|What Type of Market Is It?
QUESTION: How do you tell if it's a buyer's or seller's market?
ANSWER: Real estate markets fluctuate through cycles, and knowing what type of stage the market is at can help you decide if it's a good time to buy, sell, or wait.
In a seller's market, more buyers are available compared to the property for sale. When this happens, home prices tend to increase, and bidding wars often occur. Sellers also might receive their full asking price of the home or even more. A few signs that it's a seller's market include:
- Fewer homes for sale.
- Homes selling via word-of-mouth before they're even listed.
- Homes on the market for fewer days.
On the other hand, a buyer's market occurs when there are more homes for sale than prospective buyers. When this happens, prices are more negotiable because buyers believe they can easily move on to the next deal if the current one falls through due to expanded inventory. A few signs that it's a buyer's market include:
- Increased number of homes for sale.
- Homes sell for below-asking prices, oftentimes with numerous price cuts.
- Inventory levels rise, as do the days on the market.
It might seem easy to determine what type of housing market it is just by following those guidelines, but sometimes it's not so easy. Depending on the neighborhood, one area could be a seller's market, while on the other side of town, it could be a buyer's market.
By monitoring trends in sales prices and determining the amount of available inventory, you can have a better understanding of the market. Homes that sell above the asking price indicate that it's a seller's market. The larger the inventory of homes for sale, the more likely it's a buyer's market. Take the number of homes for sale and divide it by the number of homes that have sold in the past month. If the number is above seven, it's a buyer's market. If it's below five, it's a seller's market. Anything in the middle is considered neutral.
If you're looking to buy or sell, it's important to know what type of market you're dealing with. For help figuring out which one affects you, reach out to your real estate contact to determine how you can take advantage of the current housing market.
Sources: Learn.roofstock.com, Rocketmortgage.com