For some time now, home sellers have reaped substantial profits, as low inventory has combined with increased buyer competition to drive home prices higher. But is it still a seller’s market or are things becoming more favorable for buyers? Here’s what you should know.
What Is A Buyer’s Market?
A buyer’s market essentially happens when housing supply exceeds demand. In these instances, real estate inventory is high, and there are lots of houses for sale. At the same time, there is a relative shortage of interested buyers, which forces sellers to lower prices to compete for buyer attention. During a buyer’s market, homes tend to stay on the market longer, and sellers are more willing to negotiate to keep prospective buyers from moving on to other options.
On average, housing prices are dropping nationally, with home values on the west coast seeing the steepest declines. Rising interest rates and general economic uncertainty are among the biggest factors pushing home prices down. Much of this is in response to inflation, which has led to steep increases in the cost of everything from food to medical care to shelter.
Still, according to the latest data from the National Association of Realtors®, home sales probably haven’t declined enough to spark a buyer’s market. If trends continue, however, we may very well see a buyer’s market soon as conditions combine to reduce overall buyer demand, creating less competition that forces sellers to lower their asking prices.
With all that said, it’s important to remember that real estate markets can differ across the country. It’s not uncommon for certain areas to see more of a seller’s market while others experience better conditions for buyers.
Assessing Local Markets
Before you buy or sell a home, it’s important to remember that real estate markets are heavily localized. Still, there are some key indicators that can help you determine if your area is in the midst of a seller’s market or buyer’s market.
Local inventory: Start by reviewing the homes currently available on the local market. If you see a lot of homes for sale, it’s more likely that you are in a buyer’s market. On the other hand, if there seems to be a short supply of available real estate, the market is probably titled in favor of sellers. To get a better read on the inventory, you can divide the number of properties on the market right now by the number that sold in the previous month. If you get a number greater than 7, it’s more of a buyer’s market. If the number falls below 5, it’s more of a seller’s market. Anything that falls in between is generally considered to be a neutral market.
Recent sales: Research the recent sales of homes comparable to your own property (or the one you’re interested in purchasing). If you see that most of these homes have been selling above ask, it’s a significant indication you are in a seller’s market. If homes have been selling below asking price, this would indicate that local market conditions are more favorable for buyers.
Falling Prices: It’s common for homeowners to drop their prices in a buyer’s market. When researching current listings, be sure to review the price history. If you see that several sellers have reduced their asking prices recently, you can safely assume that low demand has created more of a buyer’s market. That said, because sellers often have unrealistic expectations about property value, you need to make sure that falling prices are a local trend and not a single occurrence.
Time on market: Another big indicator of housing conditions is how long properties stay on the market. As you might suspect, homes will sell faster in seller’s markets where competition is stiff. On the other hand, it takes longer for homeowners to sell their houses when there are a lot of other properties for sale and fewer people looking to buy.
Getting Professional Help
There are a lot of factors and metrics that can help you determine whether now is a good time to buy or sell a home in your area. In almost every instance, it’s best to get insight from a reputable, experienced real estate agent who can parse the data and help you make an informed decision.
While they can provide general outlooks on the real estate market, national trends don’t necessarily tell you what you can expect in your state, county or city. Make sure to seek help from an expert, so you can time your real estate goals in a way that will be in your best long-term financial interests.