Buyer's Market or Seller's Market: What is the difference and how to know which you're in?
Buyer’s Market or Seller’s Market: What's the difference?
In this post we’ll cover how to assess the market to understand if it’s a Buyer’s Market vs Seller’s Market.
Supply exceeds demand. When the real estate market is considered a Buyer’s Market it means there is more inventory than there are buyer’s in the marketplace.
Demand exceeds supply. When inventory is in short supply with a greater number of buyers in the marketplace it is considered a Seller’s Market.
Think of it as the real estate industry’s own supply & demand equation. Buyer’s Markets and Seller’s Markets have an inverse relationship. It’s as simple as that.
Some factors that may signal a Buyer’s Market include:
- Economic downturn or recession
- Decline in the local job market
During times of recession people might be inclined to sell their homes to get out of a pressing financial situation like not being able to make mortgage payments. Stagflation or deflation of local job markets can contribute to a Buyer’s Market with fewer job opportunities in fewer industries resulting in less draw to the area. Likewise too many housing options in an area can contribute to a Buyer’s Market - think of entire new subdivisions sprouting up in new soon-to-be suburbs of up-and-coming cities that might have a little buzz or draw to them right now.
Some factors that may signal a Seller’s Market include:
- Properties sell quickly with a lower number of days on market
- Multiple offers, and bidding wars
- Low interest rates which can incentivize borrowing for buyers
- Rapid growth in the job market (tech in the SF Bay Area circa 2010)
- Properties selling well above the asking price
Look at Marin County and other parts of the Bay Area over the past 18 months for a prime example of a Seller’s Market. A surge of people leaving the cities for the suburbs and interest rates at historic lows drove buyers to move at light speed with the best offer possible, and sometimes that wasn’t enough. Bidding wars ensued and properties sold for way above list price as many people were attempting to completely adjust their lifestyles during COVID.
Things to know for Buyer's Market vs. Seller's Market:
In a Buyer’s Market it’s important for buyers to do their homework and take a steady pace. Remember that buyers have more leverage during this market and that allows them more options whether it’s looking at a multitude of listings or browsing different areas.
For sellers in a Buyer’s Market it’s important to do all you can to present your home in the best condition possible. The small things you have learned to live with may be worth repairing. Buyers are able to be pickier and will most likely have more requests for repairs or credits when they have the leverage. Do all you can do to increase visibility and put your listing in front of qualified buyers.
A Seller’s Market typically creates more stress for buyers as they have to be ready and submit offers quickly. Buyers oftentimes have no leverage, get outbid by another buyer, or settle to purchase a home in its current condition. During this market we recommend buyers not overextend themselves and keep in mind closing costs and other fees like repairs and maintenance sellers have not had to perform with high demand.
For sellers in a Seller’s Market we recommend that you take the necessary steps to ensure a smooth sale from beginning to end. Market data shows sellers receiving offers over list price, but sellers shouldn’t take this as a cue to cut any corners. Make the listing shine. Perform presale inspections so there are no surprises or potential liability after the sale. The listing price should be well thought out. Buyers know they will be paying more during this market, but starting at an unrealistic list price could deter buyers. Buyers can experience ‘buyer fatigue’ so managing the buyer interest efficiently and not getting greedy will result in a more successful sale.
Does seasonality affect the market:
Seasonal influxes to listings in the Bay Area typically follow the school year calendar. Most people want to be settled into a new home by the start of the school year and have that stability carry through the holidays and into the new year. Typically the number of listings increase starting in February with another surge just after Labor Day.
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Aalto is a real estate broker licensed by the State of California, License #02062727 and abides by Equal Housing Opportunity laws. This article has been prepared solely for information purposes only. The information herein is based on information generally available to the public and/or from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy of the information. Aalto disclaims any and all liability relating to this article.