Table of Contents
What Is a Buyer's Market?
What Is a Seller's Market?
Is It a Buyer’s or Seller’s Market in 2024?
How to Tell If It’s a Buyer’s Market or a Seller’s Market
Buyer's Market vs Seller's Market Seasonality
Buyer's or Seller's Market Bottom Line
What Is a Buyer’s Market?
A buyer’s market is a real estate market in which conditions favor buyers. This occurs when the supply of homes exceeds the demand, giving buyers an advantage in negotiations. In this scenario, there are more properties available for sale than there are interested buyers, often resulting in lower home prices.
Sellers may need to offer incentives or reduce asking prices to attract buyers, and properties may stay on the market for longer periods. Economic factors such as higher interest rates, increased housing inventory, or a slowdown in the local economy can contribute to a buyer’s market. For example, a rise in new construction or a surge in homes listed for sale can increase supply, leading to more favorable conditions for buyers.
Buying a Home in a Buyer's Market
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 more housing inventory, giving you a greater selection to choose from.
Selling a Home in a Buyer's Market
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 is a hot real estate market with lots of demand and conditions that favor sellers. It occurs when the demand for homes exceeds the supply, giving sellers an advantage. In this environment, there are more buyers looking for homes than there are properties available for sale, often leading to higher home prices and quicker sales.
Sellers can afford to be more selective, and they may receive multiple offers, sometimes above the asking price. Contributing factors to a seller’s market include low interest rates, a strong local economy, and limited housing inventory. In such markets, buyers may face stiff competition and bidding wars, making it challenging to find and purchase a home without paying a premium.
Buying a Home in a Seller's Market
If you plan on buying during a hot real estate market, you need to be prepared to act quickly and make an aggressive offer. Homes often get into bidding wars during seller's markets, and buyers may need to make offers on multiple homes before getting an accepted offer due to the high amount of competition among buyers.
Selling a Home in a Seller's Market
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 2021 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.
Is It a Buyer’s or Seller’s Market in 2024?
As of July 2024, the market favors sellers, but the real estate market is also exhibiting a mixed dynamic across different regions and can favor buyers in some regions as well. For example, in states like Kansas and Colorado, it's a seller's market, with a high percentage of homes selling near or above the list price.
Conversely, in California, the market has shown signs of cooling down after a period of high demand and limited supply. Factors such as rising interest rates and affordability issues have contributed to this trend, making it slightly more favorable for buyers than in the past.
Overall, the current market dynamics suggest a slightly more balanced environment compared to the intense seller's market seen in recent years, but regional differences are significant, and local market conditions should be closely monitored for the most accurate insights.
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 buyer's 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.
Buyer's Market vs Seller's Market Seasonality
There’s a lot of seasonality in the real estate markets, with the summer months typically corresponding with the 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.
Buyer's or Seller's Market Bottom Line
Knowing if it's a buyers or sellers market is important if you are planning on buying a home as it can impact when you make the purchase as well as how aggressive your offers will be. While national trends are easy to determine, they don't always reflect local market conditions in your zip code. There aren’t many websites that have accessible and transparent data on local real estate markets, so the best way to find out if it is a buyer's market or a seller's market in your zip code 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.