It's basic
supply versus demand. If there are a lot of interested buyers for a limited
number of available homes, then it is a seller's market. This is because
sellers will find that they have a lot of interested buyers approaching them,
giving the seller an upper hand in negotiating the price and conditions of the
sale. Conversely, if there are quite a lot of homes available in inventory, and
only a limited number of people looking to buy in the area, then the
negotiating leverage switches towards the buyer. Each market type can be used
to a buyers or sellers advantage. Different
marketing strategies can be used to help. An equilibrium can be reached in
theory, however, this usually occurs when the
market is transitioning from one type of market to the next.
There are many
factors that affect whether we are in a buyers or sellers market. Here are a
few:
Interest rates ,unemployment and seasons.
As interest rate
decrease, so does the cost of borrowing.
Consumers are now able to afford to enter into the housing market and
existing home owners can upgrade their homes at a lower cost. If more first time buyers entered into the
housing market and the housing inventory remained unchanged, the demand for
housing is going to be greater than the supply.
High unemployment
rates can increase the supply of houses because the average household income
decreases, making it more difficult to afford housing. Conversely, low unemployment rates and a
thriving economy can increase the demand for housing. If the supply is lagging, the market will be
unbalanced and make it a sellers market.
During
particular times of the year the supply or demand of housing may favor one
market type over the other. For example during the holiday season the supply of
houses on the market is often restricted, if there are more potential buyers, the market will shift into a sellers market.
Author: Raine Laing, MBA | Sales Representative
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