While historically stable for investors, the real estate market shifts based on various factors. Housing markets in different parts of the country can also shift at different rates based on local conditions. Common factors that affect the cost of home prices and housing demands include:
- Interest rates
- State of economy
- Job availability
- Population shifts
- World events
- Local zoning
- Local law changes
As the economy shifts and as people make decisions about where to live and where to work, the housing market can swing in favor of the buyer or the seller. Standard terms you’ll hear in the real estate world are buyer’s and seller’s markets. Understanding how each of these conditions affects you is essential to mastering investing or maximizing the return on your home sale. Buyers can also use this knowledge to maximize their buying power.
What is the difference between a buyer’s market and a seller’s market?
A buyer’s market occurs when there are more homes on the market than interested buyers. In other words, the supply of homes is higher than the demand. In a buyer’s market, sellers may have to accept less or lower the price of their house to attract a buyer. Buyers have the upper hand and may be able to get the seller to concede to more repairs, a faster closing date, or pay the closing costs.
A seller’s market is the opposite. In a seller’s market, fewer homes are available than there are interested buyers. In a seller’s market, the demand is higher than the supply of homes. During a seller’s market, sellers often receive multiple offers and may sell their home for over the asking price. Buyers can expect more competition and may need to relinquish some concessions.
How does the market affect sales prices
In a seller’s market, sellers may be able to get their asking price, or more, for their home. The low supply means buyers have to offer more to compete with other buyers. In a buyer’s market, homeowners may have to accept less than their asking price to compete against other sellers.
Shifting housing markets can affect property values since property values consider the sales prices of comparable homes in the neighborhood.
What can I do to take advantage of the current real estate market
Understanding the real estate market can make a significant difference when listing your home. In a seller’s market, homeowners can profit from their homes if the conditions are right.
In addition to watching supply and demand numbers, you can do a few other things to maximize your returns.
Make strategic improvements: While there is less competition in a seller’s market, that doesn’t mean buyers will purchase any house for tens of thousands above the asking price. If you plan to sell, take a hard look at your home, and determine which improvements would yield the highest return for your investment. Typically, sellers will see the most significant return on the following projects:
- Major kitchen renovations
- Replacing the front door
- Addition of porch or deck
- Remodeled (or finished) basement
- New windows
- Minor bathroom remodel
Price strategically: Sellers will still want to price their homes competitively. A CMA (comparative market analysis) can help determine the best asking price for your home by comparing it to recent sales of similar properties in your area. Setting your price too high, even in a favorable housing market, can deter potential buyers.
Be strategic but don’t wait too long: The timing of the shifts in real estate markets can be unpredictable. While it’s tempting to wait until the market gets higher, you could miss out if you wait too long. If you need to sell your home, do your best to sell when you can get a fair asking price. While you could potentially miss out on more significant returns, you may also miss out on a sudden shift in the market that could lower your return.
If you need to sell your home quickly or want to liquidate multiple investment properties, we can help. Reach out to brick to get a fast cash offer on your house.