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Whether you’re buying a house or putting yours up for sale, entering the real estate market is exciting. But to put yourself in the strongest position possible, it’s important to know whether you’re in a seller’s market or a buyer’s market – and what each type of market means to you as a buyer or seller.
We can clue you in on the signs that you’re in a buyer’s or seller’s market. And whether you’re a buyer or a seller, we’ll help you navigate either real estate market to put you at the best possible advantage.
What Is a Seller’s Market?
Many factors determine whether the current housing market favors sellers or buyers. If all or most of those factors are in the seller’s favor, the real estate market is typically considered a seller’s market.
When the demand for homes is high, sellers can expect to get multiple offers, even if their asking price is high. In a seller’s market, sellers don’t need to accept the first offer they get. They can hold out until they get a better offer.
You’re in a seller’s market when it’s easier to sell a home and harder to buy one. As a buyer, you may need to make offers on several homes before one of your offers is accepted.
Signs of a seller’s market
We’ve put together a list of clear signs that you’re in a seller’s market. The more signs you see, the more likely it is that you’re in a seller’s market.
- Higher asking prices: Sellers can feel confident setting higher asking prices, knowing that they’ll likely get more money than they normally would because there are so many more prospective buyers in the market.
- Higher offers (and more of them): Increased demand increases the number of offers. When multiple buyers are bidding for a home, it creates competition among buyers.
- Fewer negotiations: When there are more potential buyers, sellers have more leverage. Because sellers have less incentive to negotiate, sometimes buyers skip inspections to get the house. Seller concessions are also much less likely.
- Faster sales: When there are fewer homes and more buyers, there can be a rush to get offers in quickly. It’s more likely a seller will receive an attractive offer sooner than later, and the home will sell faster.
What Is a Buyer’s Market?
In a buyer’s market, market conditions favor buyers. The supply of available homes is greater than buyer demand, and home prices are typically lower.
Buyer’s markets often happen during economic recessions. The buyer pool shrinks due to high unemployment, economic instability or unsustainably high mortgage rates.
Signs of a buyer’s market
The signs that you’re in a buyer’s market are (spoiler) the opposite of what you’d find in a seller’s market.
- Homes are priced lower: Sellers need to entice buyers, and one way to do that is to competitively price a home. Think about it, if two near identical homes are for sale and Home A is priced 20% lower than Home B – aren’t you more likely to make an offer on the less expensive home?
- Fewer and lower offers: If there are fewer interested buyers, a seller will likely receive fewer offers, giving buyers more leverage when they’re negotiating with sellers. Plus, when there’s not a lot of competition, you probably don’t need to worry about bidding wars. Translation? Buyers’ offers are less likely to rocket into the stratosphere.
- Greater opportunity for negotiations and concessions: When there are fewer offers, buyers can afford to be more demanding. They can add contingencies to their purchase offers that require anything from painting a room to the removal of a backyard swing set before they agree to close. After home inspections, buyers are more willing to ask for money off the sale price to cover the cost of any needed repairs.
- Slower buying process: When there are fewer buyers, there are fewer offers – and they may not come in right away. Buyers generally won’t feel compelled to get their offers in ASAP. And if buyers spend more time negotiating with sellers, it will take longer to get to closing.
Strategies for a Seller’s Market
Whether you’re buying or selling, we’ve got you covered. Here’s our list of useful strategies to help you navigate a seller’s market:
Tips for buyers in a seller’s market
So what do you do if you’re a buyer in a seller’s market? First, don’t get discouraged! There are several things buyers can do to gain an edge in a seller’s market:
In a seller’s market, if a house is priced right, it’s best to move fast. If you wait around, you’ll probably lose out on the house (cue sad trombone).
You can help speed the process along by knowing what you want, knowing what your deal breakers are and creating a house-hunting checklist. If a home checks all the boxes, you won’t waste time hemming and hawing before putting an offer in.
Waive home sale contingencies
You want to buy a new home, but to pay for it, you must use the proceeds from the sale of your current home.
You can usually achieve this with a home sale contingency, which is an offer with a promise to finish buying a house once you’ve sold yours, usually by a set deadline.
Sounds good? Maybe to you, but not so much to sellers in a seller’s market. Contingencies can delay a sale by weeks or months and make it easier for a buyer to back out of a deal. In a seller’s market, sellers are known to withdraw offers with contingencies in them.
To boost your chances of getting your offer seen, you may need to consider nixing a home sale contingency (or any other contingencies) if you can.
Pay in cash
If you’ve got enough money to purchase a home outright, a cash offer is the surest way to put your offer at or near the top of the pile. All-cash offers close more quickly. There are fewer potential hiccups and delays due to contingent offers. And you shouldn’t experience the financing issues that can crop up with mortgage offers.
