The real estate market is a versatile industry and an entire subject on its own. We would not be exaggerating had we said that real estate could be taught in the schools as a complete subject along with science, mathematics, law, English, and other subjects! Here is why you need to understand the buyers market vs sellers market relationship!
It is a fact that not everyone can be a real estate agent because a large amount of knowledge and experience is required to pull off these highly technical deals, which brings us to our point.
While we understand that real estate dealings are not a piece of cake, it is essential that even though we are hiring a real estate agent, we still know the basics of the deals. After all, we are dealing with some huge investments –may be the biggest that we ever will in a lifetime. And also, because you should know about things so no one could fool you.
One of the most important things that both buyers and sellers need to know is about the market dynamics. Knowledge of market dynamics is not just limited to the real estate field. No matter what field you are in, it is highly important that know the market dynamics to make a calculated decision no matter how much help and assistance we have; at the end of the day, the final decision is always ours.
Let’s read below to fully understand the buyers and the sellers’ market in the real estate industry:
Type of Markets:
The first step towards getting fully acquainted with the buyers and the sellers’ market is to understand their literal meaning and then move on to the contact. As the name suggests, the buyers’ market favours the buyers, and on the other hand, the sellers’ market favours the seller. Simple! Now that we know WHAT the buyers and the sellers’ markets are, it’s time we understand HOW the buyers and the sellers’ market favour the buyers and the sellers. Keep Reading!
Understanding Demand And Supply
the market generally consists of three variables; price, demand and supply. These three come into play to determine whether the market is going to be favouring the buyer or the seller. In order to understand demand, supply we need to know the exact meaning of demand and supply. Demand is the willingness and the ability to purchase a house in the real estate market. On the other hand, the supply is the production and the availability of the items. The price is determined at the equilibrium point of demand and supply, graphically where both demand and supply intersect – that is where the price is set.
We will not dive deep into the economic concepts of demand and supply; however, it is essential to know that the price falls when the supply is more than the demand. However, when the demand is more than the supply, the price rises. This is also known as the concept of scarcity.
Let’s finally move on to the concept of the buyers and seller’s market.
A seller’s market favors the seller; now, we will dissect how it favors the seller. A seller’s market is when the demand in the real estate market is high; however, the supply means the houses’ availability is low. This is where the demand increases, along with the price. The duration of the seller’s market only depends on the supply and demand in the market – the higher the demand compared to the supply, the higher will be the market price.
Most sellers will try to sell their houses in such a time because it will allow them to gain higher benefits during this time compared to had they sold in the buyers’ market. If you are someone who wants to sell your house, make sure you study the market holistically before putting your house up for sale!
How to Identify a Sellers Market?
Identifying a seller’s market is not like waking up one day to an email that, oh, the seller’s market start today. Apart from the market dynamics and rising prices, there are a few more things that you need to consider and look for before putting your house up for sale!
The first sign of a seller’s market is that people are going gaga over houses! They will also be up for paying more than the asking price, given that you agree to sell the house to them. Moreover, you can also check MLS – when there are very few listings from which the buyers can pick and choose to buy the house, that is when you should understand that the market is going towards the phase of a seller’s market.
One of the most obvious signs of a seller market is bidding wars! Once you see bidding wars happening here and there, that is our cue to put your house on sale. This is the time you will get amazing offers that are once in a lifetime kind! Don’t miss out on it.
As the name suggests – the buyers’ market is favourable for the buyers. If you are someone looking for a house, now is the time that you should start house hunting – or maybe if your eyes are stuck on a house, you can bid on it now! Why? Because this is the time when there are high numbers of houses available for sale in the market. In other words, the demand for houses is lesser than the supply in the real estate market. Since the demand is lesser, the market equilibrium is going to be set lesser, and hence the price will be set at lower values.
Due to the fall in prices, it will be a good idea to buy your house now as you will be getting a good house at a lower price than the sellers’ market.
How to Identify a Buyers Market?
Good question! We know in theory what a buyers market is, but how to identify it? Obviously, the market will not have a billboard that says BUYERS MARKET. Instead, there are a few signs that we need to look for in order to determine if the market in its current form is a buyers market.
