable construction. I must admit, I am on the team, but it's from a high level. :)

The second example is a home in Travis Heights. This home was purchased by the owners in 2005. Before the renovation, the home was worth $600,000 and looked like the following:

For this home, the plan was to renovate the entire home which included a kitchen, 2 bathrooms, wet bar, removing a load bearing pantry (seen in the top left photo), and paint the entire exterior.  The total budget for the renovation was $120,000 with a market price of $825,000. 

Yes, this is the same house. The renovation turned out as expected, outstanding! The home was listed, then sold for net $760,000, earning a return of renovation of 33.3%.

Math:

$760,000 - $600,000 = $160,000 Gross Gain on Renovation

$160,000 (Gross Profit on Renovation) - 120,000 (Renovation Cost) = $40,000 Net Return on Renovation  

$40,000 (Net Return on Renovation) / $120,000 (Renovation Cost) = 33.3% Return on Renovation

The Renovation approach can work with the right team. 

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Part 1 - 46.7% Return on Renovation

Typically, your home is your biggest investment. Over time, a home owner not only creates long lasting memories in their home, but also can grow significant equity at the same time. Once you grow out of your home or want to move neighborhoods, it's time to capture that equity or return.

I have been fortunate to work with sellers who want to maximize their return on their home. First, we put together a plan to renovate their home, then list their property for sale. Now, this renovation approach does not fit everyone. It takes risk, capital, and patience from the home owners. But in the right urban situation with the right team, the opportunity can create a ROR (return on renovation) of 30-100%.

A key to this equation is who will do the renovation? My wife, Diana Skellenger, is a female general contractor in Austin. For all my sellers, the only contractor I trust is Diana and her team at skellyhome.com. Skelly Home continues to lead the pack in quality, affordable construction. I must admit, I am on the team, but it's from a high level. :)

Part 1 - Return on Renovation of 46.7%

The first example is a condo. At the time of the sale, the condo was worth $225,000 and looked like the following:

For this space, the plan was to renovate the entire condo which included a kitchen, 2 bathrooms, removing a load bearing wall (adding a column for support) and creating a better storage solution in the current utility room (white pantry next to the kitchen and half bath).  The total budget for the renovation was $75,000 with a market price of $365,000. 

As you can see, the renovation turned out to be amazing. The condo was listed and sold for net $335,000, earning a return of renovation of 46.7%.

Math:

$335,000 - $225,000 = $110,000 Gross Gain on Renovation

$110,000 (Gross Profit on Renovation) - 75,000 (Renovation Cost) = $35,000 Net Return on Renovation  

$35,000 (Net Return on Renovation) / $75,000 (Renovation Cost) = 46.7% Return on Renovation

The Renovation approach can work with the right team.