What are buyer and seller real estate markets?
Anyone who has studied the property market, knows at different times, the scales tip in favour of buyers or sellers, but what does this actually mean, how does it impact you as a buyer or seller and what happens if the market is neutral and no one has an advantage. Here’s a look at each of the different markets and the signs to look for to determine what market your suburb or area is in.
Timing the real estate market is complex. It can change quickly depending on wider economic, political and unexpected global issues like the pandemic we are experiencing now. That’s why you’ll hear terms like “buyer’s market” or “seller’s market.” Another way to refer to these trends is known as taking the temperature of the market—a buyer’s market is “cold,” and a seller’s market is “hot.”
What is a seller’s market?
A hot real estate market is the best financial market in which to sell.
This sellers market describes a market where demand exceeds supply, or in other words where there are more real estate buyers than sellers. Effectively, there are not enough properties on the market for all the interested buyers, so demand for property outstrips supply. This often leads to multiple buyers interested in a single property, resulting in bidding wars and in many cases higher than expected sale prices.
Needless to say, if you are considering selling, selling in a seller’s market is preferable.
Signs of a seller’s market:
- Homes are selling for high prices – even in ‘original condition’
- Sale prices are exceeding listing prices
- Inventory is very low as compared to previous months/years.
- The percentage of successful sales and auction clearance rates are higher than normal
- Median sale prices are increasing
- The economy is on the rise
- Low days on market – Properties are selling rapidly and sold stickers are quickly being added to signboards
If you are a buyer in a buyers market.
During a seller’s market demand is high and sellers are often inundated with multiple offers. Prices often rise, more buyers offer unconditional contracts and are less likely to ask sellers for concessions or changes to the contract.
If it is a seller’s market and properties are being snapped up quickly it may be better to put down your best offer first. This is where doing your market research becomes important. Knowing what you should be paying for the property based on market data and discussions you have had with the Sales Agent, is key to having your offer accepted.
What is a buyer’s market?
The term buyer’s market refers to when the conditions are more favourable to buyers. This occurs when there are more properties on the market than there are active buyers. In a cold market buyers have a range of properties to choose from within their price range and limited competition from other buyers, they are in a stronger position to negotiate the sale and potentially purchase a property avoiding a bidding war..
Signs of a buyer’s market?
- High inventory compared to previous months/years
- Properties are consistently selling for less than expected
- Properties stay on the market for longer than the average
- Current listing price is lower than previous purchase price
- Asking price for properties start to drop
- Sellers start to offer ‘extras’ as part of the sale eg: longer settlement
If you are a seller in a buyers market.
Selling in a buyer’s market can be a great time to make an upgrade. If you are selling and buying in the same market, you can potentially jump ahead into a property that may be unobtainable in another market.
If you are selling in a buyer’s market, you need to stand out in the marketplace for buyers to notice your property.
What is a neutral market?
These markets are balanced. Typically, interest rates are affordable and the number of buyers and sellers in the marketplace are equalized. The scales don’t tip in either direction, meaning the market is normal without experiencing volatile swings
- Signs of a neutral real estate market
- Inventory levels are average
- Property sale prices are close to the listing price
- The average price of a property is neither increasing nor decreasing
- The number of buyers is stable
- Properties are selling within 4-6 weeks after listing
A final word
In most cases, property markets aren’t strictly a buyer or seller’s market, but rather a mix of both. For example, most cities and regions in Australia have suburbs where supply is greater than demand and vice versa, creating a mix of both buyer and seller markets.
However, understanding and being able to recognise the signs of the different real estate markets is important when buying and selling.
Nicole Gervasi Property Group is highly aware of conditions, whether it is a sellers, buyers or neutral market.