Types of Real Estate Markets
There are three types of real estate markets you can find yourself in locally: a buyer’s market, a seller’s market, or a balanced market. The exact market you’re in should inform your approach as you choose investments, make offers, and negotiate deals.
Here’s what these markets look like:
A buyer’s market is one in which there are more properties for sale than there are buyers. This means home buyers have the upper hand and enjoy more choices in properties, as well as more negotiating power when making a purchase. If you’re buying a home, this is the ideal market to do it in.
In a buyer’s market:
- Homes take longer to sell.
- Buyers have more listings to choose from.
- Buyers have less competition.
- Buyers can make lower offers and negotiate more on sales price and closing costs.
- Sellers may have to do more to market their properties.
- Sellers may need to lower their price points.
A seller’s market is the opposite. In a seller’s market, there are fewer listings than there are buyers, and buyers face stiff competition among themselves. Because of this, they may encounter bidding wars or their home search might take longer than expected. If you’re looking to sell a home, a seller’s market is the best time to do it.
In a seller’s market:
- Buyers may have a hard time finding a property.
- Homes sell quickly.
- Buyers face stiff competition.
- Sellers can demand higher price points.
- Sellers can be picky with who buys their home.
In a balanced market, buyers and sellers are on even ground. The number of homes for sale is on-par with the level of demand, and neither side has an upper hand. Balanced markets tend to last for shorter amounts of time than buyer’s or seller’s markets, and they usually occur between the transition from one market to the other.
In a balanced market:
- The number of homes for sale is in line with buyer demand.
- Appraisals are on par with offers.
- Home prices aren’t rising or falling steeply.
- Neither home buyers nor sellers have much power to negotiate.