Understanding the housing market is crucial, whether you’re looking to purchase or sell your home. Ensure a more seamless mortgage process by reviewing the characteristics and differences between a Buyer’s and Seller’s Market!
What is a Buyer’s Market?
According to Bungalow, a buyer’s market occurs when there are more houses on the market than there are interested home buyers. Moreover, a sudden, dramatic increase in homes for sale in a certain area or decrease in interested buyers could result in a buyer’s market. Factors such as economic recessions, a decline in the job market, and overdevelopment are just a few elements that can cause this type of market.
- Lower Priced Homes: With lower demand for housing, the price of listed homes is often below the original listing price. Additionally, buyers have more bargaining power in this market. When this happens it often results in sellers having to make multiple price cuts during the listing period.
- Slower Homes Sales: Unlike a Seller’s Market, the speed at which a home is sold will be dramatically slower. For example, in the buyer’s market, homes could sit on the market longer since there are a wide variety of homes available.
- High Inventory: With more homes available to purchase, buyers will have more options to choose from. Higher inventory allows buyers to find a home that will better fit their needs and wants. Furthermore, the chances of a bidding war in this type of market are low since there is little competition.
What is a Seller’s Market?
According to Corporate Finance Institute, a Seller’s Market occurs when the demand for housing exceeds the supply of homes available on the market. Consequently, due to limited supply, sellers have higher bargaining power and the ability to control and dictate prices. Growing populations, employment opportunities, interest rates, and the time of year are all factors that can create a seller’s market.
- Higher Priced Homes: With higher demand for housing, sellers have stronger bargaining power, resulting in higher prices for homes. An increase in home prices in a particular region can signify a seller’s market if there is a significant jump in prices when comparing to the previous period.
- Quick Home Sales: The speed at which a home is sold tends to be faster in a seller’s market than in a buyer’s market. Furthermore, both traditional and unique homes will sell quickly because buyers do not have a variety to choose from.
- Low Inventory: As previously mentioned, homes tend to sell faster, leaving a limited number of houses available on the market. Consequently, low inventory can result in bidding wars. This is where buyers try to outbid each other by increasing their offer price gradually to achieve the price set by the seller.
Buying in a Seller’s Market
If you are thinking about purchasing a home this year, check out our tips for buyers in a seller’s market. Help prepare yourself for today’s competitive housing market by reviewing our blog, 7 Things to Prioritize When Purchasing a Home!
- Get Pre-Approved: Pre-approval is a smart step (in any market) so you know how much house you can afford. This also helps to show sellers how serious you are about purchasing their home. Prepare by gathering the following financial documents: past 2-year tax returns, paystubs, and other types of documentation your lender may require.*
*Preapproval based on credit history, debt to income ratio, income, employment and down payment. Approval is subject to eligibility.
- Prioritize: Evaluate what features and amenities are “must haves” in your home, such as the number of bedrooms and bathrooms. Make sure to prioritize your “needs vs. wants” since there is limited inventory available.
- Prepare to Make an Offer: Make yourself available and flexible to stand out to sellers. Prepare to make an offer and be open to a closing date that best fits their timeline.
- Find a Good Realtor: To help you make smart decisions during the home buying process, hire a professional real estate agent when buying a home. Conduct research and ask friends and colleagues for referrals to find an agent that is right for you.
Overall, understanding the difference and characteristics between a buyer’s vs seller’s market is important to better understand the mortgage process. Learn more about the home buying process today by enrolling in our FREE DIGITAL COURSE, Homebuying For Beginners Part 1!
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