In the past, we have written posts clarifying the difference between a buyer's market and a seller’s market. With all of the turbulence in the real estate market over the past several months, it’s important to understand whether the market is currently favorable to buyers or to sellers. Ever since the Covid-19 pandemic, the real estate market has looked much different. It caused people to relocate to new parts of the country because of work, including a mass migration away from major cities. This quick disruption to the market caused effects that are still being seen in the spring of 2023.
What Is a Buyer’s Market?
In brief, a buyer’s market is a situation in the real estate marketplace that favors buyers more than sellers. In a strong buyer’s market, prices are low, interest rates are reasonable, and sellers have very little power. The supply of homes tends to be very high, while demand tends to be very low. When the market favors buyers, it is more common to see sellers accepting bids below their asking price. This is simply because they can’t find any takers at their full asking price!
The market dynamics always ebb and flow, and the situation changes every year; sometimes even multiple times per year. If you are entering the real estate market this spring, either as a buyer or a seller, it is crucial to understand what is going on.
Disclaimer: Not Every Local Market Functions Equally
While general economic principles apply everywhere, there is always some wiggle room in to what degree they apply. There can always be unique circumstances that cause one market to act differently from another. However, on a broader level, you can expect most areas to behave in a similar way, as the main economic forces of the real estate market tend to function similarly regardless of location.
Are We Entering a Buyer’s Market?
It may be too early to confidently say that we are entering a buyer’s market, as there is a lot yet to be determined. The economy is in a very unusual position, and that causes a degree of uncertainty when projecting what will happen with the housing market. What can be said, however, is that there are certainly signs that a buyer’s market may be approaching.
Home Prices are Dropping
The first sign that a buyer’s market may be on the way is that home prices are starting to drop around the country. While real estate tends to gain value very consistently over time, it is very common for the growth to happen a little too quickly sometimes, which causes prices to retract in the short term. Basically, homes get too expensive too quickly, and buyers decide to hold off until the prices come back down.
Generally, this is happening. In many places around the country, houses are starting to stay listed longer, which causes sellers to reduce their asking price in order to strike a deal sooner. Downward price movement is usually a pretty good sign that buyers are gaining power.
Interest Rates Remain High
High interest rates definitely do not favor most buyers. However, they do cause one effect that can help buyers in the short term: a reduction in demand. When interest rates are high, casual home shoppers tend to exit the market, which drastically reduces demand.
As price is a simple function of supply and demand, a drop in the demand for houses usually triggers a drop in home prices. Sellers that need to sell their homes suddenly have fewer people inquiring, which means fewer bidding wars, longer wait times, and potential concessions to buyers in order to strike a deal.
The Average Number of Days Listed Is High
The longer a house sits waiting to be sold, the more likely a seller is to make concessions to potential buyers. This could mean a reduction in price, an agreement to pay a portion of closing costs, or even putting on a new roof before the sale is finalized. When sellers are forced to make these concessions, there is no doubt that the market heavily favors buyers.
This is one of the clearest signs that the area has entered a buyer’s market. If a buyer has the power to ask a seller to lower the price or make a major upgrade to the house before the sale, it is clear who is in the driver's seat of the transaction.
Can There Be a Buyer’s Market with High Interest Rates?
High interest rates, as we said earlier, do not favor buyers. In a regular environment, it would be hard to have a buyer's market with interest rates continually inching upwards. However, due to the retraction in housing prices and the altered demand from the pandemic, there are signs that the market may be shifting more to the favor of buyers.
Is this a strong buyer’s market? Probably not, as 7% interest rates on mortgages are certainly poor compared to a couple of years ago. However, compared to the past year, things are definitely moving in a way that gives an advantage to buyers.
Is Now a Good Time to Buy a House?
There is rarely a perfect time to buy a house. There is almost always a reason to wait. After all, it isn’t every day that you shell out hundreds of thousands of dollars! You want to make sure you make the right choice.
With that being said, it is certainly a good time to start shopping. As the prices drop, there is an increasingly good chance that you’ll find a good deal on a great home. While the high mortgage rates are a deterrent for many, they don’t need to be. If you can get a good price on the home itself, you can afford the higher interest rate. You can also always refinance down the line, too!
Really, it all boils down to your own personal situation. If you need to buy a home in the near future, the time is right. The period of “waiting for the prices to drop” has largely happened, and now you can simply wait for the price of the home you love to bottom out before you make an offer. Experts don’t predict much change in the interest rate in the near future, meaning that waiting for a sharp reduction in your potential mortgage interest rate is probably not worth doing.
Thanks for reading our post on whether or not the housing market is favoring buyers in the spring of 2023! While every area’s housing market may look a bit different, the points in this post are generally applicable to all areas of the United States. As always, we are not liable for any financial decisions made as a result of reading this post. This post contains general advice that can be used in various ways to help you decide whether or not now is the right time to buy.
If you visit Myrtle Beach or any other place in South Carolina and fall in love, we’re here to help. We at The Boyd Team are committed to helping you find the right property for your needs and dreams. Any question that you have about moving to the area and finding your dream home by the beach is our pleasure to answer. Feel free to send us an email at firstname.lastname@example.org or text or call us at (843) 222-8566, and we will get back to you as soon as we can. Being true natives of the Grand Strand and Horry County and with over 25 years of experience in the local real estate market, whether buying or selling, we can help you make your dreams a reality.
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