A Seller’s Market vs a Buyer’s Market

Making the most out of the real estate industry depends on your ability to identify and differentiate the seller’s and buyer’s markets.  Wondering what those terms mean?  Let’s take you through the meanings, the differences, and how to identify a seller’s market and a buyer’s market.

What does a Seller’s market mean?  A seller’s market takes place when the number of homebuyers exceeds the available houses for sale.  In other words, a seller’s market occurs when the demand for houses surpasses its supply.  Elementary economics supports the claim that sellers are at an advantage while buyers are willing to pay more due to a high competition rate in a seller’s market.  Nevertheless, buyer’s can adopt the following methods to get the best out of the market. (1) Get a pre-approval loan ahead of time to indicate your seriousness and attract sellers. (2) It’s not always rational to conclude on paying a very high amount for your dream home.  Buying a home is more than a two-decade commitment and paying more than the worth of your dream home may not be a financially itelligent option.

What does a Buyer’s market mean?  A buyer’s market is directly opposite of a seller’s market.  A buyer’s market occurs when the number of available homes exceeds the number of buyers.  In simple terms, supply is greater than demand in a buyer’s market.  The buyers have leverage over the sellers who are forced to adjust to changing market demands through price reduction.  Buyers understand that the longer a home remains on the market, the greater the chances are that the seller will have to adjust to the present market.  Nevertheless, professional sellers also know that driving their products towards perfection may have a significant impact.

How do I spot the difference between a seller’s market and a buyer’s market?  There are a few situations like the economic crisis of 2020, which lead the real estate industry to a seller’s market.  The type of market in different geographical locations varies.  Here are some ways to know if your area is in a seller’s market or a buyer’s market. Duration on the Market:  There’s no better indication of the market than checking how long houses are on the market.  If homes are selling quickly, it could indicate you are in a seller’s market.  Inventory:  Taking the number of homes on the market can also indicate the type of market your area has.  A higher inventory suggest that you’re in the middle of a buyer’s market, while lower inventory suggest otherwise.  Pricing:  A general hike in the price of houses suggests that you are having a seller’s market while a drop in prices could mean otherwise.  Prices mostly indicate the market’s direction.  Follow market trends:  Market trends are the most assured means of knowing your area’s market type.  They indicate the type of market in your area and prevent you from guessing the wrong market.

Final thoughts:  Understanding and differentiating the type of market will inform your choice of landing your dream home at a better rate that you might have conceived.  Beyond that, it sets you apart from the percentage of people who consider home buying one of the most stressful activities in modern life.