Buyers’ Market vs. Sellers’ Market: Understanding the Real Estate Balance

When the housing market collapsed in 2008, cities and metro areas across the country turned into buyers’ markets. Inventory levels skyrocketed as homes were foreclosed on in record numbers. Meanwhile, there were very few buyers willing to purchase a home in such troubled times. Sellers had to slash their prices to make a sale. It was a classic sellers’ market.

Today, however, things have changed. We are now seeing a mix of buyer and seller markets across the country. While demand for housing has grown nationally in response to economic gains, inventory levels vary from one city to the next. It’s a mixed bag.

Whether you are buying or selling a home, you need to know what kind of market you are in. It affects everything from the listing price to your negotiating ability. This article explains the difference between a buyers’ and a sellers’ market, and how it affects you during the course of your real estate transaction.

Let’s start with some standard definitions and go from there…

Definition of Buyers’ and Sellers’ Markets

In housing terms, a buyers’ market occurs when there are (A) plenty of homes available, but (B) not enough qualified buyers to “absorb” them all. Housing supply is high while demand is low. Under such conditions, homes take longer to sell and homeowners often have to reduce their asking prices to land a buyer. Sellers have to take whatever they can get, for the most part.

A sellers’ market is the exact opposite. It occurs when there are few properties listed for sale, but plenty of buyers ready to purchase. In other words, supply is low but demand is high. In these situations, buyers have to fiercely compete with one another for a limited number of homes. Multiple offers are common, and they often turn into bidding wars.

But those are the two extremes. There is a wide swath of “middle ground” here as well. In some cases, real estate supply and demand are more balanced. So the market doesn’t really favor one party over the other. There tends to be more negotiating in a balanced market, because the buyer and seller have equal leverage.

As mentioned earlier, the housing crisis and recession created buyers’ markets all over the country. But those days are gone. Today, conditions vary widely from one state to the next. Home prices are climbing rapidly in some areas but falling in others.

So, how do you know whether you’re in a buyers’ or sellers’ market? There are several ways to gain this kind of insight.

• Read your local newspaper. Home prices and housing markets are a hot topic right now. So your local news is bound to be watching it closely. Look for stories published within the last three months or so, since real estate conditions change over time.
• Use the Internet. Do a Google News search for your city’s name, followed by the phrase “housing market” or “home prices.”
• Talk to a real estate agent. If anyone is in a position to make the call between a buyers’ market or sellers’ market, it’s an experienced agent. They can be a great source of information. Besides, if you are truly in a buyers’ real estate market right now, you might need some professional help to get your home sold.
• Seek out friends, family members or coworkers who have either bought or sold a home in the area recently. Ask them about their experience. They should be intimately familiar with the current state of your local housing market.

Don’t just assume you’re in a buyer’s market, as many homeowners do. Find out the truth. Do some digging. And don’t listen to what your neighbors say — they don’t know anything. Okay, so they might know a little. If your neighbors recently purchased their house, they could be a wealth of knowledge. Additionally, if your neighbor happens to be a real estate agent, he or she will understand current conditions. Otherwise, take everything your neighbors say with a grain of salt.

It’s important to focus on local trends. The national media tend to lump all real estate markets together into one bucket. The housing market is flat, says CNN. In truth, there is no such thing as “the” housing market. Conditions vary from one region to the next. For example, home prices are still rising rapidly in most cities in California, as of December 2014. In parts of the Midwest and the East Coast, however, prices are more stable — and even declining in a few areas.

Real estate conditions vary. It’s possible to have a buyers’ market in one part of the country and a sellers’ market elsewhere — simultaneously.  So don’t pay to much attention to the national news. Do your own local research to find out where you stand.