Buyer’s Market

Whether it’s at work in the breakroom, at a dinner party, or you hear mention of it on the news, you’ve likely heard someone recently talk about whether the real estate market is a “buyer’s market” or a “seller’s market.” Let’s define them both, so you can be sure to be a useful contributor to that conversation.

A buyer’s market occurs when there are more properties for sale than the number of buyers who are actively shopping for homes. As you can imagine, this would give the buyers the upper hand. It is simply supply and demand.

If it is truly a buyer’s market, homes that have been listed for sale can be on the market for a few months before the right buyer comes along.

In this type of situation, sellers may have to do some financial gymnastics to sweeten the deal. That may mean concessions, repairs, or covering closing costs.

A buyer’s market means that you may have to work a little to sell, but if you are a buyer, you may be able to get a sweet deal.

Seller’s Market

Conversely, a seller’s market occurs when there are more buyers than the number of properties available. Again, it is simple supply and demand. If the economy is good, dollars are flowing, and buyers are feeling confident, this can lead to competition among buyers that brings about bidding wars.

You may find multiple buyers placing multiple offers on multiple properties with the hope they will “win” one. This can even lead to buyers placing offers on properties – sight unseen.

This can also result in buyers feeling pressure to offer high or even make a cash offer in order to get a seller’s attention.

Like we saw in the run-up to the mortgage crisis in 2008, the competitive “winners” caused prices to inflate beyond the rate of property value growth. As a result, buyers were buying property for well above rebuild cost all while artificially inflated values led to a massive market correction. In turn, this led to an awesome buyer’s market that many of you might have taken advantage of.