Real Estate: The Calendar Cycle for 2010
By Brian Madigan LL.B.
Year after year, we are faced with the same cycle, repeated time and time again.
Let’s have a look at the last few years and see if we can determine any patterns?
We’ll look at the ORES Real Estate Index for single family homes in the Greater Toronto Area. The Index started in January 2005 and tracks the monthly change in the average price. As of 1 January 2005, the Index was 100; it is now at 126.59 as of the end of January 2010. Basically, that means a 26.59% increase in five years and one month. That works out to a 5.23% annual increase over that period of time. We could also say that works out to a 0.436% monthly increase over that same 61 month period. But, not every month is the same. There are some good months and there are some bad months.
Each year, there is a highpoint in the Spring, and another highpoint in the Fall. It is far from a steady progression. We will chart the two highpoints each year.
I noticed that there appeared to be a somewhat predictable pattern. Here’s what happened in 2004:
In 2004, the market increased from January to May when it reached its height, then declined from June to August, increased slightly in September, and reached its height once again in October. Thereafter, the market declined for the balance of the year.
What about 2005:
May………… 116.38
October…… 115.48
In 2005, the market increased from January to May when it reached its height, then declined from June to August, increased slightly in September, and reached its height once again in October. Thereafter, the market declined for the balance of the year.
And, let’s examine 2006:
April……….. 112.69
October…… 120.05
In 2006, the market increased from January to April when it reached its height, (held flat for one month) then declined from June to August, increased slightly in September, and reached its height once again in October. Thereafter, the market declined for the balance of the year.
What about 2007:
May………… 127.64
October…… 130.98
In 2007, the market increased from January to May when it reached its height, then declined from June to August, increased slightly in September, and reached its height once again in October. Thereafter, the market declined for the balance of the year.
And, 2008:
May………… 123.21
October…….109.23
In 2008, the market increased from January to May when it reached its height, then declined from June to August, increased slightly in September, but tipped over and the market declined for the balance of the year.
You might recall that the onset of the worldwide financial crisis occurred in the Fall of 2008, just before the US Presidential election. After September, 2009 no longer followed a predictable pattern based on previous years. This was the beginning of the worldwide recession, and the commencement of the government bailouts to the banks, insurance companies and the auto industry. The stock markets lost more than one half of their values.
So, what happened in 2009:
June……….. 125.01
October…… 131.08
In 2009, the market increased from January to June when it reached its height, then declined from July to August, increased slightly in September, and reached its height once again in October. Thereafter, the market declined for the balance of the year.
Actually, 2009 got off to a late start, until there was some hope that the governments in the world were tackling the recession. Hence, the early Spring peak was deferred one month.
COMMENT
Are you beginning to see a pattern here? The only year out of step with the pattern was 2009. And, in that year, the worldwide financial crisis offers a reasonable explanation.
All of this leads me to the conclusion that the following statement concerning the predictability of market prices throughout the year is accurate:
In any year, the market will increase generally from January to May when it will reach its height, then it will decline from June to August, increase slightly in September, and reach its height once again in October. Thereafter, the market will decline for the balance of the year.
The only aberration over the last six years would be 2006 when the Spring market peaked in April, and 2009 when the Spring market peaked in June.
So, what’s in store for 2010?
If this year is the same as previous years, we might reasonably expect that May would be the high water mark for prices, and that there will be an anticipated and predictable decline in June.
If that occurs, it would (likely) be a seasonal decline and not evidence of a major crash as predicted by the doomsayers. Then, the market will start to drift off over the summer, awaiting a slight resurgence in September, followed by a new record high in October (for a strong market), or simply a Fall high (for a weaker market). In November, the market will start to decline slightly for the balance of the year.
So, if you have been keeping track, here is the predictable pattern:
Rising Prices……….. January to April
Spring High………… May
Declining Prices…… June to August
Rising Prices……….. September
Fall High…………….. October
Declining Prices…… November to December
Interesting, eh!
Now, you know how to time your next move.
Brian Madigan LL.B., Broker is an author and commentator on real estate matters, Royal Lepage Innovators Realty
905-796-8888
www.OntarioRealEstateSource.com
