By Joe Paras
When entering the realm of real estate, it is essential to properly track the signs of a healthy market. It will help agents and clients to know when is the right timing in real estate. But, take it one step at a time. Read on to know the signs when the market is transitioning.
Buyer’s Market vs. Seller’s Market
Before digging into the signs of a buyer’s market, take a look at this comparison first:
The ball is on sellers when:
- Inventory levels are low.
- Prices are higher due to the high demand.
- There are more buyers than available houses for sale.
- Homes sell quickly.
The market favors buyers when:
- There are more homes for sale than buyers.
- Home prices tend to be lower.
- Agents/Buyers have more power to negotiate.
Key Signs When Market Is Transitioning
To help agents and clients determine when the market is transitioning from sellers to buyers, here are few signs:
Longer days on the market
The average number of days in the market is 46-60 days. When the DOM (days on market) exceeds that, it is usually considered a buyer’s market. Why does this happen? Longer DOM is due to the weak demand. As a result, houses don’t sell faster and stay on the listing.
Many “For Sale” signs around the city
Obviously, a buyer’s market means more houses are for sale. So, when roaming around the city, it’s normal to see many “For Sale” signs because fewer buyers are looking for a home. This amount of inventory is great for buyers as they can be more choosy and selective about their purchases.
Home prices drop
One of the price indicators in the real estate industry is the ratio of buyers and houses for sale. As a result, sellers tend to lower their prices when there are more properties than the buyers. This is in the hope of receiving more offers than the rest.
Homes.com said that when price appreciation falls 3% below, it’s a sign of a buyer’s market.
Sellers negotiate more
What does talking have to do with the real estate market? A buyer’s market can be identified when sellers tend to negotiate more. That is to say, they offer more incentives than usual. For example:
- Pay for closing costs and HOA fees.
- Transfer ownership of extended warranties.
Sellers do this because they want to win the heart of their buyers. So, they want to make sure that they – their houses – stand out from the rest. Keep in mind that when an agent/seller is in a buyer’s market, they’re trying to get a job done where their sense of urgency might not be matched.
Home supplies exceed demand
A high inventory indicates low buyer demand. Thus, when buyers have more options, they tend to find other homes. As a result, home buying takes a longer time, and the rate of sales slows down.
Furthermore, a buyer’s market allows home buyers to negotiate their conditions. So, when the seller disagrees with it, a buyer may just move on or keep pushing. In the most intense buyer’s market – homes stay on the market for long periods of time and seem like they can’t sell.
Homes being relisted
Of all the signs listed above, relisted homes are the driver of a buyer’s market. Buyers are often wary of homes that are relisted or they lowball their offer.
With that said, experts say that every real estate agent must know how the buyer’s market flows. They should know the different factors that affect a real estate market.
“As a professional, knowing where your market is in the cycle is very important in properly advising buyers and sellers of the potential risks and rewards to buying and selling at that particular time.”Coni Dean, Venture Realty & Investments
The Bottom Line
Do not forget that the best way to determine when the market is transitioning is to pay attention to the number of homes for sale. Purchasing a home is a high-risk, high-reward game. So, make sure to know how to move in a buyer’s market. After all, the best deals come from the mutual efforts of the agent, seller, and buyer.