Buyer’s Market Vs. Seller’s Market: Know the difference

Have you ever wondered when the best time is 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 important to pay attention to the housing market and whether your local area is experiencing a buyer’s market or a seller’s market.

The real estate market is determined by supply and demand of real estate, which then dictates whether it is currently a Buyer’s or a Seller’s market. The type of market you’re in should greatly influence your strategy as you head into your transaction. It can also help you decide whether this is the right time to buy or sell a property at all.

In a nutshell, A buyer’s market is characterized by lower prices while a seller’s market comes with ever-rising prices. But let’s dig a little further into these two terms and discover what they mean to you.

When there are more homes available for sale, buyers have more homes to choose from, which increases the odds that a buyer will find their perfect home. When they find that perfect home, they’ll have less competition for it, which could help them avoid a bidding war.

This means you can probably buy a home for less than the list price, and the seller might be willing to pay some or all of your closing costs. It’s an easier and more relaxed experience for buyers.

Signs of a buyer’s market include:

• High inventory.
• Final sale prices are often lower than original asking prices.
• Fewer buyers are purchasing.
• Median sale prices are declining.
• Real estate ads are getting more prominent.
• “For sale” signs are staying up longer.

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.

Take your time: Don’t rush into an offer, in a buyer’s market there is lower risk of losing out on a property.

Compare properties: Become familiar with comparable properties, you can use their pricing to your advantage.

Pay attention to days on market: The longer a home has been available, the more power you’ll have negotiating for a lower price.

If you find yourself selling your home during a buyer’s market, do everything you can to make yours stand out.

Make repairs: Since there are multiple properties available, making yours stand out with updated amenities can help you stand out. This includes cleaning and depersonalizing the space.

Market like a pro: Make sure you have stellar, professional photos taken of your property. If your home will be vacant or your decor is dated, it’s a good idea to hire a stager.

Price competitively: Survey similar homes on the market to see what they’re asking. Make sure your asking price is either on par with or lower than the comparable homes in your area.

A seller’s market happens when there is a lack of properties to meet the demand of the housing market. In a seller’s market, homes sell faster, and buyers must compete to score a property. These market conditions often make buyers willing to spend more on a home than they would otherwise. Therefore, sellers can raise their asking prices.

Signs of a seller’s market include:

• Inventory is very low.
• More buyers are in the market to buy.
• Median sale prices are increasing.
• Real estate ads are vanishing.
• “For sale” signs are up for only a few days before a “sale pending” or “sold” sign is attached.

Act fast: If you find your dream home during a seller’s market, you should act fast. You should get pre-approved for a loan ahead of time, so your financing is in order when you need it.

Be patient: If you find that you keep losing out on the homes you’re interested in, it’s crucial to be patient and not get discouraged. Buyers caught up in bidding wars will often offer more money than a home is valued at to get the home they want. This may or may not be a sound strategy if financial returns are your sole priority.

Don’t settle: On the flip side, some buyers will end up making offers on homes they otherwise wouldn’t be interested in because they’re tired of losing out. Remember, buying any property is a huge investment and often a 30-year commitment. Don’t settle on a home just because it’s cheaper. Unless you must move immediately, it may be a better idea to wait it out and resume your home search after the market cools down.

Price fairly: Even though homes tend to sell for more money in a seller’s market, it still helps to price your home fairly. If you set your asking price at or slightly below fair market value, you’re likely to attract more interested buyers.

Carefully consider offers: It’s even more important during a seller’s market that you carefully review the offers you receive. Sellers are often so focused on choosing the highest offer that they fail to examine the financial strength of each buyer. The last thing you want is to accept an unrealistic offer and be forced to put your home back on the market when the deal falls through. The longer your home is on the market, the more questionable it will seem to buyers, and the more power they will have when negotiating.

Be aware of contingencies: Also, be on the lookout for offers that include contingencies. Offers that include stipulations, like mortgage contingencies, home sale contingencies, appraisal contingencies and inspection contingencies, enable buyers to back out of sales contracts if certain conditions aren’t met.

Whether you’re buying a home, selling one, or just thinking about a future investment, it’s important to know what type of housing market you’re in before making any moves. What does that mean if you are planning to purchase this year?

For 2021, most experts agree that mortgage rates will remain low. In June, Fannie Mae released its mortgage rate forecast for the upcoming year. Their experts predicted that the annual average mortgage rate would reach 3.2% by the end of the year. By 2021, Fannie Mae’s US housing market forecast sees mortgage rates dropping to 2.9%. If this comes to fruition, demand for homes for sale will continue to increase. High demand is likely to continue a seller’s market through most of 2021.

When will it be a buyer’s market again? The forecast says: not any time soon. But a national seller’s market should not discourage anyone from entering the real estate market and buying an investment property. You can buy an investment property in a seller’s market. But because you, as a real estate investor, are not limited by location, you can find a buyer’s market to invest in.

Alex Jaffe is a licensed Realtor® living within Northwest Austin and represents sellers that hope to gain from today’s housing market. He is an advisor with a specific process for comparing and presenting offers to his clients and proceeding towards the seller’s goals accordingly. To schedule a conversation specific to your home/address, contact Alex today – with no obligations – this is a free, no pressure discussion designed to answer your questions.