What is the Difference Between a Buyer’s and Seller’s Market?

 

If you have been thinking about buying or selling a house recently, you may have heard a realtor or friend referencing either a “buyer’s market” or a “seller’s market.” Especially during the years of the COVID-19 pandemic which have altered the housing market significantly all over the country, these words have become even more popular. These terms may be new to you, might sound a bit too complex, and may leave you thinking you should just bow out and try again some other time. Honestly, many people get intimidated by industry jargon like this, but you have no need to worry! The concepts of buyer’s and seller’s markets are very easy to grasp, and this post will explain what a buyer’s market is, what a seller’s market is and how to know which type of market you are in, and then it will offer a couple of brief tips for buying or selling in each kind of market.

 Buying a New House in Buyer's Market is Good

What is a Market?

 

Before we explain the differences between a buyer’s market and a seller’s market, we should first explain what a market is itself. A market is basically the term used to describe the web of people buying and selling something, in our case, houses. Think of an actual market, like your local farmer’s market. Sellers bring their goods, like fruits and vegetables, to the market, and buyers go to the market to see what is for sale and hopefully buy something. This works exactly the same in real estate, as the sellers put their own houses up for sale and the buyers come looking to buy one of the houses that is up for sale. Now that you understand what a market is, we can dive a little bit deeper into the definitions of and differences between buyer’s markets and seller’s markets.

 

What is a Buyer’s Market?

 

A buyer’s market is one that is favorable to the buyer. When there are a lot of sellers and only a handful of buyers, the buyers are bound to get a great deal. This is because each of the sellers recognizes that there aren’t enough buyers for everyone to sell their home, and the sellers need to compete with each other in order to win the buyer’s attention. In this case, buyers have the most negotiation power, and can often get houses for much lower than the asking price or can convince sellers to make concessions, like covering the closing costs or including the appliances in the sale.

 

One example of a place where you might find a buyer’s market is in a city or neighborhood that was once popular and has since fallen from its glory. For example, imagine a neighborhood that once housed a major league sporting arena and all of the restaurants and hotels that the fans need in order to attend games. Now imagine that the team announced that they built a new stadium on the other side of the city and they will be leaving the area. All of the restaurants will follow, the area will become less popular, and many people may look to move away from the area to a place with more restaurants and amenities nearby. As so many people try to leave at the same time while very few buyers try to move to the area, there is a buyer’s market.

 

What is a Seller’s Market?

 

Just as a buyer’s market was a market that was favorable to the buyer, a seller’s market is one that is favorable to the seller. That sounds simple, right? It is! A seller’s market occurs when there are a lot of prospective buyers but very few homes up for sale. In this case, the buyer is almost always going to have to pay more than they would hope, as the seller can sit back and watch the buyers engage in a bidding war with each other. In this case, sellers have almost no need to negotiate and can wait for the best offers to roll in. More often than not a seller will make more than he or she initially expected if the sale is occurring in a seller’s market.

 

An example of where one might see a seller’s market is in an old neighborhood that is being rejuvenated with investments. Let’s use the same example of the neighborhood that lost the professional sports team. Over the five years or so after the sports team moved across the city, the neighborhood was selling its real estate very cheaply. This is a very favorable environment for entrepreneurs that want to start a business, as they can save money on their rent or building mortgage. As a result, the area gets flooded with new businesses and community projects, and is buzzing with cute coffee shops, trendy restaurants, nice shopping centers, and beautiful parks.

 

Buyers quickly realize that this is an incredible place to live, but the people already living there don’t have much of a desire to move away. As a result, few homes are up for sale while a long list of buyers lines up to make an offer on each one. The seller is in a great situation in this case, which is why it is called a seller’s market.

 How to tell the difference between buyer's and seller's market

 

How Can You Tell the Difference Between a Buyer’s Market and a Seller’s Market?

 

Telling the difference between a buyer’s market and a seller’s market might sound like a daunting task, but really it is much simpler than that. By looking at a few key factors, you can pretty easily figure out what kind of housing market you are currently looking to buy or sell in. Here is a general list, but just know that this is only scratching the surface. The best way to know is to get in touch with a realtor, like us here at the Boyd Team, who works in the housing market every day and has a great idea of what is going on in the area.

 

How to Know if You Are in a Buyer’s Market

 

As we described earlier, a buyer’s market is one that is favorable to the buyer and not so favorable to the seller. If you are in a buyer’s market, there are four key factors to look out for. Firstly, see how long the homes that are up for sale have been listed for sale. On average, a home that is listed will take between 25 and 30 days to sell, before the closing and settlement period. If the home has been on the market for longer than 30 days and there doesn’t seem to be anything wrong with the house itself, odds are you are in a buyer’s market. The longer the house sits unsold, the more severe the buyer’s market.

 

Secondly, you can look at the average selling price in comparison to the appraisal value of houses that are being sold in the area. If houses are selling below the asking price or the appraised value, it is likely that the buyer is strong arming the seller in negotiations. This can typically only happen in a buyer’s market.

