Buyer’s Market Vs. Seller’s Market: What Does Each Mean For You?

When is the best time to buy or sell a home? While certain seasons may be busier than others, the fluctuations within the real estate market have far more to do with the concept of supply and demand than they do with the time of year. That’s why it’s crucial to pay attention to the housing market and if your local area is experiencing a buyer’s market or a seller’s market.

We’ll provide you with everything you need to be knowledgeable and competitive in both markets.

What Is A Buyer’s Market?

A buyer’s market occurs when supply exceeds demand. To put it another way, real estate inventory is high, and there are plenty of homes for sale, but there’s a shortage of interested home buyers. These conditions give buyers leverage over sellers because when supply is higher and demand lower, the market is forced to respond.

What Happens In A Buyer’s Market?

In a buyer’s market, real estate prices decrease, and homes linger on the market longer. This means that sellers must compete with each other in order to attract potential buyers. Typically, sellers will drop their asking prices to gain an advantage in the market. Furthermore, they’re much more willing to negotiate offers to prevent buyers from walking away.

For buyers, buying a home in a buyer’s market is ideal – it allows buyers to have more choices in homes, meaning better all around deals. This increased bargaining power allows buyers to have both lower price points on homes as well as the potential for additional concessions from sellers.

What Is A Seller’s Market?

A seller’s market arises when demand exceeds supply. In other words, there are many interested buyers, but the real estate inventory is low. Since there are fewer homes available, sellers are at an advantage.

What Happens In A Seller’s Market?

In a seller’s market, homes sell faster, and buyers must compete with each other in order to score a property. These market conditions often make buyers willing to spend more on a home than they would otherwise, meaning that sellers can raise their asking prices. Furthermore, the increased interest means that buyers rarely have the power to negotiate and are more willing to accept properties as-is.

Due to this shortage of housing, these conditions often lead to bidding wars. During bidding wars, buyers will make competing offers and drive up the price, typically above what the seller initially asked for.

How Can You Tell If It’s A Buyer’s Or Seller’s Market?

Before you buy or sell, there are ways to determine if your local area is experiencing a buyer’s market or seller’s market. Here are some indicators that will help you.

Real Estate Inventory

Review the homes available on the market. The larger the inventory, the more likely it is that your local area is in the midst of a buyer’s market. Conversely, if there seem to be very few homes being listed, then it’s likely a seller’s market.

To get a precise read on the inventory, divide the number of homes currently on the market by the number of homes that have sold in the last month. If the result is above seven, it’s a buyer’s market. If it’s below five, it’s a seller’s market. Anything in between is considered a neutral market.

Recent Sales

Check the recent sales of properties comparable to your own or the one you’re interested in. Pay attention to homes with similar factors like age, size, region, neighborhood and number of bedrooms. If you find that homes generally have been selling above their asking price, it’s a good indication that you’re in a seller’s market. If they’ve been selling below their asking price, signs point to a buyer’s market.

Pricing

In a buyer’s market, sellers will often drop their asking prices. When looking at current listings, review the price history. If you see that the prices of a number of homes have been cut recently, you can assume that it’s a buyer’s market.

Be aware that sellers may have unrealistic expectations about their homes’ value, so make sure that what you’re noticing is a trend, not just a single occurrence.

Market Rates

You can also observe interest rates to determine if it is a buyer’s or seller’s market. Higher interest rates can cause people to back out of the real estate market, which benefits buyers. Lower mortgage rates allow an influx of buyers, signaling a seller’s market.

Time On Market

The number of days that a home is on the market is another strong indication of housing conditions. Homes sell faster in a seller’s market and take more time to go under contract in a buyer’s market.

Market Trends

Knowing if home prices across your area have been increasing or decreasing is the strongest indication of whether it’s a seller’s or buyer’s market. The easiest way to gauge if housing prices are rising or falling is to look at market trend reports.

Rocket Homes^SM provides a free report of market conditions for anyone who creates an account. By searching the location you’re interested in, you’ll be given an option to see location trends.

Tips For Buying In A Buyer’s Market

A buyer’s market is the ideal time to purchase a new home because prices are lower and there are fewer buyers to compete with. There are a few ways a buyer can negotiate a deal to get the best possible terms on a home:

• Take your time. In a buyer’s market, the lower demand for homes means you’ll likely face little competition for the homes you’re interested in, allowing you to take the time you want to find your home.
• Know what’s available. See as many properties as possible before making an offer. Knowing what’s available on the market is highly beneficial – not only will it help you ensure that you find your ideal home, but also afford you a greater ability to negotiate price.
• Analyze comparable properties. Becoming familiar with comparable properties (or “comps”) on the market is key to negotiating effectively. By analyzing them, you can use their pricing to your advantage. On top of doing the research yourself, a real estate agent or REALTOR^® can help you analyze comps on their multiple listing service (MLS).
• Pay attention to days on the market. The longer a home has been available, the more power you’ll have negotiating for a lower price.
• Seek concessions from sellers. Even if you don’t ask for a significantly lower price, yo