Tis The Season For Cheap Real Estate

Joe Pinsker flags research by L. Rachel Ngai and Silvana Tenreyro on why house are more expensive in the summer than the winter:

Ngai and Tenreyro haven’t built a model that explains exactly why prices vary with the season, but they can at least speculate. It might seem like weather would be a factor—it’s more pleasant to scope out properties during the warmer months—but prices vary significantly even in places where summer and winter are tougher to distinguish, such as Los Angeles and San Diego.

They guess that it has to do with the timing of the school year.

“We think parents of school-age children find it more convenient to search in the summer,” Tenreyro says. But, as she notes in her paper, that contingent is only estimated to make up less than a third of prospective home buyers at any given time—a substantial proportion, but not enough, it would seem, to determine when the majority of homes are sold.

This group’s disproportionately large impact gets to the heart of how Tenreyro and Ngai’s model works, in that it accounts for a snowballing effect. “Because there is this critical mass that prefers searching in the summer, then sellers put their houses on sale in the summer,” Tenreyro says. “And because there are more houses for sale, then other buyers also then prefer to search in the summer and so on and so forth. The effect gets amplified as a virtuous circle.” In this way, the unique preferences of a relatively smaller group of home buyers ends up dictating the market for everyone else.