Change is coming to the U.S. housing market. At least, that’s what the experts are saying over at REALTOR Magazine. According to the publication, there’s a power shift on the horizon, with buyer’s acquiring the upper hand in negotiations.
A recent report from CoreLogic found that home values moved 5.1 percent higher this past November when compared to November 2017. Now, we know what you must be thinking: If home prices are moving higher, how is that helpful to buyers? The answer lies not with price growth but the rate at which price growth occurs, i.e. price appreciation. Appreciation growth is finally starting to slow down, going from an annual increase rate of 5.4 percent in October to a predicted 4.8 percent by November 2019. In other words, home prices may still be on the rise, but they’re not rising as fast as they were – which indicates that prices should level off within a year or so.
This is good news for those who plan to buy sometime in the near future. However, those buyers who are hitting the pavement now, hoping to find their dream home without paying a high price or having to compete with other buyers, may be disappointed.
With the outlook favorable for buyers in the year ahead, we’d like to dedicate the rest of this post to helping our readers understand what exactly a buyer’s market really is.
What Makes A Buyer’s Market?
In real estate, the market generally either favors buyers or sellers. When the market is favorable to buyers, it usually means there is more supply than demand. In other words, there are more homes for sale than there are buyers making offers on them.
When supply is higher, value typically does not increase as drastically. However, even when it’s a buyer’s market, don’t expect home prices to plummet. Housing is a fairly solid market however, so with the exception of a major economic event such as the Great Recession, housing values typically move upward over time, even if there is more supply than demand.
Buyer’s Market Doesn’t Always Mean Lower Prices
The key point to remember about a buyer’s market is not that prices will be lower, but rather buyers will have more power to negotiate. For example, in a seller’s market, where there are more people competing for homes than there are homes for sale, buyers will usually need to make a very strong offer – sometimes even offering above list price – to get the home they want. By contrast, in a buyer’s market, there are likely fewer people interested in the same home, so an interested buyer could theoretically have a better chance of getting the home they want, even if they make a lower offer.
Other signs of a buyer’s market might include…
- More sellers including extra incentives such as appliances, cash allowance for repairs, home warranty, etc.
- Significantly more homes to choose from.
- Homes sitting on the market for longer periods of time.
- Higher number of listings with price reductions.
To help further illustrate the point, here are a few tell-tale signs of a seller’s market:
- Higher occurrence of bidding wars, especially in popular neighborhoods.
- Fewer homes to choose from, particularly in certain price points.
- Homes selling quickly, sometimes within a week of being listed.
- Seller’s less likely to accept lower offers.
When buying in a seller’s market, it’s important to know how to position yourself as a strong buyer. Read our blog post, “Tips for Buying a Home in a Seller’s Market” for more insight.