Updated: May 21, 2020
Whether you are contemplating buying a new home or selling yours, the wise thing would be to start by carefully considering the real estate market.
The concept of buyer’s vs seller’s market may not seem difficult to understand at first glance. But look deeper, and you will find a complex web of factors that could change the outlook significantly. The real estate market is very sensitive to certain elements, therefore entering the market on either side affects your investment option in some way. Let’s take a closer look.
A Buyer’s Market
Should the real estate market find itself with an overload of homes available for sale, this is an ideal condition for those looking to purchase. Because there are many options, sellers are willing to be more competitive with their prices. After all, they also want to move on with their lives. This increases the bargaining power of the buyer. Because sellers are willing to close at lower prices, higher valued properties become more affordable. Buyers can, therefore, take their time in making their final decision.
A Seller’s Market
Property is not easily increased. Space is finite and developments do not happen overnight. These factors make the scarcity of available property a reality. Once properties become limited and the demand for them increases, the market becomes more beneficial for selling. This places the seller in a better bargaining position. Buyers become more willing to accept properties at higher costs, even if the value is lower than they set out to find. Because of higher demand, the likelihood of multiple offers on a home is higher. In this case, buyers themselves can drive the price up as they try to outbid each other. Fun! For the seller, that is.
Main factors driving the markets
Here is where things get complicated. Many factors can drive the process in either direction. Each has a direct bearing on the motivation of either a buyer or a seller. A mix of these factors could affect your strategy, whether you are buying or selling.
This is the most obvious factor, and the easiest to understand. It directly affects how mortgage rates are set, as banks determine how much they can borrow according to interest rates. When interest rates fall, buyers are motivated to enter the market, since mortgages will be more affordable. They can afford better for less. This increases demand and causes an increase in property prices. Both parties stand to benefit.
Overall economic conditions
It is worth keeping your finger on the pulse of economic developments. The general trend is for the real estate market to reflect the general economic condition. When GDP is good in terms of employment, manufacturing, etc. buyers will be more positive in their outlook and willing to invest. With increased economic health comes more buying power. Sellers stand to benefit by being in a better position to bargain.
In an attempt to boost the economy, the government will at times introduce new policies, subsidies or incentives. Buyers are often placed in better positions in cases such as tax credit incentives for first time home buyers. It is worth being aware of these fiscal factors even when selling since the higher demand could create a seller’s market.
And there is more
Then there are other elements at play, such as local conditions, appraisals, and property class. Even demographics can play a big role in certain parts of real estate marketing. Consider, for instance, the Baby Boomer generation leaving the workforce to retire. Many at this stage decide to sell their big family homes in favor of smaller properties or retirement developments. This impacts the supply/demand for housing in a different way. Our realtors are deeply occupied with all factors that play a part in the way property markets behave. When making such a strategic decision, the sure way to get it right is to tap our knowledge and experience. Schedule your complimentary investment consultation today.