The housing market’s “January Effect”

25% declineHome sales plummet by 25%?!

The 376 houses sold during the month of January 2016 in the Reno and Sparks, Nevada market represented a nearly 25 percent decline in the number of home sales from the month prior (December 2015).

25 percent sounds like a very large decrease. But is it really that uncommon? Should we be concerned? The answer to both questions is No. Let’s take a look at some historical numbers.

Number of Houses Sold Number of Houses Sold the Month Prior (December) Percent Decrease in January from December
January 2016 376 499 24.6%
January 2015 363 520 30.2%
January 2014 354 494 28.3%
January 2013 360 492 26.8%
January 2012 449 534 15.9%
January 2011 365 485 24.7%
January 2010 346 426 18.8%
January 2009 233 295 21.0%
January 2008 165 228 27.6%
January 2007 245 291 15.8%

As you can see from the past ten years of data, January has always seen a large decrease in the number of houses sold for the month when compared to the number sold in December. This is due to many home sellers and buyers being incentivized to close on the sale of the home prior December 31.

Why purchase a home by December 31? There are many reasons for this, but probably the biggest are the tax savings (the ability to deduct mortgage interest, property taxes, points on your loan and interest costs) available to many buyers who close before the end of the year.

The motivation to close by year’s end results in the parties involved moving forward the closing dates for transactions that would have normally closed in January. In this way December cannibalizes some of the January’s sales. Think of it as sort of a reverse “January Effect”.

Further supporting this notion is the fact that the number sales in December is seen as a spike upward when compared those of the prior month (November).

Number of Houses Sold Number of Houses Sold the Month Prior (November) Percent Increase in December over November
December 2015 499 423 18.0%
December 2014 520 473 9.9%
December 2013 494 477 3.6%
December 2012 492 525 -6.3%
December 2011 534 497 7.4%
December 2010 485 398 21.9%
December 2009 426 461 -7.6%
December 2008 295 270 9.3%
December 2007 228 204 11.8%
December 2006 291 281 3.6%

Looking at the same ten years of data and comparing December home sales to November’s homes sales, we observe that December’s sales typically are higher than November’s.

Nov vs Dec vs Jan sales


About Guy Johnson

I am a licensed Nevada REALTOR® (lic.# S.0075262.LLC) living and working in fabulous Reno, Nevada. I cover Reno, Sparks, Incline Village, Carson City, and beyond. Give me a call at 775-722-4011 and I will be happy to assist you with your real estate needs. I'm your Guy!
This entry was posted in Agent Insights, Market Trends and tagged . Bookmark the permalink.

One Response to The housing market’s “January Effect”

  1. Pingback: January median sales price, units sold, DOM and inventory | Reno Real Estate Blog

Leave a Reply