Buyer’s vs. Seller’s Market: How to Get What You Want in Either Market
Your dream home is listed for $800,000. It’s been sitting on the market for over two months, and you want to buy it, but it’s just not the right time. Three years later, the exact same home is on the market again, but it’s now going for $900,000 and sells in two days. Why did this happen?
It's the difference between a buyer’s and seller’s market.
In this post, we’ll compare buyer’s vs seller’s markets, show you how to identify which type of market you’re in, and offer helpful tips for buyers and sellers in each.
What Is a Buyer’s Market?
A buyer’s market occurs when supply exceeds demand. There are lots of available homes and not enough aspiring homebuyers. Homes might sit on the market for longer than normal. Since this type of housing market is favoring potential buyers, it’s not uncommon for housing prices to dip below their market value. This is especially true for listings that have been available for a substantial number of days.
Signs That You’re In a Buyer’s Market
Think about the housing market as a pendulum. It’s swinging in either the buyer’s or seller’s direction, and some signs indicate when there’s a shift in the market conditions.
Buyers usually have the upper hand when:
- There’s an economic downturn or recession: During a recession, homeowners might be inclined to sell to get out of a pressing financial situation (e.g., being unable to make mortgage payments).
- The local jobs market declines: The stagflation or deflation of local job markets can contribute to a buyer’s market because fewer job opportunities result in less draw to the area.
- There’s an overdevelopment in the supply of homes: When there are too many new homes in an area, it can contribute to a buyer’s market. For example, if tons of spec houses are being built in the new soon-to-be suburbs of up-and-coming cities, they might offer lower prices because people aren’t looking to move there ... yet.
What Is a Seller’s Market?
During a seller’s market, the number of homes available is less than the pool of buyers actively house hunting. Homes are in high demand and open houses are buzzing. When this happens, your dream home can come with a stiff price tag — often greater than its asking price.
Look at Marin County and other parts of the Bay Area during the pandemic as a prime example of a seller’s market. A surge of people leaving the cities for the suburbs and interest rates at historic lows drove buyers to move at light speed with the best offer possible, and sometimes that wasn’t enough.
Bidding wars ensued, and properties sold for way above list price as many people attempted to adjust their lifestyles during COVID.
Signs That You’re In a Seller’s Market
Home sellers have the upper hand when:
- There’s rapid growth in the job market: Do you remember what the tech industry was like in the SF Bay Area circa 2010? Home sale prices were going for way over asking!
- Properties sell quickly: When the average number of days on the market declines, it’s because offers are coming in rapidly.
- Multiple offers and bidding wars are common: When there are numerous offers on the table, sellers have all the negotiating power. Buyers will often remove contingencies and even do risky things like sign a purchase agreement without requesting a home inspection.
- Lower interest rates incentivize buyers: Even if home prices are increasing or going for above asking, low mortgage rates help buyers offset their monthly payments because they’ll be paying less interest per month. Lower interest rates also incentivize homeowners to refinance and lock in a better rate.
Buyer’s Market vs. Seller’s Market: Helpful Tips
Whether you’re a first-time home buyer or an experienced seller, here are a few tips and tricks for when the market trends your way, and when it doesn’t.
Buyer's Market Tips and Tricks
In a buyer’s market, buyers need to do their homework and take a steady pace. Because there are fewer buyers, they have the advantage. This provides them with more options, whether looking at many listings or browsing different areas.
However, it won’t be a buyer’s market forever. The pendulum will eventually swing the other way, so enter the market prepared with a preapproval letter in hand, a decent credit score and history, and enough savings for a down payment.
For sellers in a buyer’s market, it’s important to do everything possible to present your home in the best condition possible. The small things you have learned to live with may be worth repairing. Buyers can be pickier and will most likely have more requests for repairs or credits when they have the leverage. Do all you can to increase visibility and put your listing in front of qualified buyers.
Also, be open to covering some of the closing costs. Seller concessions, like offering to pay for appraisal and inspection fees, can go a long way.
Seller’s Market Tips and Tricks
A seller’s market typically creates more stress for buyers as they have to be ready and submit offers quickly. Having a preapproval letter from your lender is a must. You’ll also want to demonstrate your seriousness by making an earnest money deposit.
Typically, buyers have no leverage in a seller’s market and frequently get outbid by another buyer (sometimes with all-cash offers!). They may also settle on purchasing a home in its current condition. We still strongly recommend getting it inspected first. We also recommend that buyers not overextend themselves with making an offer. You’ll still need money for closing costs and other fees like repairs and moving expenses.
If you’re a seller in a seller’s market, take the necessary steps to ensure a smooth sale from beginning to end. This is your opportunity to sell your home for optimal profit, so don’t cut any corners and make the listing shine:
- Perform presale inspections so there are no surprises or potential liabilities after the sale.
- Keep it in tip-top shape during open houses
- Highlight the home’s amenities
- Be kind and courteous to your potential buyers
Also, your listing price should be well thought-out. Buyers know they will pay more during a seller’s market, but starting with an unrealistic asking price could deter them. The last thing you want is for them to experience buyer fatigue and miss your opportunity to sell your home at a premium.
How Seasonality Affects the Market
While the market favors buyers and sellers for varying lengths of time, seasonality often shifts the current market in one direction or another. For example, seasonal influxes to listings in the Bay Area typically follow the school year calendar. Most people want to be settled into a new home by the start of the school year and have that stability carried through the holidays and into the new year.
The listings typically increase in February, with another surge after Labor Day. It’s not an exact science, but it’s worth keeping in mind when buying or selling a home.
Navigating the Buyer’s and Seller’s Markets With Aalto
At Aalto, we’re shifting the balance of power in residential real estate away from industry insiders and toward people like you. Our self-service real estate platform is here to help you buy or sell your home and save tons of money in realtor fees.
Whether or not the market’s in your favor, our goal is to make your real estate journey as easy and stress-free as possible. Are you ready to start exploring the housing market? Sign up with Aalto today!
Aalto is a real estate broker licensed by the State of California, License #02062727 and abides by Equal Housing Opportunity laws. This article has been prepared solely for information purposes only. The information herein is based on information generally available to the public and/or from sources believed to be reliable. No representation or warranty can be given with respect to the accuracy of the information. Aalto disclaims any and all liability relating to this article.