Know your limits
It’s so easy to get caught up in the competitive spirit of a bidding war. Just make sure your wallet doesn’t get caught up in it, too. Be sure the excitement of buying a home doesn’t lead you to offer more than you can afford.
Use our handy mortgage calculator to see what your monthly payments would look like at different price points.
Tips for sellers in a seller’s market
Think that all you need to do in a seller’s market is to list your house, put on your sweatpants and relax? Au contraire. Here are some tips for sellers to attract buyers, close quickly and make the entire home selling process easier.
Price it right
If you’re the seller, it’s always a good idea to price your home fairly to encourage more prospective buyers. Just because it’s a seller’s market doesn’t mean you can slap an exorbitant price tag on your home.
You still want to attract buyers, and you want them to be serious about paying for your house. If you price your house just below the assessed value, you could encourage a bidding war, which may help boost the price anyway.
Give offers careful consideration
When offers come rolling in, take your time looking at them. Don’t just pick the highest bidder. Accepting an offer that ends up being too high for the buyer to make good on will probably lead to putting the house back on the market, which is something you don’t want.
Give all buyers equal consideration and familiarize yourself with the Fair Housing Act. Your real estate agent can be a great source of information and advice on reading offers and choosing the right one.
Look for preapprovals
A preapproved mortgage is golden when it comes to offers. This means the buyer has already qualified for a loan and is pretty likely to get it. By the way, a preapproval is better than prequalification, which quickly estimates how much of a loan the buyer may get.
Strategies For a Buyer’s Market
Here’s some advice for both buyers and sellers when you’re dealing with a buyer’s market.
Tips for buyers in a buyer’s market
Even in a buyer’s market, prospective buyers will need to develop strategies to buy a house at the right price. Some best practices are to:
Take your time
There’s no need to rush or worry that, unless you act fast, you’ll miss out on a home. Make sure you’re exercising due diligence with each property. And if you do miss out on a home, know that there will be others.
Get to know what’s out there. Ask your real estate agent, go online, drive around – and go to open houses to get a feel for what’s on the market and at what price.
Remember, because you may be able to get a house for less money in a buyer’s market, you may have money left over for a project like a small renovation, exterior paint job or new landscaping. Keep all those numbers in mind when you make your offer.
Although a strings-free offer will be more attractive to sellers, including an inspection contingency is a wise move so you’re not surprised by unforeseen issues with the home. And a mortgage contingency can help you avoid paying two mortgages for too long.
Tips for sellers in a buyer’s market
In a buyer’s market, you’ll need to do everything you can to maximize interest in your home.
Make sure your home is priced right. Check the comps to see at what prices homes recently sold for in your neighborhood and what homes are listed at now.
Setting your price at market value, or just under it, will put you in a good place to attract buyers. If you’re itching for ringside seats to a bidding war, pricing your home just under the assessed value might encourage one.
Consider all offers
In a buyer’s market, a seller should look at all offers. Accepting an offer with a contingency(ies), like a mortgage contingency, inspection contingency or others, may be the thing that gets your house sold. Yes, a buyer may back out of the purchase if the conditions aren’t met, but it may be worth the risk.
Be sure to discuss it thoroughly with your real estate agent.
Depending on your circumstances, it may be possible to hold off on selling your home. Markets are cyclical. It may make sense to wait until conditions favor sellers.
The answer depends on where you live. Real estate is local and prices, where you’re looking or selling, may trump national trends. That said, 2022 was essentially a seller’s market, even with rising interest rates.
That’s a little like asking when’s the best time to buy a stock. Nobody knows for sure. The key is to pay attention to trends in your area. If homes are sitting for longer, you see price cuts and sellers are offering to cover closing costs, these are strong indicators the pendulum has swung back to buyers.
That’s a complicated question because many factors are at play with a recession. When there are fewer buyers, which is typically the case during a recession, if you can afford to buy a home, that can be a good time to enter the housing market.
No Matter the Market, Put the Odds in Your Favor
Whether you’re a buyer or a seller, it’s important to understand the current real estate market trends in your area. Take a look at how many homes are for sale at a time and see if they languish on the market or seem to disappear almost as soon as they’re listed.
Keep watching the entire time you’re in the market, as housing trends can shift, whether it’s a home buyer’s or seller’s market. Getting the advice of a reputable real estate agent will help you better understand housing market conditions, how to price your home or how to put in a competitive offer in either the next buyer’s or seller’s market.
Home is worth it.
Take the first step toward owning a home. You’ll be glad you did.