Buyer Beware: Why a Seller’s Market Is Hard to Navigate
A seller’s market is hard for the buyers but it is a great situation for a seller. In a seller’s market, the seller is going to have the ability to sell for maybe a bit higher than asking and at a quick pace. This means that potential buyers will have to make solid offers, have great down payments ready, and jump on any chance they get to get a house.
What is A Seller’s Market?
A seller’s market comes about when there is more demand on the market than sellers can supply. It can be a difficult time to be a buyer.
Currently, most areas are dominated by a seller’s market. There are few homes that are for sale and the prices of those homes are steadily increasing. Many people are looking to buy to get out of their renting situation, but few are finding homes that match their criteria.
There are many homes that are being constructed. However, it is not enough to satisfy the amount of buyers that are on the market. While the amount of homes being built is drastically increasing, it is still not enough to sell to every buyer that is looking.
Additionally, the costs of construction are inhibiting builders from constructing even more homes. The prices of supplies have increased a whopping twenty-five percent in the last year. This can push up the asking price for these newly built homes. The result can make it impossible for buyers to purchase if they are working on a lower budget.
How Seller’s Markets Arise
There are many reasons why a seller’s market may develop in an area. One is the amount of housing starts the area has. A housing start is the amount of homes that builders are set to build in that given month. With new construction, the market will have more homes for sale. If there are few housing starts there are fewer homes to choose from.
The population of the area is also important. Many people moving to a certain area will make it impossible for them to all find homes. Especially, if it is a sought after area where few homeowners are looking to sell.
A new company can also increase demand. Increased job availability will allow for more population growth. Both instances will demand more housing for people as they move to town to get closer to potential work.
Buying in a Seller’s Market
There are signs of a seller’s market that buyers can look for. One big indication is how long houses stay on the market. The average days a home is on the market will give insight into the demand in that area. Any area that has houses selling in ten days or less on average is in a seller’s market.
Final pricing of a house is also factored in. A seller’s market can often spark bidding wars between buyers who are trying to get a great property. These bidding wars can push the final price of the house far past the asking price. If there are major increases between asking price and final price then the market may be dominated by sellers.
Finally, the overall prices of homes increase in a seller’s market. Watch the trends of the market throughout the months and years. Research where the prices were at the year before and compare to the current homes for sale.
A buyer has to be ready to make a strong offer in a seller’s market. Sellers have the pick of the litter and will move on to the next buyer if they are not seeing the offer they want. It is important that a buyer has a pre-approval from a lender to show a seller that they can deliver on their offer.
Having a substantial down-payment and specifying what money will be put down as earnest money is helpful. Even waiving contingencies can help a seller notice one buyer over the other. It is all about trying to get the seller’s attention and making them want to sell.
Trying to buy in a seller’s market can frustrating. There are many hoops to jump through and there are few homes to choose from. Many buyers feel hopeless while sellers are raking in the cash and getting more offers than they know what to do with. Buyers must play it smart to buy a home during a seller’s market.