What is a buyers market?


What is a buyers market?

What is a buyers market?

You will often hear the media talk about buyer's markets and seller's markets, which begs the question - what do these terms mean?

In the real estate world, a buyers market describes a situation where buyers have more choice. There are more listings available than in a seller's market, meaning that at any one time a buyer will have a number of properties available that may suit their needs.

This creates an environment where sellers (and their hired real estate professional) have to work hard to secure buyers, as opposed to a situation where a large pool of buyers have to compete over very few properties (a seller's market).

Buyer's market = more conditional offers.

Because there is more choice, meaning less competition for each individual property, buyers are in a stronger negotiating position and are able to place offers that are subject to various conditions.

In a seller's market, on the other hand, there is so much competition that buyers are often forced to make their offers unconditional to stand much chance of having their bid accepted.

In short, a buyer's market makes it easier for people to make offers.

In a buyer's market, sales take longer.

Buyers want to see everything they could potentially buy before making their choice. This means the time on market for each property increases. There is simply more to look at before you make an offer!

Good properties stand out.

There is a saying in real estate that attractive properties sell well in any market. And while the total number of offers might decrease, it's still common to see strong competition for attractive homes, even in a down market.

The flip side is that properties that are hard to sell can take a lot longer to move, with buyers in a situation where they are not forced to buy whatever the market gives them. They can take their time, knowing that other properties will come up for sale soon.

Buyers with a house to sell can finally move.

In a seller's market, everyone has to be a cash buyer which makes it difficult to move if you already have a home you need to sell. Conversely, in a buyers market, people can submit offers subject to the sale of their own home, knowing it won't be a complete waste of time and energy.

This, in turn, helps bring more properties to the market, which is great for everyone. And, it makes it easier for owners to leave homes that no longer suit their needs, especially anyone looking to downsize from a large family home to something smaller.

What doesn't happen in a buyer's market

Contrary to what some might think, a buyer's market does not guarantee a huge discount on any property, compared to previous market highs.

A buyer's market is simply a set of circumstances that places more power in the hands of potential purchasers, but it doesn't necessarily mean that prices are going to go through the floor. In any market, most owners are in a position where they would like to move, but they don't have to move.

For any sale to occur, both sides need to find common ground. Following a seller's market, this might happen at a slight discount from whatever price might have been achieved at the peak, but it doesn't mean there's going to be a dramatic sell-off. For purchasers, there is little point running around putting in offers 30% below what you think the property is worth. Just because the overall market is considered a buyer's market, doesn't mean owners are suddenly desperate to sell.

In an extended, recession-led buyers market, you might see a few mortgagee sales become available, but that is one very small part of the real estate puzzle. Most owners are moving purely because they need more space, have a new job, want a lifestyle change, etc.

In those situations, people will only move if the deal works for them and they fundamentally feel good about the transaction.

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