Buyer’s Market VS. Seller’s Market

It all goes back to Economics 101. The difference between a buyer’s and a seller’s market depends entirely on supply and demand. When prices are high, usually as a result of a low supply, the seller has the upper hand because there are less homes on the market to choose from, increasing demand and enabling them to justify the higher sales price. Another way to look at it is there are significantly more buyers in the market than there are homes for sale. For example, when mortgage interest rates drop significantly, a seller’s market usually results because people considering purchasing a home now have incentive and the pool of buyers in the market increases as a result.

Conversely, when the amount of homes for sale vastly outnumbers the quantity of active buyers, a buyer’s market is created. The high supply drives down the price, favoring the buyer because sellers are desperate to sell and more willing to negotiate a lower sales price. High unemployment is an example of an external factor that could lead to a buyer’s market.

Obviously, there are other factors that influence the real estate market. The time of year, weather and other causes may have an indirect (and usually temporary) effect on what’s happening in the industry, but there are no clearer implications of the current market type than supply and demand.

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