In a buyer’s market, an abundance of housing inventory for sale gives buyers plenty of options to choose from — thus giving them more leverage than sellers in the home buying process. When there are more homes for sale than there are buyers, sellers have to work harder, and potentially offer more concessions, to get a buyer’s attention. For example, if a buyer is looking for a three-bedroom home in a particular area and there are several available, they have the luxury of being picky about which one they prefer based on the best price, terms or condition.
Are we in a buyer’s market?
Definitely not. For the last several years, most of the country has actually been experiencing the opposite: a seller’s market, in which a lack of houses for sale creates an advantage for sellers. This scenario can lead to bidding wars, with multiple buyers putting in competing offers on the few houses available.
There are some signs that the housing market is cooling down as a result of interest rate increases, but we are not yet close to a buyer’s market on a national level. In fact, the last time conditions were more favorable for buyers than sellers nationwide was in the years immediately following the housing market crash of 2008.
While most experts agree that a bust the size of 2008’s is unlikely, we will most likely see certain localized real estate markets cooling in the coming months. The parts of the country at the highest risk of becoming a buyer’s market in the near future are “areas with higher taxes combined with a concentration of secondary and tertiary homes,” says Erin Sykes, the chief economist with Nest Seekers International.
“We are heading into a more balanced market first,” Sykes continues. In a balanced market, conditions don’t favor buyers or sellers — homes would sell in reasonable amounts of time at fair market value, with no bidding wars from buyers and no significant price drops or concessions from sellers. After the market becomes more balanced, says Sykes, “the question is will it stay balanced, or continue to shift toward favoring buyers?”
Tips when you’re in a buyer’s market
If you’ve been trying to buy a home in recent years, you’re likely used to putting in offers as soon as a home comes on the market, regardless of whether it’s a perfect fit. You’re also likely used to preparing for a bidding war and making compromises to get your offer noticed, including waiving home inspections.
But when you’re in a buyer’s market, you don’t have anywhere near the same level of pressure to make big decisions too quickly. You can take the time to build up your credit score and improve your debt-to-income ratio so your finances are solid. You can also take the time to shop around for the right home — one that is within your budget and provides the best location and amenities for your family. And if issues arise in inspections, you have significantly more leverage to get the sellers to repair their home on their dime before closing, saving you money.
If your local market is starting to cool down, Sykes advises buyers to “take advantage of the opportunity to lock in a mortgage rate now” and shop around as more inventory arrives on the market. Locking your rate as early as you can is especially smart as rates continue to rise.
Real estate transactions have heavily worked to the seller’s advantage lately, and home sellers are in for a rude awakening if — and when — that scale tips. In a buyer’s market, there are simply more homes on the market competing with yours.
Working with the best real estate agent you can find is crucial. Experienced listing agents know how to price your home correctly to quickly attract buyers, and what concessions to offer to entice more offers than competing homes. They can also advise you on cost-effective ways to quickly add value to your home.
Having the right agent in a buyer’s market can also help you manage your own expectations and avoid costly mistakes when it comes to holding out for high dollar offers that may never come. “Sellers should be realistic and consider all offers,” Sykes says. If you’re consistently getting offers in the same price range, that’s probably the market value of your property in a buyer’s market, “regardless of what it was worth a few months ago,” she says.
- In a buyer’s market, buyers can take advantage of more homes to choose from to find the right fit for them. They also have the luxury of time, both to shop around and to make sure their finances are secure. So if you’re not in a mad rush to find a new place, it’s OK to be patient.
- You can certainly sell your home in a buyer’s market. But sellers should work with an experienced agent to make sure their home is priced competitively to bring in the best offers.
- The overheated housing market may be cooling off in some parts of the country, but a nationwide shift to a buyer’s market is unlikely in the immediate future.