Over 5 million existing homes changed hands in 2019. That number is likely to be lower in 2020 seeing as how interest in home buying has dropped off due to the ailing economy
That’s just one sign that today’s market, for the first time in a long time, is a buyer’s market.
Buyer’s markets, as the name suggests, is a term that’s used to describe a market where people that are looking to purchase homes can get the best deals. This comes at the expense of sellers who, during these market periods, are having a hard to fetching the prices they want due to issues with demand.
If you’re unsure as to how you can quickly identify a buyer’s market versus a seller’s market, keeping reading. Below, we quickly go over a handful of buyer’s market telltale signs.
- Houses Are Selling Slowly
One of the most common ways to tell if a buyer’s market has arrived is by gauging how long listings are sitting. Most houses sell in about two months. Houses that are having trouble moving can start pushing into the three months and beyond range.
Tools like Zillow can quickly brief you on how long listings have been on the market so you can get a feel for where averages are at.
Even without the help of Zillow, you can get a sense of market speed by noticing “For Sale” signs in your neighborhood. Have they been out for a long time? If they have, the market is cooling which creates opportunities for buyers.
- Price Cuts Are Taking Place
If a house starts at a listing price of $450,000 and within 30 days drops by tens of thousands of dollars, that’s because the house has garnered no interest at $450,000. While that might just be an issue with a single property, if price cuts are happening across several listings, it’s a market issue.
Again, real estate apps are a great place to get a beat on price changes a property has undergone and whether or not those changes are systemic.
- Agents Are Reaching Out to You
Real estate agents have so much interest coming to their doorsteps during seller’s markets that they aren’t spending too much time engaging leads. During buyer’s markets, the story is different.
Demand is low enough in buyer’s markets that agents will need to start dialing numbers of buyers they’ve interfaced with in the past to try and drum up interest around properties. If you’re getting a call from an agent inviting you to see a property, you can be sure that market interest is limited.
- The Rental Market is Solid
People need to live somewhere. If they’re not buying houses, they’re probably renting them.
That’s why we always look at the strength of the rental market as a good indicator of whether or not the housing market is likely to be in good shape.
The more happy renters you have, the fewer people are going to be putting bids out on homes.
- Interest Rates Drop
A slow housing market is never good for the economy. To try and keep things on track when buyer’s confidence has slowed, the federal government slashes interest rates which enable banks to offer better deals to home buyers in hopes of getting them interested in making a purchase.
For example, in today’s housing market, we’re seeing interest rates hover around record lows which has inspired many to take the plunge into homeownership despite today’s shaky financial times.
- Appreciation Creeps Close to Inflation
Every year, houses tend to appreciate unless the location of a house undergoes severe, negative changes. During strong years, appreciation can be extreme with some houses seeing 10%+ lifts in their value.
In down years, you’ll see appreciation mirroring inflation (~2%).
The less houses are gaining value over time, the more likely you’ll be able to grab a great deal. You can find out more information on home values online.
- Professional Investors Are Active
Do you know a real estate investor? If you do, how busy they are is a great tell of how much of a buyer’s market is in effect.
Real estate investors make living buying homes and commercial properties at low prices and then renting/reselling them at a profit. That process requires investors to get the best deals which often means waiting for a buyer’s market to roll around before making multiple transactions.
- Bidding Wars Are Rare
In a seller’s market, you could offer a home seller the exact price they’re asking for and still not get the house. This is caused by multiple bids being made on a property which then results in a bidding war.
In a buyer’s market, not only are bidding wars rare but you can often get away with making an offer well below ask and get it accepted or entertained with a counter-offer.
A Buyer’s Market Is a Great Time to Become a Homeowner
Picking up a house in a buyer’s market is a great way to become a homeowner without breaking the bank. The only trick is having the cash-on-hand required to make a buy during a time that’s likely experiencing economic hardship.
It never hurts to talk to a real estate agent to see what’s possible in any kind of market so find a well-reviewed agent in your area and let them know your housing goals. A couple of conversations could put you on track towards scooping up the home of your dreams.
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