What is a buyer’s market?
December 20, 2022 6 min read
Have you ever wondered when is the best time to buy a home? No one can say for certain when home prices will rise or fall. But if you pay attention to real estate trends, you may spot some clues about where the market is headed.
Real estate prices can go up or down depending on the supply and demand of available houses. A buyer’s market occurs when the supply of homes outweighs the demand for them. In this type of market, home sales might slow down, prices could drop and homebuyers may have more bargaining power.
Read more about the buyer’s market and how it could affect buyers and sellers.
- In a buyer’s market, the supply of available homes exceeds the demand from potential buyers.
- In a seller’s market, the number of buyers is greater than the number of available homes.
- Homebuyers may have more leverage to negotiate prices in a buyer’s market. But sellers typically have the upper hand in a seller’s market.
- Understanding real estate market trends could help buyers and sellers make informed decisions.
How a buyer’s market works
Financial factors—like credit history and budget—can influence a person’s homebuying decisions. Market conditions could also affect when someone buys a home and how much house they can afford. That’s why it’s helpful for house hunters to know if they’re starting the homebuying process in a buyer’s market or a seller’s market.
A buyer’s market occurs when the supply of homes is greater than the demand for them. This housing surplus can give buyers some leverage when it comes to negotiating sales agreements.
Buying a home in this type of market may offer some advantages, such as:
- More choices: Buyers may have a wider selection of homes to choose from and less competition. They may also have better chances of finding a home with the features they want.
- Financial benefits: Buyers could negotiate lower selling prices, have the seller cover closing costs and more.
Signs of a buyer’s market
Buying or selling a home can be stressful—even under the best circumstances. But knowing which type of market you’re dealing with can help you plan accordingly.
Wondering when the next real estate shift will happen? These signs may signal that a buyer’s market is on the horizon:
- There are more homes available.
- Homes are staying on the market longer.
- Home prices may remain the same or start to decrease.
- Sellers start paying closing costs or offering other incentives.
Buyer’s market vs. seller’s market: What’s the difference?
A seller’s market occurs when the number of willing buyers is greater than the supply of homes. In this market, limited inventory can create more competition between buyers. Homes tend to sell faster, prices often increase and buyers may need to make concessions—like waiving contingency clauses—to strike a deal.
Signs of a seller’s market
These signs may indicate a shift toward a seller’s market:
- There are fewer homes for sale.
- Homes begin to sell faster.
- Buyers may enter into bidding wars.
- Homes are selling above the asking price.
Buyer’s market tips for buyers
Prospective homebuyers might have more options in a buyer’s market. But finding a great deal on a dream home can still take some work. Wondering how you can make the most of the next buyer’s market? Consider these tips:
Know your buying power
Several factors—like interest rates, inventory and credit scores—can affect a person’s buying power. For example, a buyer’s credit history could play a role in the interest rates or mortgage amount they’re offered. Those with higher scores, steady employment history and lower debt-to-income ratios may be offered better mortgage rates.
It might be a good idea for buyers to review their credit scores and reports before they start their home search. If they want to boost their buying power over time, they might consider taking steps to improve credit scores, pay off debt and save more money, or request a credit line increase.
Work with a professional
Working with real estate agents could potentially save homebuyers time and money. Agents can find listings that fit a buyer’s needs and budget. They can also coordinate showings and work with buyers to create competitive offers.
Buyers could also benefit from having an agent in their corner for negotiations. That’s because good agents are trained to look for any potential issues a property may have. They can request things like disclosures, home inspections or other contingencies to help protect their client’s interests.
Don’t skip home inspections
A dream home can turn into a disaster if the property has underlying issues. That’s why a home inspection is such an important part of the homebuying process. A home inspector can help spot hazards like mold and water damage, electrical issues and more. If a home inspection uncovers serious problems, a buyer may be allowed to back out of the sale without penalty.
Some mortgage lenders may require home inspections as part of the closing process. You could read the Consumer Financial Protection Bureau’s tips for scheduling a home inspection to learn more.
Ask for what you want
In a buyer’s market, sellers may be more willing to negotiate. Buyers might consider asking the seller to pay closing costs, lower the selling price or complete repairs. Keep in mind, though, that each seller will have a different bottom line. Making too many demands could cause a deal to fall through.
It could be a good idea to write down a list of requests and review them with a real estate agent. They may have some insights into which requests are reasonable and how to include them in an offer letter.
Buyer’s market tips for sellers
Selling a home in a buyer’s market might be more difficult, but it can be done. These tips could help sellers navigate tough market conditions:
Find a great agent
An experienced real estate agent can leverage their network to attract potential homebuyers. They can also help sellers decide on a price point that’s competitive yet fair.
Add some curb appeal
Taking the time to clean and stage a home can help sellers catch the eye of potential buyers. Simple fixes—like adding outdoor lighting or planting new shrubs—could add to a home’s exterior appeal. And placing furniture in empty rooms might help buyers visualize how the space should be enjoyed.
Keep in mind that an online listing may be a buyer’s first impression of a home. Hiring a real estate photographer to take high-quality photos could help showcase the home’s best features.
Know your lowest selling price
In this market, finding the right buyer may take some time, so it’s important to be patient. Sellers also need to be realistic about their home’s price point. To attract the right buyer, sellers might need to make some compromises. But that doesn’t mean they have to accept the first offer that comes along.
Understanding a home’s fair market value can help a seller determine their bottom line. If a seller isn’t willing to budge on price, they might consider paying closing costs or making minor repairs instead. This flexibility could help close the deal.
Working with a buyer’s agent: What to know
Buying a home is a personal decision, so it’s helpful to find an agent who understands your needs. Asking family or friends for real estate agent recommendations may be a good place to start. You could also call local agents to see if any are a good fit.
You may want to keep the following in mind as you search for the right buyer’s agent:
Buyer’s agent responsibilities
From finding listings to handing over the keys, buying a home has many moving parts. A buyer’s agent can walk clients through each step of the process. Some buyer’s agent responsibilities include:
1. Finding the right home
- Find homes that meet a buyer’s lifestyle and budget.
- Schedule showings.
- Provide information about home prices, taxes, HOA dues and more.
- Search for any property disclosures about liens, environmental concerns or other issues.
2. Making an offer
- Provide buyers with a complete market analysis.
- Help buyers decide on a price to offer.
- Write and submit the offer letter.
- Negotiate on behalf of the buyer.
3. Closing on the property
- Help connect buyers with mortgage brokers.
- Walk buyers through the escrow process and handle earnest money deposits.
- Coordinate closing process checkpoints with the seller or the seller’s agent.
- Represent the buyer’s interests at closing.
The buyer’s market in a nutshell
In a buyer’s market, the supply of homes is greater than the number of buyers. These market conditions can affect the process of buying or selling a home.
In this market, buyers can typically negotiate lower selling prices, have sellers pay closing costs or add contingencies to purchase agreements. While this market tends to favor buyers, there are strategies sellers can use—like flexible pricing or adding curb appeal—to be successful. Working with an experienced real estate agent could help buyers and sellers make the most of a buyer’s market.
Are you considering if a move is in your future? Doing some research ahead of time can help make your home search a success. You can read up on some important questions to ask before buying a house to learn more.