The home-buying process isn't simple, and neither is the home-selling process, but it's easier when you understand one fundamental principle. This principle is the difference between a buyer's market and a seller's market.
When you understand a buyers vs. seller's market, you'll know how to determine the best time to buy or sell a home. So, what are the differences, and why does it matter?
Here is a guide to help you learn what each market represents and how to use this information to time your home purchase or sale.
A buyer's market presents the perfect time for people to purchase homes. Therefore, if you want to buy a house, you'll benefit by completing this event during a buyer's market.
Here are some of the characteristics of a buyer's market:
Supply and demand play a massive role with all products, including homes. As a result, you'll notice a high supply of homes and a lower demand during a buyer's market.
The natural effect of more supply than demand in real estate leads to an overabundance of homes for sale. This is good news for buyers. Buyers will have more homes to choose from and other benefits.
You can typically tell when it's a buyer's market by evaluating how many homes you can find for sale. It's probably a buyer's market if you see many homes for sale.
As a result of the high number of homes for sale, you'll notice that home prices fall. You'll pay less for a house during this time because that's how supply and demand work.
When supply exceeds demand, prices drop, which is true in real estate and all other markets. Therefore, buying a home during this time is beneficial for buyers.
Another thing you'll notice during a buyer's market is less competition. Fewer people are shopping for homes at this time. Thus, it causes a decrease in the competition buyers face when shopping for homes.
Additionally, buyers have more room for negotiation. When you shop during a buyer's market, home sellers need to stand out if they want to sell their properties.
As a result, home sellers will typically negotiate more. On the other hand, if they aren't willing to negotiate, they might have more trouble selling their houses.
Finally, a buyer's market causes slower home sales. During this time, a seller might wait for months before receiving an offer.
If you're trying to sell a house during a buyer's market, this might be one of the reasons it's not selling.
When you consider all these characteristics, you'll see why buying a home during a buyer's market is beneficial for people who want to purchase homes. But, on the flip side, it's not an ideal time to sell a house.
On the flip side is a seller's market. Homeowners who want to sell their houses benefit by selling them during this market type.
Here are some of the characteristics of a seller's market:
Homes sell like hot cakes during a seller's market. The result is fewer homes for sale. The demand for homes increases during a seller's market, leading to a decrease in the supply of homes.
As a result, shopping for a house during a seller's market might prove difficult. You'll have fewer houses to choose from and other adverse effects.
However, this market is ideal for home sellers. Home sellers benefit when the supply of homes for sale decreases.
Selling your home during a seller's market also leads to higher selling prices. If you want to make a larger profit on your home sale, you might want to wait until the market reaches this point.
Again, as demand for homes increases and supply decreases, the natural effect is a price increase.
Another benefit for sellers is the increased competition from homebuyers. When homebuyers have fewer homes to choose from, they might fight for the ones they find.
This battle might lead to a price war on homes for sale.
Buyers have the short end of the stick when it comes to negotiating during a seller's market. Sellers won't have to negotiate, as there will be more buyers than homes for sale. Again, this leads to increased home prices.
Finally, homes sell faster during a seller's market. Therefore, if you want to sell your home quickly, choose a seller's market. For example, you might sell your home the day you list it during these market conditions.
One question you might have is how to tell which real estate market it is. Fortunately, you can learn by speaking with a real estate agent.
An agent can describe the market features to you and help you determine if now is the right time for you to buy or sell. You can also evaluate the market yourself by looking at the number of homes for sale and prices.
You might also want to consider the days on the market (DOM) statistics. It's likely a buyer's market if the DOM is higher than usual. Likewise, it's likely a seller's market if the DOM is lower than usual.
Learning the differences between a buyers vs. seller's market is crucial before buying or selling a home. Are you ready to learn more?
If you're ready to purchase or sell a house in the Frisco area, contact us. We can help you with both events, and we'll even help you sell your house for free. You can learn more by visiting our website or contacting us.