The typical advice investors are given is that the fall-winter season is a great time to buy real estate. The narrative goes like this:
- Families are done house hunting for the season because they don’t want to disrupt the school year.
- The homes that didn’t sell during peak season are likely to be discounted by increasingly nervous sellers.
- Shrewd investors can get great deals on real estate.
Does this seasonal pattern really still apply to the current housing market?
If we dig a little deeper into what’s really going on with the post-pandemic real estate market, we’ll see that things have changed. Autumn and winter 2023 will look different for investors for a number of reasons, and this change is likely to be long-lasting.
Seasonal Buyers Are Becoming “Anytime Buyers”
Traditionally, the end of summer signals a drop in demand for single-family homes as families settle in for another school year. However, this hasn’t been the case since 2020, according to recent research by Opendoor.
The researchers analyzed housing data from 2017 to 2022 and found that “even though new listings decline on average 21% in the fall, demand from buyers has increased since 2020. In other words, there have still been just as many buyers looking in the fall—people we’re calling ‘Anytime Buyers.’”
First, the school year, important as it is, is not the only factor in homebuyer decision-making. Job and income changes play a big part in moving decisions. The ability to work remotely post-pandemic has shifted buyer perspectives like no other factor. Interstate moves are now officially more common than moves within the same metro area, according to migration trend research by Redfin. Moving between metro areas is a big life disruption, including changing schools, and it’s one that homeowners are increasingly willing to undertake, regardless of the time of year.
Affordability is another key factor. Many homebuyers are determined to secure a home in a market that remains highly competitive, with demand outstripping supply. Neither rising interest rates nor economic uncertainty has had much of an impact on this doggedness.
One strategy buyers are adopting involves looking for homes after peak real estate season. The promise of better deals in the fall and winter is an open secret, with many more people taking advantage of this supposedly quieter and cheaper season.
What It Means to Real Estate Investors
These shifts have several implications for real estate investors. As an investor, you’re no longer in the somewhat privileged position of bargain-hunting during the low season. You are now in competition with other homebuyers who haven’t exited the market until next year, as would have been the case before the pandemic.
At the same time, if house flipping is your goal, there is good news. A steady influx of buyers throughout the year will be an advantage once your investment is ready to sell.
All the current research is pointing toward a huge appetite for better housing among existing homeowners. Yes, first-time buyers are really feeling the squeeze, increasingly unable to afford starter homes. However, when it comes to buyers wanting to move up to a better, bigger home, there are no signs of a market slowdown.
We know that people are on the move; we also know they are moving out of the large cities like New York, Los Angeles, and Chicago and into metro areas that offer them a higher quality of living for less—places like Las Vegas; Sacramento, California; and Myrtle Beach, South Carolina. If you can tap into this ongoing “great migration” and offer ready-to-move-in properties at competitive prices, you can still reap the benefits of the pandemic housing boom, even if many media outlets claim it’s over.
If you’re a buy-to-rent investor, you also are in a strong position if you can tap into hot housing markets. Florida and the Midwest are currently leading in popularity as the most desirable locations for renters, according to data from Yardi Matrix. Once again, as many young professionals are now unconstrained by geographically fixed employment, many are seeking a warmer climate, a more relaxed lifestyle, and the higher affordability of the South and the Midwest. Many regions, especially Florida, are seeing near-full rental occupancy.
What Will Autumn and Winter Look Like For Investors?
The single most important thing investors should bear in mind about the current housing market is that a historically low housing stock dominates it. And this factor is unlikely to change during this fall-winter season.
As Jack Macdowell, chief investment officer and co-founder at Palisades Group, told Forbes in a recent interview: “Inventory is approximately 46% below the historical average dating back to 1999. We think that it is highly unlikely that the inventory problem will be resolved in 2023.”
So what does this forecast mean for investors going into the fall-winter season, coupled with what we know about the changing behavior of homebuyers? It means that your behavior as an investor should change, too. If you are basing your investment decisions on the traditional expectation of a decline in demand as summer ends, you need to rethink your strategy.
Tap into those hot, affordable housing markets now while they are still hot and affordable. The fate of every real estate hot spot is to eventually become saturated and unaffordable—that’s when you may have trouble both selling and renting out. The time to buy real estate in the booming areas is right now.
Tapping into the current demand for bigger and better family housing in affordable areas is what many savvy investors are doing. Alison Williams, a Redfin Premier agent in Sacramento, one of the current hot real estate markets, says that some of her current clients are investors “who are looking to buy a home here and rent it out for a few years before moving in themselves.”
Under the current market conditions, it’s wise to become an “anytime buyer” as long as you know your plan for each property you invest in.
