Why Real Estate Values Dip in the Fall and Winter

According to the National Association of REALTORS (NAR), American homes are about 16% more expensive in June than in the winter months of December through February.

There is a long-standing tradition of real estate values dipping in the fall and winter nationwide. But why? Why would a property be less valuable in November than it was in May? 

Turns out, there are several reasons. Let’s discuss them and explore ways to take advantage of this seasonal cycle as real estate investors.

Here are the main reasons why property values tend to dip in the fall and winter months.

Many buyers, particularly those with school-aged kids, prefer to move in the summer when school is out. Not only does this eliminate the stress of packing and moving while trying to get the kids ready for school each day, but it also avoids an awkward mid-year school transfer when moving to a new school district. 

Plus, fall kicks off the holiday season. With all the prep that goes into Halloween, Thanksgiving, Christmas, Hanukkah, and New Year’s, people are extra busy. Unless they need to move asap, they might just prefer to lighten their load by waiting until after the holidays to start a house hunt. 

With fewer buyers in the market, competition (and the bidding wars that accompany high competition) naturally declines. 

While it’s not a big issue in our warm and sunny Los Angeles market, many American markets struggle with cold, snow, rain, and wind in the fall and winter. This makes the idea of house hunting and moving less appealing. Plus, it reduces curb appeal! Homes often look less vibrant when trees are bare, lawns are dormant, and daylight is shorter, making properties feel less inviting both in person and in listing photos.

The weather challenges and plan-around-the-school-year mentality have culturally trained us to think of spring and summer as “better” times to buy to sell. So many homebuyers and sellers pause their relocation plans for the fall and winter based on expectations.

This becomes a self-fulfilling prophecy. People believe they need to wait for spring, so they do, which lowers actual activity in the fall and winter. And this lower activity often leads to lower price points because of less competition. 

Sellers who list in the fall or winter are often highly motivated to sell. They may have waited until the spring if they didn’t need to sell for a job relocation or financial liquidation. 

This motivation makes them more likely to accept a lower offer.

Because home appraisals are typically based on recent sales of comparable properties, a single owner accepting a low offer in the slow season can drag down the appraised value of similar properties. And, since most buyers invest in an appraisal before closing, they see the lower comps and may renegotiate their offer accordingly. 

So basically, lower sales prices from slower months can influence lower appraised values, reinforcing the seasonal dip.

The temporary price drop in the fall and winter makes this a great time of year to build (or expand) your real estate portfolio. You can buy low, which automatically increases your return on investment potential on two fronts. One, your income rents represent a higher percentage of your investment amount. And two, you stand to earn a higher profit when you sell high in the future once the value appreciates.  

Plus, in states like California, where property tax increases are capped, buying when prices are temporarily low also reduces your property tax liability for as long as you own the property!

Gatsby Investment takes advantage of the seasonal price dip to acquire new properties at favorable prices for our investors (although, to be clear, we’re on the lookout for good deals year-round; we’re capitalizing on seasonal fluctuations, but we’re not limiting ourselves by them). 

You can leverage the seasonal dip by purchasing a property on your own this fall/winter. Or, if you don’t have the time (or desire) to shop for investment properties during this busy season, you can invest in one of our pre-vetted real estate deals. We’ve done the analysis to determine which properties have the highest return potential, and those are the opportunities we offer to investors. That’s how our investors enjoy such high average annualized returns with no prior experience and no time or energy spent on the property!   

Join us today in taking advantage of temporarily low prices to boost our return potential!