Getting to Know the Buyers Market and Sellers Market in Real Estate
Investing in a house is not a straightforward task. It is not just about knowing the prices of houses and matching them with your budget. Whether you are a new investor or a seasoned buyer, you ought to study the housing market to know whether it is a buyers market or a sellers market.
Knowing the two is also important whether you are looking to buy a house or sell a house. But before you identify the current state of the housing market, let us walk you through the difference between the two.
What is a Sellers Market?
A sellers market is, as the name suggests, when the market condition is more favorable to the seller than to a buyer. This means that the demand in the market exceeds the supply. In other words, in a sellers market, there are more people looking for a house to purchase than those who are willing to sell.
Because of this situation, bidding wars often happen since usually many buyers are interested in one certain house. Buyers are willing to pay higher prices than the asking price to ensure that they will get the house that they want.
This is good news for a seller in a sellers market it translates into a quicker and more profitable sales transactions. On average, a person in a sellers market can sell their property in just three months or less.
If you are a seller, then the perfect time to let go of your property is when there is a sellers market. However, if you are a buyer, then be wary of sellers being opportunistic. Bidding low will not help you as there are more competitive buyers out there willing to outbid you.
Therefore, during a sellers market, potential buyers usually end up being renters until the market conditions become more favorable to them.
The usual signs that the market is a sellers market are:
What is a Buyers Market?
A buyers market is the reverse of a sellers market: the supply of properties outweighs the demand of the buyers. This situation is favorable to buyers especially for the first-timers in the real estate industry.
When there is a buyers market, the properties are, on average, sell at lower prices since people are not engaged in competitive in bidding. Properties usually stay on the market for at least six months during a buyers market. Sellers also have a hard time closing sales since buyers have more options to choose from.
If you are seller, expect your properties to stay on the market for a longer period of time. To sell your property, you may have to be willing to negotiate your selling price. You may even have to do additional promotions or enhanced marketing efforts to attract buyers.
If you are a buyer in a buyers market, then this is the perfect time for you to purchase properties at reasonable prices. Take your time sifting through all the listings since there little to no competition from other buyers.
The usual signs of a buyers market are:
How Would You Know if the Market is a Buyers or a Sellers?
Whether it is a buyers market or a sellers market depends on a number of factors. For one, the market depends on the area and its demographics. If the area has strong employment growth and there is an influx of capital investment, then people have a tendency to migrate to the area.
This results to a rising demand for housing. Therefore, cities with a good number of job offerings and booming industries will most likely be a sellers market. On the other hand, those areas that are less industrialized are often considered to be a buyers market because the demand for housing is low.
Aside from the demographics, studies show that the market can also be influenced by the season. During the warm months of summer, the supply of houses exceeds that of the demand. However, during the winter, there are less houses available and more demand for them.
Another way of determining the current market condition is to check your local listings to determine the number of houses for sale. The rule of thumb is that if the inventory is low, then the market is more often than not, a sellers market.
When doing your research, make sure that your findings are those of your local area. Many areas, even contiguous ones, have different market types from one another.
If the figures or statistics for the whole country show that there is a sellers market, you might be disappointed to know that this may not be the case for your area. Be careful in interpreting the figures and ensure that they are localized and regularly updated.
Why Is It Important To Know Whether There Is A Buyers Market Or A Sellers Market?
Aside from the impacts on the seller or the buyer mentioned above, the condition of the market also affects the local real estate agent. They have to think of different marketing or selling strategies depending on the characteristics of the market.
They will need to be aware of the market and its repercussions in order to give the best advice for you. They should be able to accurately estimate your top level selling price if you are a seller in a sellers market or how low you should plac your offer if you are in a buyers market.