The Difference Between a Buyer’s Market and a Seller’s Market

You have probably wondered when's the best time to buy or sell a house. You may think the time of the year significantly impacts fluctuation, but you might be mistaken. The changes have more to do with demand and supply than anything else.

Knowing what's happening in your local real estate market is essential to determine whether it is a buyer’s or a seller’s market. But what exactly do these terms mean? This guide will help you differentiate them.

Buyer’s Market

This market occurs when supply is more than the demand. There is high real estate inventory, and plenty of homes are for sale, but few interested buyers. This market's buyer has more leverage than the seller since higher supply than demand favors buyers.

The house prices in a buyer’s market decrease, and homes stay on the market longer. As a result, sellers must compete to get buyers by lowering their asking price. Moreover, the sellers are willing to negotiate with buyers to prevent them from walking away.

Seller’s Market

A seller’s market occurs when demand is more than supply. Few homes are for sale with many interested buyers. Since the inventory is low, this market's sellers have the upper hand.

Houses in a seller’s market sell at a high pace, and buyers must compete with each other to secure property. These marketing conditions make buyers more willing to spend more than they otherwise would. As a result, sellers raise their asking prices. Moreover, buyers will have less negotiating power. They accept the properties as they are. Seller's markets usually have a housing shortage, resulting in bidding wars where buyers make competing offers, driving the price up. Consequently, the price goes above what the seller was initially asking for.

Is Your Market a Buyer’s or Seller’s Market?

Before performing a real estate transaction, you can determine what kind of market your local real estate is experiencing. Below are some indicators to assist you:

  • Inventory: Review your local real estate inventory. Your area is likely experiencing a buyer’s market if the inventory is extensive. If the converse holds, that is a seller’s market.

  • Pricing: Ensure you go through the price history of recent listings. If the prices have dropped, then that is a buyer’s market.

  • Recent sales: Compare the recent deals to your home or the house you are interested in. A high selling price indicates a seller’s market, while a low price indicates a buyer’s market.

  • Time a house stays on the market: Homes will sell quickly in a seller’s market compared to a buyer’s market.

  • Trends: Check whether prices have been increasing or decreasing.

Final Remarks

When purchasing or selling a home, it is paramount to understand the local real estate market. As a buyer, a buyer’s market will favor you while a seller will gain more in a seller’s market. Ensure you are one step ahead when going into any transaction, and you will always have the leverage.

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