Buyer’s market vs. seller’s market: Which is next?
What You'll Learn: Everything about how markets shift from buyer’s to seller’s and vice versa.
EXPECTED READ TIME: 5 MINUTES
The housing market has seen its fair share of ups and downs in recent years. Since last year, trying to buy a home may have felt like a sporting competition due to bidding wars, lack of inventory, and sellers having the upper hand during negotiations. It’s been tough for buyers everywhere, but every seller’s market must come to its eventual end.
While there is no guarantee of when the market will change, in this article we’ll dive into the details of each type of market and current real estate trends so you know what’s on the horizon. That way, you can determine the best time to jump into the homebuying process.
What is a buyer’s market?
The most advantageous time for homebuyers to shop is known as a buyer’s market. Simply put, a buyer’s market is when there are more homes for sale than the number of buyers looking to purchase. Sellers are eager to get their property off the market and may be more willing to lower their asking price or add in other perks to the purchase contract in order to obtain a bid.
What is a seller’s market?
Opposite of the buyer’s market is a seller’s market. In real estate terms, a seller’s market occurs when the number of buyers in the market outweigh the available properties for sale. This results in more bidding wars between buyers who are interested in the same homes, giving sellers the upper-hand in picking between different offers and more power during negotiations.
Trends that may indicate a shift toward a buyer’s market
In general, the housing market has been in a whirlwind — especially in recent years. Soaring prices, increased interest rates, and competition between eager buyers have created a favorable market for sellers. However, recent data and trends are hinting that a potential shift to a buyer’s market may be on the horizon. But, despite the seller’s market cracks appearing, there is still lingering seller favoritism.
- Home prices are still high: Currently, the prices of homes in most areas are still relatively high compared to previous years. According to data from the National Association of Realtors (NAR), the median price of existing home sales has increased to $379,100, a 5.1% jump from January 2023, indicating sellers still have leverage in the market.
- Slow growth in inventory: The number of unsold homes has increased by 2% in the last month, the equivalent of three months’ supply at the current month-to-month sales pace. However, this is still considered scarce by housing market standards, meaning the market is competitive between buyers in many areas.
Housing market wheels spin slowly, but there’s still plenty of reasons for buyers to be hopeful that a shift is coming:
- Increased mortgage rates are decreasing demand: As mortgage rates have increased, fewer buyers have been jumping into the homebuying process. As a result, we may see a decrease in demand for homes. This would give buyers more confidence in negotiations with sellers, who may be forced to reduce their asking prices.
- Rising inflation may force sellers to lower prices: Everything is more expensive these days, including the cost of living. As a result, some sellers may be more inclined to sell their home at a lower price in order to strike a deal.
- More homes are becoming available: Despite the slow growth of housing inventory, the number of homes for sale is still increasing in a positive direction. This means, buyers won’t have to worry about intense bidding wars and less negotiation power.
- Houses are sitting on the market for longer stretches: A good indication of a buyer’s market is the length of time homes are lingering on the market. This is a good sign that buyers aren’t as desperate to buy as they were a year ago, and sellers are losing some leverage.
Should you wait for a buyer’s market?
Buying a home is a life-changing process and your decision to buy now or wait will come down to various personal factors, as well as market trends. Things like interest rates and economic climates will always be out of your control, so it’s important to keep your finger on the pulse. Although it’s preferable to purchase a home during a buyer’s market, it’s still possible to secure a good deal on a mortgage and property in the current market.
It’s important to research trends in real estate in your area to gain a solid understanding of where you stand as a buyer. Plus, taking the time to improve your finances, getting pre-approval from a trustworthy lender, and building a reliable homebuying team will go a long way in helping you secure the home of your dreams.