The Seattle housing market is constantly fluctuating, with various factors influencing the supply and demand of homes. As a potential home buyer or seller, it's important to understand whether you're in a seller's or buyer's market. In this post, I'll explain what these markets mean, how they differ, and what you can expect in each scenario.
What is a Seller's Market?
A seller's market is when more people are looking to buy homes than homes for sale. In this situation, sellers have the advantage as there is a limited supply of homes and plenty of demand. This means that sellers can typically sell their homes quickly and for a higher price than they would in a buyer's market.
One reason why a seller's market might occur is if the economy is doing well, and people have more disposable income to invest in real estate. Additionally, if there is a low unemployment rate, people may feel more confident about making a big purchase like a home. This increase in demand can cause a shortage of available homes, driving up the prices and creating a seller's market.
What Does a Buyer's Market Mean?
A buyer's market is the opposite of a seller's market. It occurs when there are more homes for sale than there are people looking to buy them. In this situation, buyers have the advantage, as sellers may need to lower their prices or offer incentives to attract buyers.
A buyer's market may occur when there is an oversupply of homes, either due to a decrease in demand or an increase in the number of homes being built. Additionally, if interest rates are high, this can make it more difficult for people to obtain a mortgage, which can lead to a decrease in demand for homes.
What Are the Key Differences Between a Seller's and a Buyer's Market?
The main difference between a seller's and a buyer's market is who has the upper hand in the transaction.
Likely conditions in the seller's market
- Prices may escalate due to competition
- Fewer contingencies
- Shorter escrow periods
- More offers to choose from
- Lower buyer expectation
- Less days on the market (selling faster)
- Few price reductions
Buyer's market conditions
- Increased days on the market (more time to decide)
- Contingencies to allow for thorough due diligence.
- Increased number of price reductions
- Seller's incentives such as closing costs or repairs and upgrades
- Sellers are more likely to complete repairs or projects requested in negotiations after an inspection
- Less competition
While the broader US housing market may favor buyers or sellers at any time, local markets may differ. Coastal, statewide, cities, and even neighborhoods are unique. Property types and price points also occupy their own markets.
A vital indicator of the market status is the absorption rate and number of months supply of inventory available. While these statistics give strong indicators, it's not black and white. Seller and Buyer market dynamics fall on a spectrum. This is where the nuances of specific local markets come into play.
Working with a trusted local real estate agent who can give you current specifics is essential. Stay up-to-date by asking your Realtor for regular market reports. They can also provide a comparative market analysis of individual property. A comparative market analysis is a document analyzing similar properties to the subject property to establish current market value. Buyers should closely define what types of homes they want and work with their agent to analyze that specific market. Sellers should partner with their agent to review their micro market and gain the best position within it.
Understanding the difference between a seller's and a buyer's market is critical when buying or selling a home. In a seller's market, sellers have the advantage, while buyers have more bargaining power in a buyer's market. By understanding the current market conditions and working with a trusted real estate agent, you can make informed decisions and achieve your real estate goals.
Contact me today if you don't have a Realtor to represent your needs and interests! Not ready to buy or sell, but just have questions about real estate? Reach out today. I'd love to hear from you.
