What is a seller’s market?
January 31, 2023 6 min read
When the relationship between supply and demand changes, the real estate market might shift in favor of either buyers or sellers. A seller’s market occurs when the demand from buyers is greater than the supply of available homes.
In this type of market, limited inventory could lead to increased competition among buyers. Listings may receive multiple offers, homes may sell faster—often above the asking price—and sellers may have the upper hand.
Thinking about buying or selling a home? Here’s what you need to know about navigating a seller’s market.
- According to the law of supply and demand, prices will rise when demand for an item is greater than the supply.
- A seller’s market occurs when the demand for homes is greater than the supply of available homes.
- In a seller’s market, homes may sell above asking price, homes may sell faster and buyers could waive contingencies.
- In June of 2022, the median U.S. home price rose to a record $450,000.
How a seller’s market works
In a seller’s market, demand from prospective buyers outpaces the amount of available inventory. If this happens, buyers may enter into bidding wars in the hopes of securing a home. And these real estate housing market conditions could give sellers some serious leverage.
Signs of a seller’s market
If you’re thinking about buying or selling a home, it might be helpful to understand the market conditions you’ll be working with. The following scenarios could signal a seller’s market:
- Increased home prices
- Faster home sales
- Fewer available listings
- More homes selling above the asking price
- More buyers willing to waive contingencies, such as appraisals or inspections
Seller’s market example
American consumers experienced the shift to a seller’s market in mid-2020 when home prices skyrocketed across the country. A shortage of available housing coupled with low interest rates led to increased home prices. Some buyers entered into bidding wars or waived inspections to help ensure their offer was accepted.
During this time, some buyers and sellers experienced:
- Increased home prices
- Listings spending fewer days on market (DOM)
- Multiple offers per listing
- Offers with fewer contingencies
Seller’s market vs. buyer’s market: What’s the difference?
When the housing market is in equilibrium, the supply of goods is equal to the demand for them. But sometimes demand from buyers outpaces the limited supply of homes, which results in a seller’s market. Other times, the supply of houses is greater than the number of prospective buyers, shifting the market toward a buyer’s market.
It could be more difficult to sell a home in a buyer’s market than in a seller’s market. That’s because buyers have more homes to choose from, so they might:
- Offer less than the asking price
- Ask for contingencies—like home inspections
- Negotiate for sellers to pay some, or all, closing costs
Buying a house in a seller’s market
In a seller’s market, buyers might face limited inventory, increased competition and limited bargaining power. While it may be more challenging to buy a home in a seller’s market, it can be done.
You might want to keep these tips in mind if you find yourself searching for a home in a seller’s market:
Things move quickly in a seller’s market, so it’s helpful to be prepared. Consider the amount of earnest money that you can realistically put down. And getting pre-approved for a mortgage could help you see what you can afford. Having this information on hand could also help you narrow your home search and show sellers that you’re a serious buyer.
During the pre-approval process, lenders may check your credit and verify your income. If you’re pre-approved, the lender may give you a letter stating that they may be willing to lend you a certain amount of money.
But keep in mind that pre-approval doesn’t guarantee you’ll get a loan, and it could impact your credit. So it may be a good idea to start the pre-approval process only when you’re ready to buy a home.
Work with a real estate agent
In a tough seller’s market, an experienced real estate agent could help answer your questions and guide you through the homebuying process. They can find listings that meet a buyer’s needs, schedule showings and act in their client’s best interest during negotiations.
Make a great offer
Fierce competition and fewer listings might lead to bidding wars among prospective buyers. With more options to choose from, sellers may look for:
- Cash offers
- Generous earnest-money deposits
- Offers with few, or no, contingencies
- Offers well above asking price
That doesn’t mean you should place a bid that’s above your budget. But it does mean you might need to consider how much over asking price you’re willing to offer.
Curious how a seller’s market may affect your home-buying budget? You may want to speak with a lender to help determine your price range. You could also work with a real estate agent who can find listings in that range.
Don’t give up
Finding the home of your dreams may take some time, so remember that you don’t have to rush into anything. But it doesn’t hurt to be flexible. You may want to explore markets with lower home prices, consider buying a fixer-upper or wait until things cool down to resume your search.
Selling a house in a seller’s market
It may be a bit easier to sell a home in a seller’s market, but that doesn’t mean you won’t have to put any effort into finding the right buyer. These strategies might help you get top dollar for your home:
Find the right price
Pricing a home too high may discourage potential homebuyers. But pricing a home too low could mean losing out on more money.
Finding the right pricing strategy could help you attract great offers. So it may be a good idea to consult a local real estate agent. They can compare similar listings in your area to help you find a competitive price point.
Declutter your space
Getting rid of any unwanted items can make a space feel bigger. Putting away personal items—like family photos—may also help prospective buyers visualize themselves in the home.
Have a backup plan
In a seller’s market, listings typically don’t stay on the market very long. So you may want to have your next move planned before you list your home. It might be a good idea to look for buyers who can be flexible with the closing date too.
Seller’s markets in a nutshell
High demand and low inventory could make a seller’s market the ideal time to list a home. But buying a house in this type of market might be more challenging.
Increased home prices, bidding wars and fast-moving inventory are a few signs that the market may be shifting in favor of sellers. And whether you’re a prospective homebuyer or looking to list your home, having a real estate agent in your corner could help you navigate these market conditions.
Thinking about buying or selling a home? Learn how to create a homebuying budget and figure out how much house you can afford.