HOLMES: Understanding the cyclical nature of our market

By Doug Holmes, contributing editor  |  I had several people come up to me last week and ask me about a recent article they had read about local real estate activity in the local newspaper. They were concerned that the market here might be losing steam.

The article in the local paper had done a great job at misleading them. They had published that buying activity here in Charleston had experienced a steep decline over the past month. While that is somewhat true, that same article can be printed every September and another one can be printed every October, November and December.

You have to understand that our market, as are most real estate markets, is cyclical within the year. Buying activity is at its highest in the spring and summer, March though August. April and May are usually the busiest months. Then, each year, there is a slight tapering off in activity each month from September through the following January or February. But you also have to understand the newspaper’s point of view. Explaining all the facts is not nearly so eye-catching.

What is more important is how this August did, compared to last August. August is always going to be slower than July. And each month after August will be worse than the preceding month in reference to buying activity. So, it turns out that this August was better than August 2014. It was only up 1.1 percent in terms of the number of sales. But that’s not a headline that’s going to grab readers’ attentions. So, the local newspaper decided to focus on a much larger percentage, the comparison of August to July.

The method that I use weekly to keep up with buying activity is to look at how many properties go under contract each week. And I correctly compare this to the same week from the previous years. I’ve mentioned this in these articles before.

Any time that we see more than 200 properties go under contract in the Charleston area in a week, we know we’ve had a good week. Anything over 300 is phenomenal. From 2008 to 2010, we hardly had any weeks go over 200. 2011 had a few more weeks over 200. In 2012, you could really tell things picked up when the vast majority of the weeks were over 200. But we didn’t get weeks over 300 again, like in the 2004 to2006 period, until 2013.

2014 was a little better when 21 weeks had over 300 and our market was really gaining momentum. In 2015, almost every week has been over 300 and we even had four weeks over 400, something we’d never seen before.

Now, this past week was the first under 300 since January. But it was to be expected. It’s that time of year. There’s nothing to be alarmed about. Sales will continue to slow slightly until next February. This happens every year. I guess, the local newspaper will expect you to be shocked when Christmas comes in December again this year.