When you’re looking to buy a home, you obviously want to make sure you’re getting the best deal possible. One of the biggest factors you should consider when weighing your options is when it will be the right time to buy. Depending on the timing and demand for homes in your neighborhood, the price you pay for a house could look very different.
You can keep track of the housing market’s ups and downs by checking whether your neighborhood of choice is experiencing a seller’s or buyer’s market. Depending on market conditions, you could have more or less negotiating power as a home buyer.
Read on to learn what a buyer’s market is, how you can tell if you’re experiencing one and how it can give you more power to get the things you want in a real estate transaction.
What Is A Buyer’s Market?
A buyer’s market describes a state of the real estate market in which the number of houses for sale is greater than the number of buyers looking to purchase one. Since there are more homes than buyers, the home buyer has more power to decide what they want and are willing to negotiate on when cooperating with sellers.
Because of the high number of available homes, house prices tend to decrease during buyer’s markets. Sellers are forced to compete for buyer interest, which can be very advantageous to you as a buyer. Sellers may be more willing to compromise on asking price and closing costs than they would otherwise if they are trying to win your interest in their house.
What’s The Difference: Buyer’s Market Vs. Seller’s Market
The opposite of a buyer’s market is a seller’s market – which is a situation where there are more buyers than houses for sale, giving the seller more negotiation power instead. While prices tend to drop in a buyer’s market, they may increase drastically in a seller’s market, since there is a lot of buyer competition.
Purchasing a home can also be riskier during an extreme seller’s market, since sellers have no incentive to compromise in many cases. Buyers might be forced to overpay for a home as well as purchase it as-is, which in some cases could be very detrimental if something that wasn’t found in an inspection is wrong with the house.
Is It A Buyer’s Market Or A Seller’s Market Right Now?
The condition of any housing market is usually fairly local, since there can be a lot of factors that might contribute to whether there is demand for homes in a given area. In general, though, the housing market in the U.S. has been an intense seller’s market since the beginning of the COVID-19 pandemic.
There are still far less homes for sale than there are buyers, which has led to fierce competition, bidding wars and high selling prices. Mortgage interest rates for home sales, however, remain low – and there is evidence that the market may be slowly cooling, as well.
How Can I Tell If It’s A Buyer’s Or Seller’s Market?
As a buyer, you ideally want to purchase a home in a buyer’s market where you’ll have more power to negotiate a lower selling price and other concessions – but how do you know when it’s a buyer’s market?
Let’s go over a few key signs of a buyer’s market to help you identify the right time to buy. Though it may not be a buyer’s market again for some time, if you are trying to wait out the current seller’s market, keep an eye on real estate trends to get an idea of changes in the market.
Why Does It Matter If I’m In A Buyer’s Or Seller’s Market?
So, why does it matter if you’re working with a buyer’s or seller’s market? Can you feasibly buy a house under both conditions? The answer is yes – you can buy a home in most any market conditions. Purchasing in a buyer’s market will simply yield you more advantages. Let’s take a look at a few key benefits to making a home purchase during a buyer’s market.
In a buyer’s market, you have more inventory to choose from when shopping around for homes than you would in a seller’s market when there is limited inventory. With more homes available to you, it may be easier to find a house that fits more of your needs without compromising.
Since there is a greater supply of homes in a buyer’s market, you will also typically enjoy lower home prices. Homeowners selling their houses will have to compete for buyer interest, and in many cases that can mean lowering the listing price on their home.
Seller concessions are closing costs that a seller may agree to pay in order to entice a buyer into working with them. In a seller’s market, it can be more difficult to get your seller to budge on these costs – but when you have more leverage as the buyer, your seller might be willing to pay for things that would benefit you, such as your property taxes, processing fees, attorney fees, etc.
In a buyer’s market, there is much less competition for homes. Since there is a surplus of homes on the market, sellers will be the ones competing for your interest – so it’s unlikely you’ll have to deal with any bidding wars or contingency-free contracts.
Time To Consider Your Housing Choice
Buying a home in a seller’s market can be chaotic and frustrating. Not only is there a ridiculous amount of competition for homes – you may not even be able to find a home that hasn’t (or won’t soon be) snatched up by another buyer.
This stress is eliminated in a buyer’s market. Since there are plenty of homes to go around, the process of shopping for one that fits your needs is less stressful and you can take your time deciding on a good fit.
When Was The Last Buyer’s Market?
Since the pandemic, the national market has been a particularly intense seller’s market. The last time there was a buyer’s market in many communities was around 2011 – 2013, directly following the 2008 Recession. After the housing market crash, there was a huge drop off in demand for homes, creating a temporary buyer’s market. While there is not expected to be another buyer’s market any time soon, there have been signs that the market is at least calming down in the wake of the pandemic.
The Bottom Line: A Buyer’s Market Favors Buyers Over Sellers
The housing market can change quickly – and the state of the market can have a potentially huge impact on how much you end up paying for a house. A buyer’s market is the ideal time to buy a house because it favors the home buyer in negotiations, but you can buy in a seller’s market, too – there will just be more competition to deal with.
Source: quickenloans ~ By: Sidney Richardson ~ Image: Canva Pro