 

Thirdly, you can look at the total number of homes on the market, that is homes that are up for sale. If it seems like there are a lot of homes for sale relative to the total number of homes in the area, this probably means that you are in a buyer’s market. One of the best ways to evaluate this factor is simply to go for a drive through the area to see how many for sale signs are up on each block. Nothing beats first-hand information, right?

 

Finally, you can see what the average selling price of the houses in the area is in comparison to previous years. If home prices have been dropping month over month or year over year, it probably means that you are in a buyer’s market. This should make sense, as sellers won’t typically lower their price unless they’re more pressed to make a sale. If you are a seller, you want to get the full value for your home, and selling in these conditions may not be the best idea.

 

How to Know if You Are in a Seller’s Market

 

As you can probably guess, the ways to know if you are in a seller’s market are the exact opposites of the ways that you can know whether or not you’re in a buyer’s market. It is not possible to be in both a buyer’s market and a seller’s market at the same time. As a seller’s market is one that favors the seller in lieu of the buyer, you want to keep an eye out for factors that give sellers an upper hand. The first of these factors is the length of time that homes tend to remain on the market in the area. As we said earlier, the average amount of time for a house to stay on the market before being sold is currently between 25 and 30 days. If the houses tend to get sold in fewer than 25 days, you are probably in a seller’s market. The quicker the houses tend to sell, the hotter the market is.

 

The second way to know if you are in a seller’s market is to look at the average selling price of houses now compared to the asking price or the appraisal value. If the houses are selling for a higher amount than the initial asking price or the appraisal value, it means that buyers are probably engaging in bidding wars. When multiple buyers fight over the same house, it is a seller’s market.

 

The third way to know whether or not you are in a seller’s market is to see how many houses are for sale in the area. This one is not perfectly clear cut, though, as the absence of sale signs could either signal a seller’s market or simply an unpopulated neighborhood. Regardless, seeing fewer for sale signs means that it is harder for a buyer to find a house, so if that house is in a high demand area, you are probably in a seller’s market.

 

The fourth way we would advise to determine whether or not you are in a seller’s market is to look at the historical home values and compare them to the current asking prices. This metric will tell you how much the property values have appreciated year over year. If an area is in high demand, its selling prices will go up over time. This makes the market very favorable to sellers.

 

 Advice For people selling their house

 

Advice for Sellers

 

If you are looking to sell your home, it is worth waiting for the market to heat up. Unless you are in an urgent rush to move to a new house and need to sell your current house before moving, you should probably wait for a better selling environment. Waiting to sell until there is a hot market can earn you an additional several thousand dollars, which is no small sum to scoff at.

 

Whether you are in a rush to sell or can take your time, we absolutely advise consulting with your realtor to determine a selling strategy and figure out what your acceptable price boundaries are. Your realtor does this for a living and having a good conversation with them about price expectations and timelines could pay off big time for you. If your realtor understands your goals for the sale and you are both on the same page, only good things can happen.

 

Advice for Buyers

 

If you are in the market to buy a home, there are two huge pieces of advice that you should consider. Firstly, be patient. You should almost never buy the first house that you visit, and letting yourself fall in love with a home before comparing other options will probably not work out well for you. Each home that you visit teaches you more about your own preferences and desires along with showing you a little bit more about the housing market in your area.

 

Secondly, you should be flexible. Being flexible on location, for example, can unlock countless more options of homes for you. There are great neighborhoods in every area, and limiting yourself to just one might really prevent you from finding your dream home. Additionally, being flexible on features of the home or on pricing can further open up the market for you. Just make sure not to overspend! If you are looking for more information on budgeting to buy a home, be sure to check out this blog post.

 

Advice for people buying a house

 

Final Thoughts

 

Buying a house is a really big deal, and understanding key terms like “seller’s market” and “buyer’s market” can help you to make a more informed decision and a more educated purchase. Markets change frequently, and understanding the dynamics that change the complexion of the market can help you to find the perfect house or the perfect buyer at the right price. While this post should help you to understand a couple of buzzwords that are frequently used in the housing market, there is no better resource available to you than your realtor, who comes with years of experience and wisdom in the local housing market. Realtors work every day with people like you that are either trying to buy or sell a house, and the expertise that they can offer is extremely valuable. Also, whether you're buying or selling right now, be sure to read our post on ten things to look for when buying a new home. It can really help you to pick the perfect place!

 

Hopefully this post helped you to understand exactly what a seller’s market and a buyer’s market are, as well as how to tell the difference between the two. Waiting for the right moment to buy or sell a home can mean thousands of dollars, which goes a long way toward your moving expenses!

If you visit Myrtle Beach or any other place in South Carolina and fall in love, reach out to us for help. Curious why you should move to South Carolina? Check out this post with all of the best reasons! We at The Boyd Team are always here to help you figure out whether Myrtle Beach is your next home or not, and we are committed to helping you find the right property for your needs and dreams. Like we said, having a realtor is invaluable whether you’re looking to buy or sell a house, and we at the Boyd Team are at your service if you are thinking of moving to or from the greater Myrtle Beach area.

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 eddie@boydteam.com 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.  

No One Knows The Grand Strand Better! Trust, Knowledge, Experience, Professionalism, You Can Count On!

 

Written by Greg