Housing prices can change from year to year and even from month. Real estate professionals must be aware about the nuances of market conditions. The savvy real estate professional will put a careful eye on factors that may influence the condition of the market.
The Three Types of Real Estate Markets
Housing markets can be divided into three general types: a buyer’s market, a seller’s market and a balanced market. The real estate agent must be aware of factors that can further influence housing markets. Agents or sellers can look at certain factors to determine whether it is a buyer’s market or a seller’s market. These factors include market inventory such as how many houses are on the market at any given time such as six months. They also include examining the housing stock records to determine if there is a pattern of possible price cuts. If the average prices of houses have fallen significantly in less than a year, then this can be an indication to real estate professionals that the market is very much a buyer’s market. Other factors that may include a buyer’s market include how long houses are staying on the market. National interest rates can also be important. Low-interest rates can help push buyers into the market while higher interest rates may keep them out.
What is a Buyer’s Market in Real Estate?
A buyer’s market is a market in which conditions are favorable for buyers. In this kind of market, houses may sit on the market for a longer period than desired by sellers. Housing stock may also be in large supply in the area, giving buyers much to pick from when looking for a home. A buyer’s market means that buyers can be choosy and need not to act quickly even if they see a house they like very much.
Buying in Buyer’s Market
This kind of housing market can be ideal for a first time buyer. The first time buyer does not have to worry about selling a house they own to finance their next house. A buyer in a housing market of this type may be able to bargain the official selling price of the house down often by as much as ten percent or more. The buyer may have the opportunity to scoop up a larger house or a better neighborhood than they might have otherwise envisioned.
What is a Seller’s Market in Real Estate?
Another kind of housing market is the seller’s market. Often, a new company may have opened up in the area, but the housing supply has not yet quite caught up to provide enough housing for the workers. Other developments that can lead to a seller’s market are a strong regional economy, the creation of a new transportation facility such an airport or commuter line and a school system that is admired for excellence. All such factors can add value to a house.
How to Buy in a Seller’s Market
Real estate professionals know that buying in a seller’s market requires careful preparation. In a seller’s market, buyers must act quickly to find a house they like. Offers of ten percent or more above the asking price are not uncommon. A buyer should be fully prepared in the face of this kind of market with tools that can set them apart from the competition such as mortgage pre-qualification that indicates they can get a loan. The buyer should also make sure they have enough cash on hand to help pay for a down payment of size. The buyer who is prepared is the buyer who can always get the house he wants even in a market that requires him to act fast.
A Balanced Market
Buyer’s and seller’s markets are common. Another common scenario is known as a balanced market. In a balanced market, market prices have reached a balance. The housing supply in a given area is neither too large nor too small to meet demand. Houses may sit on the market but not for too long. The house that is priced right for the market here will find buyers who will typically pay close to the asking price of the home. What this means for sellers is that they can find buyers but they need to be aware of market conditions and make sure their house appeals to buyers. What this means to buyers is that they can typically find a house they like that is probably close to their expectations. The buyer needs to be prepared and ready but need not be in a rush. Typically, both buyers and sellers can come to an agreement about the ultimate housing price they want.