If you buy a house solely as a place to live, you may think knowing about seller's markets and buyer's markets is not that important. On the other hand, if you are looking at property as an investment opportunity, it is essential you understand the basics of buyers' and sellers' markets. However, at the end of the day, the place you buy to make your home is still an investment and the real estate market always goes through cycles. So, all homeowners can benefit from learning more about buyer's markets and seller's markets as it enables them to determine whether it is the right time to buy, sell, or hold on to their properties.
The Difference Between Buyer's Markets and Seller's Markets
A buyer's market means there are more properties for sale than there are buyers. Buyer's markets are ideal for investors because the situation gives them negotiating power. And if they cannot get the deal they want, it is easier to move on to another potential property and negotiate a good price.
In a seller's market, there are more buyers than there are properties for sale. When that happens, home prices rise, meaning properties sell for the full asking price or even higher. Expect bidding wars in a seller's market.
The Nuances of Buyer's and Seller's Markets
Buyer's and seller's markets occur due to many economic factors. For instance, low mortgage rates can drive up the demand for property, and mortgage rates are tied to things like bonds and the broader economic situation. But even in an economic downturn, it is possible to find favorable mortgage interest rates. Here are the current mortgage rates for 2021.
While experts may claim the market belongs to buyers or sellers, in reality, market conditions are not always that well defined. For instance, in one area of a city, you could find one part is a seller's market while a couple of miles away, the properties fall into a buyer's market. Also, the market type may not always affect certain types of properties. For example, a single-family home may always appeal to buyers due to rental demand, regardless of the broader market type for the area.
How to Determine a Buyer's or Seller's Market
While you can listen to experts to find out if you are living in a general buyer's market or seller's market, you will need to be more astute to determine which type of market specific areas and properties belong to. Here are some helpful ways to spot whether the properties you are looking at are in a buyer's or seller's market.
Recent Sales
Look at how much properties comparable to the one you are interested in have sold for in recent times. If they have been selling above the asking price, you can assume it is a seller's market. If they have been selling below the asking price, it is an indicator that you are in a buyer's market.
Pricing
When sellers drop their asking prices, it indicates it is a buyer's market. Look at properties comparable to the one you are considering purchasing to review the price histories.
The Time on Market
Properties sell faster in a seller's market. If several homes in an area have been up for sale for a long time, it is a good indicator that it is a buyer's market.
Real Estate Inventory
Generally speaking, when lots of homes are up for sale in an area, it is likely it is a buyer's market. Conversely, if few homes are listed as for sale, it is likely to be a seller's market.
