You’ve probably heard the terms buyer’s market and seller’s market. Read on to learn the signs of these markets and what they mean for you when you are buying or selling a home.
What is a buyer’s market?
In a buyer’s market, the supply of houses is higher than the demand. More people want to sell their homes than there are buyers for these homes. This often gives you an advantage as a buyer when you are negotiating the purchase of a home.
For example, you often have the ability to negotiate a lower price for a home in a buyer’s market. That’s because the seller may have fewer offers from other buyers while you have more choices of other homes you can buy. This means the seller may be willing to lower their price to close the sale with you.
You may also be able to negotiate other concessions and contingencies from the seller in a buyer’s market. These can include things like offering less earnest money, letting you choose the closing date, paying some of your closing costs, making repairs to the home, or including in the sale items like outdoor furniture, a snow blower, or a lawn mower.
If you are trying to sell a house in a buyer’s market, then you many need to make these kinds of concessions to close the sale on your home.
What are the signs of a buyer’s market?
Real estate agents are a good source of information about local markets because they watch housing sales trends. This means they are likely to know the two key signs of a buyer’s market. The first sign is when many houses are selling for less than their list prices. The second sign is when many houses take longer to sell than they take at other times.
There are other signs of a buyer’s market that you can see by driving around a neighborhood or looking at online listings. These include:
- Many "For Sale" signs in a community, especially if you see the same signs week after week.
- Signs or online listings that advertise home prices have been reduced.
- Multiple open houses for the same property or open houses which do not attract many potential buyers.
- Houses being taken off the market and relisted a few weeks later, especially at a lower price.
What is a seller’s market
In a seller’s market, the supply of houses is lower than the demand. More people want to buy homes than there are people who want to sell their homes. This often puts you at a disadvantage as a buyer when you are negotiating the purchase of a home.
For example, you often have little or no ability to negotiate a lower sale price for a home in a seller’s market. That’s because the seller may have many offers from other buyers. If you are in a strong seller’s market, you may have to bid over the asking price of the home to close the sale because there are so many other buyers competing for the same house.
You may also have a harder time negotiating concessions from the seller in a seller’s market. If fact, you have to make concessions to the seller to buy the house. These concessions can include offering more earnest money, not asking for repairs, or not making your offer contingent on the results of a home inspection.
If you are trying to sell a house in a seller’s market, you may enjoy benefits such as getting more money for you home than you anticipated.
What are the signs of a seller’s market?
Real estate agents can also spot the key signs of a seller’s market, which are many houses selling for more than their list prices and taking less time to sell than they take at other times. Other signs of a seller’s market include:
- Few "For Sale" signs in a community, especially when these signs disappear quickly.
- Open houses which attract many potential buyers.
- Stories in the local news about high home prices or bidding wars.
Is it always either a buyer’s market or a seller’s market?
No. There are many times when the supply of and demand for homes in a market are in balance. This means there are about as many homes for sale as there are buyers for those homes. As a result, neither the buyer nor the seller has an advantage negotiating the purchase of home.
One sign of a balanced market is when houses take 30 to 45 days to sell. Real estate professionals often see this as an indication that the market is "neutral" and does not favor either buyers or sellers.
Another sign of a balanced market is when there is a 6 month supply of houses. What this means is that the current supply of houses in a market would take 6 months to sell. This is another indication that a housing market is neutral and does not favor either buyers or sellers.
Keep in mind that the definitions of buyer’s markets, seller’s markets, and balanced markets are not exact. There is no single measure of what constitutes these markets that all real estate professionals use. Instead, look for trends in the neighborhood where you might want to buy or sell a home, and make your plans based on your goals!
Last reviewed and updated April 2022 by Freedom Mortgage Corporation.