Seasonal Patterns in the Housing Market
Rico Nederveen
12 februari 2025
Reading time 5 minutes
Ngai, L. Rachel, and Silvana Tenreyro. 2014. "Hot and Cold Seasons in the Housing Market."
The article examines why the housing market experiences predictable fluctuations each year. In other words, during the summer we often see a significant increase in both the number of houses sold and in house prices, while in the winter these figures are lower. This pattern is observed in both the United States and the United Kingdom.
What Stands Out?
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Hot and Cold Seasons
In the summer (the “hot” seasons), prices and the number of transactions rise above the normal trend. In the winter (the “cold” seasons), prices and transactions fall below the trend.
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Traditional Explanations Fall Short
Conventional theories about housing prices rely on the present value of future rental income to determine a house’s value. According to these models, prices should already reflect expected changes in rental income. However, in practice, rents and other costs remain nearly constant throughout the year, leaving these theories unable to explain the marked seasonal fluctuations.
The New Model: A Search-and-Matching Process
​The article introduces a model that better reflects real-life market behavior by considering how buyers and sellers actually operate. This is the search-and-matching model. Its key components are:
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Match-Specific quality​
Not every house is equally suitable for every buyer. The “match quality” (denoted as ε) indicates how well a house meets a buyer’s needs and preferences. As a result, two buyers can have very different opinions about the same property.
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The Thick-Market effect
The model suggests that when more houses are available—a “thick” market—buyers have a greater chance of finding a house that perfectly fits their requirements. This increased selection makes buyers willing to pay more. In the summer, when a higher moving rate puts more houses on the market, the market becomes “thicker,” leading to better matches, higher prices, and more transactions.
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Seasonal differences in moving activity
People tend to move more often during the summer, influenced by factors like the school calendar, better weather, and vacation periods. Even small differences in moving rates between summer and winter can have a large impact on overall market dynamics.
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Seller’s bargaining power
The model also highlights that a seller’s ability to secure a higher price depends partly on their negotiating power. Sellers with strong bargaining positions can capture a larger share of the extra value created by better matches in a thick market. This helps explain why, in some markets—such as in the UK or in bustling US cities—the seasonal price differences are even more pronounced.
What does this mean in practice?
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For home buyers
If you’re looking to buy a house, it might pay off to search during the winter. In this period, there’s usually less competition, which can lead to relatively lower prices. Although the selection might be more limited, this strategy can be advantageous if you’re not in a hurry to move.
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For home sellers
If you’re planning to sell your house, summer is generally the best time. A larger market means more buyers are actively looking, and because they can find a house that fits their needs well, they are often willing to pay a premium.
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What does this mean in practice
The article demonstrates that the predictable seasonal fluctuations in the housing market arise from the way people search for and purchase homes. The “thick-market effect” is central: when there is a high supply of houses, buyers can secure better matches, which in turn drives up prices and increases the number of transactions. Moreover, differences in moving activity and the seller’s bargaining power further amplify these effects.In short, the timing of your housing transaction—whether you’re buying or selling—can make a big difference. The insights from this research offer valuable guidance for both buyers and sellers, helping them strategically navigate the seasonal dynamics of the housing market.
New insights into seasonality​
Recent replication research by Dean Scrimgeour (2022) revisits the findings of Ngai and Tenreyro (2014) on seasonal match quality in the housing market. While the original study—based on 1999 data—suggested that homes bought during the summer tend to be occupied longer and incur lower renovation costs (indicating a better match), these effects diminish considerably when data from 1999 to 2011 are included. Furthermore, the study highlights methodological challenges, such as ‘heaping’ in the prior move month data, which can be partially corrected using multiple imputation techniques. Although the article does not directly address sales volumes, the dynamics of the summer market imply a busier and potentially pricier environment. This supports a strategic approach for homebuyers: consider purchasing in winter, when there is generally less competition, and selling in summer to take advantage of higher demand and more favorable prices.
