Are you going through the housing market but are unsure which kind you’re in? The buyer’s and seller’s market can get confusing if you’re not new to it. So, how can you tell them apart?
Whether you want to buy a house or sell a home, it helps to know the difference between both markets. This way, you can identify where to put your home up for sale when it’s ready.
The question is, how do you know if you’re already in the sellers market? Here’s a guide to help you identify a seller’s market apart from one for buyers.
The Difference Between Each Housing Market
A common mistake investors make before buying or selling a property is to consider what market they’re in. As a result, they fail to execute effective strategies that benefit their investment.
Current and future conditions of the market affect how well a strategy works. So, it’s essential to know what stage of the market you’re in to guide your decisions. This way, you know the best time to buy, sell, or hold a property.
But to get there, you should know the difference between a buyer’s and a seller’s market. Here’s a brief explanation for each of them:
What is a Buyer’s Market?
A buyer’s housing market usually has more homes for sale than there are the number of buyers. It’s great for real estate investors because they have higher negotiating power. And so, it allows them to move to the next deal when their prospect disagrees with the terms.
What is a Seller’s Market?
If you’re in a seller’s market, you will notice more buyers than properties for sale. As a result, home prices increase, and properties sell for the original asking cost or more. You might even find bidding wars due to a single property receiving multiple offers.
How to Set Them Apart
The real estate market condition varies from time to time. One area could be a seller’s market, while the other feels more like a buyer’s market.
A consideration included is asset class. Here, the demand for properties changes every time. But besides that, the following are a few ways to determine your location’s housing market conditions:
Check the Available Inventory
A neutral housing market occurs when the favor for buyers and sellers is equal. In most cases, it usually has six months of available inventory.
Even so, you can identify this by taking the number of homes currently up for sale and dividing it by the sales in the previous 30 days.
If the inventory goes over six months, you’re shifting to a buyer’s market because there are more homes than its demand. At the same time, it becomes a seller’s market if there’s less than six month worth of inventory. It’s due to the demand being higher than the number of properties for sale.
Amount of Homes With a Price Cut
Properties sold exactly at or close to their original listing price mean the demand for them is high. And so, it means you’re in a seller’s market. But if most sellers start to reduce their asking price a lot more, it could mean you’re entering a buyer’s market.
You can get help with selling your home through third-party providers. When you contact expert real estate agents, there’s a high chance you could find a buyer or renter even if you don’t lower your prices too much.
Days on Market
When you sell a house, you want to note its days on the market. It refers to how long the property stays in the market from the time you list it until it gets sold.
Let’s say a market has an average DOM, or days on the market, of 50 days. If recent sales only stay up for up to 40 days at most, it means homes are selling out faster.
If so, look at the reason that could be causing it. If properties sell faster due to extreme price cuts, you’re still in a buyer’s market. You can say you’re in a seller’s market if homes sell even if there’s little to no price change.
Home Sale Trends
Many suggest checking home sale trends before you sell a home. This way, you can determine how the market changes from its previous condition.
One thing to remember about the real estate market is that it shifts more often than you think. If prices rise too quickly, it can become a seller’s market. Likewise, if people start selling enough to exceed the demand, it shifts into a buyer’s market.
A tip around this is to keep track of how the market moves. This way, you can get the most from the best times to sell and buy homes.
Interest Rates
The changes in mortgage interest rates also affect how often investors and homeowners buy or sell homes.
If interest rates are low, it makes buying houses easier for investors and homeowners. And so, it brings you into a buyer’s market.
When it rises, buyers can get priced out of the market. In this case, the demand for rental properties grows as much as the number of occupied housing. It could mean you’re in a seller’s market.
Delinquent Mortgage and Negative Equity Level
Two metrics that can also help determine the type of market you’re in are the percentages of delinquent mortgages and negative equity. Among other factors, they indicate when the housing market becomes distressed.
A delinquent mortgage refers to a situation where an individual becomes unable to make their payments, leading to the point where their lender forecloses them. Additionally, property owners with negative equity might return the house to their bank.
Although it makes properties available for buyers at a lower value, investors should take note of the conditions behind it. Growing foreclosures could mean a downward trend in the real estate market.
Learn How to Identify a Sellers Market Right Here
If you get into real estate, you want to know the best ways to maximize your investment. One way is by knowing when you’re in a sellers market. This way, you find the ideal times to put your property up for sale or rent.
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