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Although its the fall of 2009, there is an interesting myth, supported by hard facts and data from CREA, about the spring selling season.  Historically the spring season is very strong for the Real Estate markets across Canada.

Usually the hottest time of year for the market. It is so widely accepted that quite often sellers are advised by Realtors to “wait until spring” before selling their property if they are thinking about listing in any other season.

Investors have picked up on this too and will often attempt to snatch-up properties during the Christmas holiday season lull in an effort to achieve instant equity that eventually materializes with the milder weather and higher prices.  “Flippers” or “Sharks” are experienced renovators who often try and buy early in the winter season then unload their finished product into the spring selling season.

I’m confident you’ve heard that spring is, generally speaking, very kind to real estate. Where there is some confusion, however, is not in accepting that belief as a consistent reality (most do), but why the phenomenon occurs. I’ve heard many reasons why and I’m not sure I buy into all or even any of them.  For me, I don’t like banking on investment profit because of the seasons.  That’s a little too easy.  But I thought for discussion this myth could be dissected as to the source of its occurrence.  Add a comment and enlighten us if you’ve heard any other logic behind this myth yourself.

From the most basic of all logic, I’ve heard (and you may have too) that Real Estate does well because life gets a little more pleasant in the Spring.  Huh?  That’s actually a theory a lot of people believe and it may have some truth to it.  The idea is that people like to roam around and shop for their most precious possession because of the new blissful weather outside.  You know, the smell of new flowers and fresh cut grass in the air, blossoming gardens escalating the appeal of the previously snow-drenched house, the newly revealed landscaping that now highlights the natural splendor of the home etc..  Anyways, the property price tag is believed to go up alongside it’s new found spring weather appeal/demand.  I don’t know about this one.  Maybe there is some truth to that, maybe not, but I’m sure not going to fully subscribe to that theory.  And there’s no way to really prove that one either so we’ll move on.

The second point is kind of interesting, it is argued that it has nothing to do with demand, but instead housing supply simply dwindles in the spring. Builders (try to) complete all their projects just before the spring season and then turn the spring and summer season into planning their next new developments.  I don’t buy into that one either.  Seems to me that there’s tons of construction going on in the spring, advertising for new homes, & Realtors in model homes still trying to unload their inventory, aggressively.

Finally, I’ve heard that historically the spring is so successful for Real Estate markets because of the financing.  I guess this is the one I find most relevant (if I do have to choose a reason for such a widely accepted belief that Real Estate does best in the spring).  After all, who in Canada is buying all the houses?  Its not you or me even if we do put our names on title for the home.  The buyers are actually the Big Banks and Trust Companies.  When a person buys a home, they usually put down 25% or less of the purchase price and the Big Banks and Trust companies supply the remaining 75% or more.  So putting up 3/4th of the cash means the Banks are the ones doing all the buying, really.  And coincidentally the Banks all line-up to advertise and release their new financing mortgages, financing tools and financing options all during the same time period: That’s right, they encourage all the buying (via financing) in the spring.

Why? Not sure but they do. I do know that the Big Banks devote December, January and February exclusively to hammering the message home that you need to pile all your cash into RRSPs or else face the cruel punishment later in life eating canned beans huddled around a trash can fire.  Or at least it feels that way anyways.  Their aggressive marketing is pretty good at delivering the need-to-RRSP-invest message I must admit. And the whole looming “RRSP deadline” that gets larger and larger as we inch closer to that deadline helps fuel that fire.

But then of course with each passing day after the RRSP deadline, the RRSP fades away behind us and the marketing focus immediately is turned over to mortgages and lending.

So come Mid-March, take note of all the over sized posters in the windows of the many finance companies in London as you walk buy, take inventory of all those images burned into your subconscious of extensive housing renovations/additions, the smiling families in front of perfectly groomed houses, and whatever else they have in store for us.  That giddy feeling about buying a beautiful and expensive new home you’ll be feeling next spring may just be as a result of this universal lending marketing campaign aimed at the….spring…. lending season.

Will this upcoming 2010 spring lead us to another big year? I’m not sure.  I guess we’ll find out soon.  What I am concerned about is that we may have already dragged tomorrow’s buyers into today with these enticing low interest rates of today.  Not only that but the global real estate frenzy of 2003 to 2007 possibly has dragged tomorrow’s buyers into yesterday and today, despite such low interest rates, we may be left trying to manage this inefficiency.  Time will tell, but what we do know is its the long-term vision that counts (see our articles on leverage, inflation and how to make $1million in real estate).  Focusing on the long-term and concentrating on increasing rents annually will naturally render short-term gyrations irrelevant.

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