It’s only natural to want to figure out what type of market you’re entering when you decide to list your home for sale. There are distinctive differences between a buyer’s and seller’s market that are worth learning about.
Seller’s markets are characterized by:
- A depleted inventory of homes for sale.
- Escalating home prices.
- Multiple offers on homes in good shape and located in decent areas.
- Buyers have little bargaining power.
Let’s take a closer look at each of these characteristics.
Depleted Inventory
The most common cause of low inventories in a real estate market is a combination of few homeowners listing their homes and strong buyer participation in the market. It’s a matter of supply and demand. As of March 2016 we are already seeing a high influx of new and returning buyers for the year and a considerably low inventory of homes for sale.
Escalating Home Prices
The economic principle of supply and demand works with most commodities, including real estate. When buyer demand is high but the supply of available homes is low, those homes that are available increase in value. Currently our low inventory is at a 2.5 month absorption rate, anything 5-6 months or higher indicates a Buyers market. The lower it gets from 5-6 months indicates how strong of a sellers market it currently is, at this rate expect prices to rise quickly in the coming months. Feeling curious about what your home is worth? Check here for free.
Multiple Offers are Common
When there are few decent homes on the market yet plenty of ready and able buyers vying for them, multiple offers on suitable homes become common. Or, as I always say when I see the inventory shrink “Home listings dry up and we break out in bidding wars.”
Like the tug-of-wars with products at Black Friday sales, bidding wars are commonplace in seller’s markets. I have noticed this to be true within a certain price range. Nice homes going on the market with a asking price range of $200,000 -$300,000 are literally getting multiple offers after the first day.
Buyers have little Wiggle Room
Sellers are in the driver’s seat in this market. They dictate the terms, they set the price and they have all the power when deciding who will purchase their home. It’s frustrating for buyers to know that they have no wiggle room for negotiations and must come in with their highest and best offer. For these reasons it is extremely important to work with professional real estate agents that know what you need to have prepared before you find your dream home. When you find it, you will need to be ready to strike right then and there.
Turn these seller’s market characteristics backward and you’ll have a description of a buyer’s market. Inventories of available homes are large, there are few buyers in the market for a home and prices typically . Buyers dictate the negotiations and sellers may find themselves taking less for the home than they hoped or offering concessions to buyers to entice them to buy the home.
