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How To Recognize A Buyer's Market

buyer's market

A buyers market is when the number of homes for sale in an area is greater than the number of buyers. This gives buyers the upper hand and the ability to control the purchase process.

Most sources use months of inventory as a primary measure to determine if it’s a buyer’s or seller’s market. This is the number of months it would take to sell all existing inventory without adding new listings. Balanced markets usually have a 4-6 month supply of homes – less than that means a seller’s market and more than that means a buyer’s market.

There are a variety of other factors that contribute the every-day market including the local economy, interest rates, the area  and the home. These are important things to note in order to take full advantage of the conditions. Knowing the characteristics to recognize and how to interpret the data is important for both sides.

Here are the characteristics of a buyers market:

  • More sellers than buyers
  • Prices tend to decrease as buyers have many options
  • Presence of “distressed” homes (foreclosures, short sales, REO)
  • Fewer offers for sellers, many off list price
  • Longer days on market
  • Seller concessions or other incentives common

These are a few factors that influence a buyer’s market:

  • Season – Late summer through early spring tends to favor buyers
  • Economy – Unsettled economy, rising or high rates, nervousness
  • Area – Those expecting to turn but not yet there are prime markets; undiscovered areas
  • House – Under maintained, functional or external flaws, distressed seller or inventory
  • Buyer & Seller – Aggressive buyers, often cash or low LTV loans, flexible to accommodating sellers