Selling a Home In The Summer is Not What You Think...

When it comes to the housing market, everyone knows that with seasonality things boom in Spring and lull in the Winter.  There is one aspect of seasonality that unfortunately gets ignored each and every year, by sellers and agents alike, that ends up costing them thousands; and right now is the time of year when this mistake begins to cause headaches.  People call it the “dog days of summer” but fail to understand one of the largest contributors to this phenomenon... pricing a home based on the Spring’s peak.

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The Spring vs Summer Markets…

To understand where this issue comes from it is important to first take a look at the seasonal market changes surrounding it.  Everyone understands that there is a yearly increase in activity over the Spring months. In fact, when looking at the percentage of the yearly home sales volume broken down by month, it becomes obvious how big of an increase actually happens in Spring.  Historically the percentage of the value of homes that sell each year increases by about 10% each month between March and June. An average of 8% sell in March and jumps up to a little more than 10% selling in June.  This is significant because the 2 factors affecting this growth are an increase in homes sold as well as an increase in home prices. All of this is why Spring has become synonymous with a market boom.

One thing that is important to realize, when looking at this graph, is that a home typically closes a month after offers are accepted which means that the June homes were actually negotiated in May.  Statistically, Summer is the busiest time of year in terms of people moving so we know that competition is almost always still there. Instead, the slowing of the market seems to be caused by a change in the perception of buyers, with the realization that the Spring market has increased prices.  This change causes buyers to slow down in terms of throwing out an offer, BUT the competition is still there for the homes that are priced and show well. Due to all this the summer months require a seller to compete with the buyers on price but also with other sellers because of the buyer’s altered perception.  All of this is why Summer has become synonymous with competition.

The Mistake…

When pricing a home the first step is always to compare the home with others that are active, under contract, and sold.  The closer the home is to the others in both quality and time, the more confident you are able to price a home. The problem that arises when doing this in the summer is that the peaked Spring market just finished which means the prices on those comps are typically inflated.  This causes a home to have an initial price just above what the new season’s market will accept and force the seller to trail the market with price drops.

As an agent, year-after-year, you hear about homes that were priced slightly above what the market would bare and, as a result, were forced to chase the market down while others had their initial price pushed up by multiple offers.  Since the competition is still there you end up seeing both extremes.

The Solution…

Be conservative with the initial price and let the market react.  The market will always determine price, so when deciding on that initial price it is important to get as many eyes on the property as possible.  Being a little on the conservative side, especially when the dog days of Summer start, allows the most buyers to consider the home and lets the competition do the work.  For a more in-depth understanding of why this strategy works, read our explanation of Selling a Home for More, By Asking for Less!