If the real estate market is in the phase of a buyers market, it will have lower prices, as explained above in detail. However, a few more signs will help you determine the buyer’s marker; for example, the listings will start staying on the market for a longer period. For example, if the average duration of home sale is four days, it will start rising to 10 or 15 days in a buyers market. If you see this sign know that it’s your cue to start house hunting.
Next, you will notice that home constructions are on its rise – new buildings and houses are being built in every locality which means that the supply of houses is going to increase and hence the prices are going to fall. And lastly, one of the most important signs of a buyer’s market is that you will notice that there are a wide number of listings from which you can choose the house you want to purchase. The options will not be limited – when you see all these signs, try to run as fast as you can and buy the house of your dreams.
All in all; If you are not urgently looking to buy a house – then you should wait for the buyers market and buy the house. On the other hand, if you are not in financial difficulty and don’t have to sell the house urgently, you should wait for the seller’s market!
Pros and Cons:
Just the price raise or decrease is not the only perk of buying in the buyers market and selling in the seller’s market; the pros and cons both are beyond just the change in price.
Let’s talk about both the pros and cons of the buyers and the seller’s markets.
Read below to find the advantages and the disadvantages of the buyers market.
Buyers Market from the Buyers Perspective:
From the buyers perspective, the buyers market in the real estate industry is ideal; the perfect time to buy the houses. It’s a given that the prices are low, a lot of houses are on the market, and you can get the house of your choice. More houses are on the market, the better house you will be able to get.
One of the most prominent benefits of buying in the buyers market is that there are much lesser bidding wars, and it will be easier for you to get your hands on the house that you want – obviously, the bidding wars can be very exhausting. In the buyers market, you will be able to escape this. Negotiating will b much easier as well in the buyers market since the demand will be low, and those who want to sell will be open to a compromise.
Overall, the buyer’s market is extremely beneficial for the buyers.
Buyers marker from the Sellers Perspective:
if you are a seller and want to sell your house, we do not recommend you put your house up for sale in the real estate market. During these times, the demand is low. Either you will have to entertain a lot of potential buyers; however, since many houses are on the market, the probability that your house will sell will be immensely low.
Secondly, they are going to ask for much lesser prices and will negotiate too. We do not recommend you to put your house up for sale during this time period.
Cons of Buying in the Buyers Market;
While there may not be any huge disadvantages of buying in a buyers market, most sellers with amazing houses can sell cave in this period as they do not want to settle for low. In case you are buying old, damaged houses in this time period just because of the lower price, we would say you are settling for less.
Seller’s Market from the Sellers Perspective
just like the buyers market is the ideal market for the buyers, the seller’s market is the ideal for the sellers. The sellers will be able to sell the houses on their asking prices or more, and the negotiation will be less along with the lower time a house stays on the markets. It’s time for the sellers to fly high!
Seller’s Market From the Buyers Perspective
While the sellers would be happy, it might not be the best time for the buyers since the sellers are in domination at this time. They rule the market due to high demand and lower supply. Hence, the buyers will have to buy the houses at the asking prices, less negotiation and be quick since the houses sell out extremely fast.
Cons of Selling in the Sellers Market:
Even though the sellers will be the kings in the seller’s market, we also need to understand that if people do not have the money for the prices, the sellers are asking eventually, they will not buy the houses, and the demand will fall. The sellers might be the kings in the seller’s market – but who will they rule upon if no one can afford to buy the houses?
Things to Think About With Buyers Market Vs Sellers Market:
Think about it: what will happen if sellers stopped selling in the buyers market and the buyers stopped buying in the seller’s market? While this might only have in a perfect real estate market that there are 0 purchases in the seller’s market and 0 sales in the buyers market, the price would come back to an equilibrium point of prices, and the price fluctuation would end.
What we mean to say is that the price for houses will remain the same all around the year. At the same time, this might happen in a perfect market and not in our real world it’s still worth giving it a thought.
Conclusively, we still recommend that you sell in the sellers’ market and purchase in the buyers’ market since the pros are much more than the cons!
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