A buyer’s market happens when the housing market favors the home buyers. This occurs when home prices are low and there are more homes available on the market. Most real estate agents and analysts use a six-month scale as their base level for determining where the housing market is. That is, if most homes have taken more than six months to sell, then it is a buyer’s market.
What causes a buyer’s market?
There are several reasons the housing market may switch to a buyer’s market. Firstly, when there is the construction of new homes, without ensuring that there will be buyers to purchase the new homes, the market can swing into a buyer’s market. Additionally, economic trends can greatly impact the housing market. Loss of jobs may cause people to search for smaller homes or apartments, which in turn adds their homes to the market. Finally, home buying patterns can cause shifts in the housing market. For example, many millennials are waiting longer to buy a home, which shrinks the number of buyers in the market.
What are the results of a buyer’s market?
The biggest result of a buyer’s market is the lowering of new home prices. People who are selling their homes may be eager to move on and reduce their asking price (often more than once) in an attempt to entice buyers. Additionally, buyer’s markets encourage real estate investing. Buyers rely on the buy-low, sell-high philosophy, which relies on the expectation that the market will soon shift into a seller’s market. When it does, they can re-sell the home at a higher price. Finally, a buyer’s market keeps homes on the market for longer, which is more expensive for sellers. This is because a seller must maintain the cost of upkeep of the home to keep it looking nice for potential buyers and the cost of a real estate agent.