What constitutes a “Seller’s Market” vs a “Buyer’s Market” and Does it Matter?
“It’s a Seller’s Market” is something we are hearing in the real estate industry. How do we know for sure and how does it affect your selling or buying in our market? Here is one perspective:
“Simply put, a seller’s market is a market where there are more homebuyers than sellers. Based on basic laws of supply and demand, this means sellers have the upper hand: They will likely sell their place quickly, perhaps for over asking price, with a minimum of fuss or pushback from buyers. So here’s what buyers need to know about seller’s markets—and how to survive them.
Are we in a seller’s market?
For the greater part of 2021 and 2022, the U.S. housing market was a seller’s market. Homes were flying off the market in record time due to historically low mortgage rates and sellers were in the driver’s seat. Buyers all over the country had to waive contingencies and offer over asking just to have a chance at being the winning bid.
But in the last several months, uncertainty about the economy, inflation, mortgage rates, and more has stunted the market—and taken power away from buyers and sellers alike. Some experts have dubbed it “nobody’s market” right now. Others still believe we’re in a seller’s market, especially in hot areas of the country where buyer demand is high and median days on market is low.
Are you in a seller’s market? How to tell
Home buyers and sellers can evaluate whether they’re in a buyer’s or seller’s market by analyzing a few key variables:
- Average days on market (DOM). This measurement shows the median age of real estate listings in your area. “If houses are selling in your neighborhood in less than 10 days, it’s a strong seller’s market,” Lejeune says. You can find what the average DOM is in your city using realtor.com’s Local Market Trends tool.
- Asking vs. final home price. In seller’s markets, bidding wars can often erupt among buyers, which means sellers may enjoy a final sales price that’s equal to their asking price, or more. So, if a home is listed at $450,000 and sells for $450,000, $460,000, or higher, that’s a seller’s market. In a strong seller’s market, the final sales price is typically at least 10% higher than the asking price. You can compare listing price vs. closing price in various cities across the country at realtor.com/local.
- Home prices over time. Rising home prices over time is a sure sign of a seller’s market. You can determine if home prices are rising or falling in your city by looking at your ZIP code’s “market price curve” on BuilderOnline.com.
Buying a house in a seller’s market
To compete against other buyers in a seller’s market, you need to be prepared. First and foremost, you’ll need a mortgage pre-approval letter before you start shopping, so that a seller knows you can put your money where your mouth is.
You may also have to waive some contingencies to edge out other buyers—or widen your search to an up-and-coming neighborhood with less demand.
Other ways to make your offer more attractive include increasing the amount of earnest money that you’ll put into the escrow deposit, adding an escalation clause, writing a personal letter to the seller and, of course, offering above list price. Here’s more advice for home buyers on how to survive a seller’s market.”
For Full Article, click on What Is a Seller’s Market? A Tough Road for Home Buyers (realtor.com)
Author Daniel Bortz
Apr 20, 2023 Daniel Bortz has written for the New York Times, Washington Post, Money magazine, Consumer Reports, Entrepreneur magazine, and more. He is also a Realtor in Virginia.