What is a buyer’s market?
A buyer’s market means conditions in the real estate market favor buyers, which typically occurs when there is likely to be more housing supply than there is demand. Essentially, this means that if you’re planning on buying a property during a buyer’s market, you have a great opportunity as you will have more leverage and negotiating power when making an offer on a home. You can also expect there to be more housing inventory, giving you a greater selection to choose from.
If you’re a seller, you can expect it to take longer to sell your home during a buyer’s market. Listing the property for the correct price and having great marketing will be critical in a soft market. You might even need to lower the price of the house after you list it as there will be fewer buyers looking to purchase properties. The lack of demand will make selling a home harder, and it’s essential to work with an experienced real estate agent to ensure you find a qualified buyer.
What is a seller’s market?
A seller’s market means that the real estate market is hot, and that market conditions favor sellers. This happens when there are plenty of homebuyers, with demand overwhelming supply, creating a lot of competition between buyers and leading to rising prices and bid-wars on houses. If you plan on buying during a hot real estate market, you need to be prepared to act quickly and make an aggressive offer.
If you’re selling a house during a hot market, you’ll have an easy time securing a buyer and getting top dollar for your house. For example, the 2018 real estate market was a fantastic seller’s market, with many homes receiving competing offers and generating bidding wars. Such a hot market can create an excellent opportunity for you to save some money by working with a listing agent who charges a lower commission or by negotiating a lower fee.
How to Tell if it’s a Buyer’s Market or a Seller’s Market
You can use supply to determine if the market favors buyers or sellers. As a general rule, a neutral market will have 6 months of housing supply. This means that if there’s less than 6 months worth of inventory, it’s a seller’s market, and if there’s more than 6 months’ worth of inventory, it’s a buyers market. When determining if it’s a buyer’s or seller’s market, you must look at housing supply on a local level, usually by neighborhood or zip code, as it’s not uncommon for areas in the same city to be in different markets. For example, Brooklyn in New York was experiencing a seller’s market for much of the 2010s. At the same time, Manhattan shifted from an incredibly hot market that favored sellers to a buyer’s market by the end of the decade.
Don’t forget about real estate seasonality
There’s a lot of seasonality in the real estate markets, with the summer months typically corresponding with peak buying season. The reasons this happens include a combination of better weather as well as the fact that families with kids generally prefer to move during the summertime to avoid pulling their children out of one school and changing to another.
This means that when you’re looking at overall market trends, it’s crucial to compare them to the previous months as well as to the same month in past years. Don’t merely look at overall year sales and divide that by twelve as you could get the wrong picture. For example, if there are 1,200 home sales per year in your area it’s likely that the colder months from October through March only account for about 35-40% of the annual sales equivalent to around 450 home sales while the warmer months might account for the remaining 750 transactions.
A real estate agent can be a great resource
Whether you’re a seller or buyer, it can be challenging to determine market conditions, especially on a hyperlocal level. There aren’t many websites that have accessible and transparent data on local real estate markets, so the best way to find out if the market in your zip code favors buyers or sellers is to consult with a real estate agent. An experienced realtor will have a pulse on the market and can provide you with expert insights and advice.
Is it a buyer’s or seller’s market in 2020?
So far, 2020 has been a crazy year, with what looked like a solid seller’s market on the national level to get things going, followed by an upheaval unlike anything we’ve seen in decades due to the coronavirus pandemic. It is already clear that 2020 will undoubtedly be a down year in terms of overall volume due to the stay-at-home orders and effective shutdown of the US economy, but whether or not the market will favor buyers or sellers has yet to be determined. Mortgage rates are at historic lows, helping more buyers enter the market, but the overall damage done to the economy by COVID-19 is tremendous. This is likely to weaken demand while also increasing supply, so the most reasonable expectation is that we’ll see a buyer’s market for the rest of the year.