For much of the last decade, the real estate market has been underperforming. Over the course of the past few years, though, there’s been quite the turnaround, to the point where in many parts of the country are experiencing better market conditions.
If you’ve browsed through Anne Arundel County home listings, you might have noticed something. There aren’t many listings on the market. And the ones that are there today might be gone tomorrow. In most cases, prices are on the rise.
It’s all thanks to the phrase “It’s a seller’s market” that many cities have been experiencing since March 2015. We have clients ask us what a seller’s market really means to their sale and bottom line.
What is a seller’s market?
A common question we see, should you buy a house in a seller’s market? Regardless of whether you’re selling your home, looking for a new one, or trying to do both at the same time, understanding the seller’s market will help give you an edge over your competition. A seller’s market means there’s much more demand for homes than there is available supply, and it’s what we see in the Maryland real estate market today.
A buyer’s market is the exact reverse – this happens when there’s ample supply but less demand. In a buyer’s market, not only is there more inventory to choose from, but sellers must also compete harder for the attention of buyers which means a potential decrease is the list price.
In a seller’s market, it’s the sellers who have the advantage.
In this market, sellers often have more leverage than buyers. They may have multiple bids of eager buyers hoping to purchase their home. This can lead to competing offers on the same home or contracts that favor sellers. If you’re the buyer, you may not be able to negotiate as much, or you may forgo common requests—like a home inspection—to make your offer more appealing.
It is very common for a house to go for more than the list price in a seller’s market. Properties are sometimes purchased up by all-cash buyers, who can close faster than someone who needs to finance the purchase.
All of these factors can present a challenge to buyers, who may also need to sell their current home. Your home could sell fast, but then you may face the challenge to buy as quickly as you sold – which could put you at a disadvantage.
Sellers Market Considerations
One major factor helping fuel the seller’s market is a drop in interest rates, which allows more people to qualify to buy homes and to afford more expensive ones. Population growth and increased employment opportunities also bring more buyers into the market.
Expanding government housing assistance programs provide another boost that allows for special low-interest loans, down payment assistance, or tax credits for qualified buyers.
In addition to the list price, a seller’s market can affect other parts of the home buying process. The average time it takes a home to go from “listed” status to “sold” shrinks. In the past, a home might have taken 11 weeks to sell – but in today’s market – the average time on the market is just a few weeks.
Some homes may never be officially listed at all. When the market is this hot, some houses are sold through “pocket listings“. This is common among the luxury market in which an agent may first look to their personal network for a buyer or private deals, as opposed to publicly listing the home.
Increases in homebuying can signal an overall healthier economy, too, which may cause mortgage interest rates to rise.
How to buy a house in a seller’s market
The best way to make sure you’re taking full advantage of a seller’s market is to work with an experienced Realtor. An experienced realtor will help you know just how high you can price your home, and what offers are worth considering. You’ll also need to cultivate some patience – especially if this is your first time selling a home, you may be tempted to accept the first offer you get. During a seller’s market, you could well receive a higher offer tomorrow, and a better one the day after that.
Finally, if you’re needing to buy a home as well as sell one, ask your realtor about the possibility of a “leaseback” (or rentback), where you arrange to rent your former home from the new buyer for a period of time. This may work well for a buyer who felt rushed into making a quick purchase in such a hot market, but still needs more time to relocate.
Although several other factors go into determining the interest rate on your loan, this can impact the cost of borrowing money. To help you choose the best option, Stahley Thompson Homes offers a team of experts that examine your entire financial picture. If you have questions regarding the sale of your home, here are 7 things to avoid.
If you’re looking to buy, you need to be ready to move fast. Visiting a reputable lender and getting prequalified provides more advantages in a hot market.