You may have heard about today’s market being a buyer’s market. But what exactly does this mean?
In general, a buyer’s market refers to a real estate market that is beneficial to buyers. A buyer’s market means that a number of factors are in the buyer’s favor creating buying opportunities. This usually means the following:
• There is a larger inventory of homes – In a buyer’s market, you can be sure that there are a lot of homes on the market from which to choose. In other words, the supply is greater than the demand. As a result of more sellers and less buyers, the price of homes during a buyer’s market usually drops. In addition, buyers may be able to negotiate better prices and terms with sellers because sellers may be anxious to sell their homes after an extended time on the market…which brings us to our next reason:
• More time on the market – In a buyer’s market, because there is more supply than demand, homes tend to stay on the market for a longer period of time. A home that has been on the market longer than the local average may be a better deal because the sellers may be quite anxious to sell their home after waiting it out for so long.
• Stricter lending standards – Today’s buyer’s market is unique because it also comes with stricter lending standards. Of course, tighter lending standards are just one piece of the pie when it comes to this buyer’s market. However, in general, because fewer buyers are being approved for home loans, the number of potential buyers drops even lower, creating even more of a chasm between supply and demand.
• Smaller pool of potential buyers - Stricter lending standards create a smaller pool of buyers in today’s buyer’s market, thereby creating less competition in the market. Less competition and an increased inventory of homes on the market mean that buyers have their pick of real estate,and sellers are likely quite anxious to sell their home to the first buyer that comes their way.