Supply & Demand.
It’s a crazy thing. Given that we’re so close to Christmas, perhaps the best way to illustrate this is with a run on a desired toy. A few years back, it was the Sesame Street “Tickle Me Elmo” doll. When it was introduced in 1996, it quickly rose to the top of every child’s “Dear Santa” wish list. Tyco, the manufacturer, had a suggested list price of $28.99. They started production with 400,000 units. Those quickly sold out, and Tyco pumped out another 600,000. The $28.99 doll was soon being sold by retailers for $30.00, and then $40.00, and then more. Those eager to leap on the craze began to offer Elmo dolls in classified ads and on the fledgling internet. Second-hand sellers advertised Elmo dolls for hundreds of dollars. It wasn’t uncommon to see an asking price in excess of $1,000. Someone in Denver bought one for $7,100.
Housing is sort of the same thing. When everyone is building, prices go down. When everyone is selling, the market deflates.
When everyone is buying, however, prices rise.
Some of this is based on inventory. When there is a limited amount of stock, it become harder to find that desired product and it becomes more expensive. Some of it is basic finances. Mortgage rates were at desirably low rates before the Covid pandemic, and concerns about the economy drove the Federal Reserve to press them lower. While we’ve all been under a cloud of uncertainty about the basic economy, Covid has made it a great time to buy a house.
But much like Christmas will drive up the prices of toys, and Memorial Day brings a seasonal rise in gasoline prices, the housing market is affected by the seasons.
This time of year is generally good as far as home prices. There’s a lull between Thanksgiving and New Years, as nobody wants to spend the holiday season moving, so sellers in the late Fall are pretty motivated to move quickly. The weather makes it harder to have your home inspected or to host an open house, so sellers may add perks like appliances or guarantees on things like roofs and HVAC systems. These factors are balanced by the fact that there will be fewer homes on the market.
The real estate warms up with the warmer weather of Spring. Children are preparing to get out of school, and sellers are sprucing up their properties. After sitting through the cold Winter months, folks are anxious to get moving again, both figuratively and literally.
The dog days of Summer are considered a peak real estate season, and an exodus of expectant buyers can drive prices up.
This may be tempered if you’re shopping in places like Florida or Arizona. Air conditioning matters if you’re house-hunting on a hot day.
Buying and building a custom home is impacted by all of these factors. Is there enough open land available for sale? Are home builders looking at a backlog of sold projects? Have interest rates remained stable?
The beauty of choosing a custom-built home is that it’s done on your schedule. You decide if you’re financially healthy enough to build your dream home. You decide if the lot you’ve just seen is the perfect one for you. The home you build is being created for you, and not for the next person making the higher offer.
When you build a custom home, it’s always the right season for you.