Homebuyers Guide Real Estate

Buyer's Market vs. Seller's Market

The best time to buy or sell a house is whenever you’re ready. Maybe your family is growing, or maybe you’ve relocated for a new job. Maybe you’re just desperately ready for a change. Many people don’t have the luxury of waiting until the time is exactly right (and, really, when is it ever exactly right?) to buy or sell a home. 

That’s OK! neighborhoods.com is designed to help you find the right match no matter the circumstances. But if you do have a more flexible pathway to buying or selling a home, you may want to consider looking at whether your city, town, or neighborhood is a buyer’s market or a seller’s market. 

Take a look below to see which one best describes your current situation. It might just give you the nudge you need to put your home on the market or pull the trigger on a house you’ve been eyeing. 

What is a buyer’s market?

A buyer’s market is good for buyers. This term refers to a period when houses are widely available with less demand, meaning they may stay on the real estate market for longer periods of time—and you may be able to negotiate a lower price (you may even find a seller drops the price before you have to ask.) 

In a buyer’s market, supply is greater than demand—you’ve got a lot of inventory, but not a lot of interested buyers. This means if you do find a property you like, you’ve got more leverage than usual. A seller will do what they can to prevent you from walking away, whether negotiating on the price, closing costs, contingencies, repairs, or other terms of sale.

Buying in a Buyer’s Market

If you’re ready to buy during a buyer’s market, there are still factors to consider. Namely, you’ll want to look at several houses to make comparisons of what’s on the market, and what the going rates are. This will give you a strong sense if a house is a good deal, and also enhance your negotiating power. If a home is overpriced given the current market, you’ll know it is. 

In addition to having a comprehensive understanding of several available properties, it’s also helpful to look at how many days a particular property has been on the market. If a home has been languishing for weeks or months, you’ll likely have more negotiating power to lower the asking price.

If you’re a seller enduring a buyer’s market, you may end up needing to lower the price—and your expectations.

Selling During a Buyer’s Market

If you’re a seller enduring a buyer’s market, you may end up needing to lower the price—and your expectations. You can reasonably plan for your home to stay on the market for a longer period of time, and you may want to invest in updating key areas of your home to make it more appealing for buyers (right now, with many people still working from home, that might include upgrading your backyard and patio areas or adding a home office). And just as buyers are doing their homework, you’ll need to do yours, too—aim to price your home competitively along with going rates in the current market. 

What is a seller’s market?

A seller’s market refers to when there’s more demand and less inventory, and that’s good news for sellers. The pandemic has affected just about everything, and real estate is no exception. Because fewer people are selling homes, there’s less inventory. Couple that with historically low interest rates set by the Federal Reserve: In fact, in August 2020, mortgage rates dropped for the eighth time in a year.

The result? Buyers are more interested than ever in purchasing homes because it’s cheaper to finance than ever. Homes in short supply plus buyers trying to take advantage of low rates all adds up to an enviable position for sellers. Still, amid a developing health and economic crisis, potential sellers may want to move quickly rather than wait it out—it could always become a buyer’s market again. 

The Bottom Line

If you’re a buyer in a seller’s market, you’ll also want to act fast. If you find a property you like, make an offer quickly, and consider taking extra steps like getting pre-approval (it’ll expedite the process and show sellers you’re a serious contender), or pre-underwriting.

Conversely, you may just decide to slow down and wait for the market to cool. A home is a monumental purchase, so you don’t want to settle for a property you don’t like just because it’s the only one available, and you don’t want to exceed your budget in a bidding war.

Buying a house almost always includes hidden costs, and you’ll be paying a traditional mortgage for 30 years. That means even if interest rates are low, a higher monthly payment as a result of a bidding war could have serious consequences to your bottom line. 

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