Determining the Local Housing Market: Buyer’s or Seller’s Market
Sep 29, 2022 brooklyn,brooklyn home ownership,brooklyn homes,brooklyn real estate,brooklyn realty,brooklyn seller's agent,new york,red hook,seller broker,sellers,selling a home,selling your home
If you’ve been toying with the idea of selling your home, but aren’t yet sure if you’re ready to take the plunge, there’s one major factor that can help you make your decision: the state of your local housing market. Being in a buyers market or a sellers market can make a big difference in the length of time it takes to sell, the number of offers you get, and how much you can sell your home for. Here’s how to determine if it’s a good time to sell your home.
What is a Buyer’s Market vs. a Seller’s Market?
What is a buyers market?
In a buyers market, there are more homes for sale than there are buyers in the marketplace, so the housing market is favorable to buyers (unfortunately for sellers!).
What is a sellers market?
In a sellers market, there are more buyers looking for homes than there are homes available. This type of housing market is favorable to sellers, as you’re more likely to receive multiple offers — sometimes above your asking price.
How do I determine the current housing market conditions in my area?
- Check available inventory: Real estate inventory can vary not just from state to state but from ZIP code to ZIP code, so it’s important to look at what’s available at a local level. Essentially, it’s a sellers market if the local inventory is sufficient for less than five months’ worth of sales. With between 5 to 7 months of inventory, you have a balanced market, which favors neither buyers nor sellers. Anytime you have more than seven months’ worth of inventory, you are firmly in buyers territory. To determine inventory in your specific area, take the number of houses for sale and divide by the number of sales in the past 30 days. So if there are 10 houses for sale in your area and only one sale in the last month, that’s 10 months of inventory and a buyers market. But if there were 10 houses sold, that’s one month of inventory and a sellers market. For help finding this data, visit Zillow Research, scroll to “Home Listings and Sales” and select the dropdown for “Monthly Home Sales.” It will provide a download with information for your local area.
- Research recent price cuts: Use the Zillow Home Values page to pinpoint the number of listings in your area that have cut their list price (you’ll find it under the “Listings & Sales” section of the page). If the percentage is fairly low, it indicates a sellers market. If many sellers are cutting their prices, it’s definitely a buyers market.
- Check out real estate comparables: Comparables are recent sales in your area of homes that are similar to yours, in terms of location, age, size, and number of bedrooms. Looking at comps in your area from recent sales can give you a feel for the health of the market. What are other houses selling for in your neighborhood? If housing comps are selling for their asking price (or above), you’re in a sellers market.
- Note the length of time homes sit on the market: Drive around your neighborhood and note the addresses of a few new listings. Then, watch them on Zillow. Are they still listed as “Active” after a few weeks? Or do they go “Pending” quickly? The faster they go under contract, the more likely your home will, too.
- Follow trends in home price sales: Are prices increasing or decreasing in your area? Here’s another place the Zillow Home Values page can come in handy. If prices have been rising in the last few months (and if they’re projected to keep going), hello, sellers market.
- See how many distressed properties are on the market: Distressed properties are homes that are under foreclosure, short sale, or going to auction. The volume of distressed properties is a good indicator of the health of your local market. The fewer distressed or bank-owned properties on the market, the better the position you’re in. Search your ZIP code to see how many are in your area.
- Follow interest rates: Lower mortgage interest rates allow more buyers to enter the marketplace (which is good for sellers). When rates are high, more buyers are priced out of the housing market. Interest rates have been historically low since the housing crisis of 2008-2009, allowing many first-time home buyers to enter the game. Check online or keep an eye on financial headlines to watch for signs of rates increasing.
How to Use Market Conditions to Determine Property Value
Once you know if you’re in a buyers or a sellers market, you can start figuring out how much you may be able to sell your home for. When you start talking to a real estate agent or when you begin doing your own local housing price research, you’ll want to know the answers to these questions:
What is fair market value?
The fair market value of your home is the price your home would sell for in the current local real estate market. This number takes into consideration the health of the real estate market in your area, as well as local housing prices, and assumes that both the buyer and seller are knowledgeable, willing, and not under any unreasonable pressure to make a deal.
What is a Zestimate?
Your Zestimate is Zillow’s take on the estimated market value of your house, computed daily based on millions of data points, including comparable sales data. It serves as a good jumping off point to determine property value.
When should I call in an expert?
If you’re getting serious about selling, it can be valuable to hire an experienced local appraiser to give you an objective, professional report on the value of your home. It costs $500 to $700 and can go a long way toward helping you choose the right listing price.
Should I Sell My House in this Market?
Selling a home in a sellers market
PROS
Move fast: Simply put, you’ll sell your house faster than you would in a buyers market.
Negotiation power: When inventory is tight, you have the upper hand in negotiating with potential buyers.
Bidding wars: While not a guarantee, you’re more likely to receive multiple offers that could drive the price up.
CONS
Risk of stale listing: In a fast-paced market, everyone knows that the best houses sell quickly. If your home doesn’t generate interest right away, your listing can quickly lose appeal.
Less leeway when a deal falls through: In sellers markets, deals can fall apart due to high appraisals. Buyers can be skeptical of homes that don’t sell quickly, and may wonder why your home is back on the market.
Selling a home in a buyers market
PROS
Time to prepare for your move: In a sellers market, you can be caught off guard by how quickly you have to be out of your home. Sometimes, a little extra time to pack is nice.
Competing against distressed properties:In a buyers market, there tend to be more foreclosures and short sales listed, many of which have been stripped down and are sold as-is. Your well-maintained, non-bank owned home may look a lot more attractive to buyers who want a smooth transaction.
CONS
Lots of competition: When you’re up against many other similar listings, you’ll have to put in more effort to make your home stand out against the competition.
Slower sales: If you need to sell your home in a hurry, a buyers market can be a challenge, as it can simply take longer to find that right offer.
Of course, our best piece of advice is to consult with an experienced seller’s agent (like us!). We can give you a free home valuation for free and give you insight on the current market. Get in touch!
If you’re interested in learning more about the selling process, download our free Seller’s Guide. We share a ton of valuable resources to demystify the selling process and help you along this emotional journey.