How am I supposed to know?
The easiest way to determine whether you are in a buyer’s market or seller’s market is to compare the local inventory with demand. For example, in a buyer’s market there are more local properties available than there are buyers looking to buy a home. Thusly, buyers have an advantage because potentially there is less competition for any property they may be interested in. Inversely, if there are fewer houses than there are buyers in a given area, buying a home can become a much more complicated task. In a buyer’s market, you have the power to negotiate in your favor because sellers understand that coming across an interested buyer can take a longer period of time. In a seller’s market, the seller may have multiple offers on their property, eliminating the potential power you had to negotiate a deal that would be more in your favor.
The real estate market is cyclical. The numbers fluctuate and the market can shift several times in a year. On average, the inventory usually climbs before or during summer shifting the advantage to buyers during the summer months. Even though this holds true in many cities across the country, there are other things to take in to consideration when determining the market advantage.
So what else should you consider? Is your local economy boom, bust, or somewhere in between? If your local economy falls somewhere in between, then the standard rules will usually apply. If your economy is an outlier to the average, then there are some other things to consider. If you live in a booming economy with job growth that is above average, then demand maybe high for a long period of time. The Austin real estate market is a great example of this. In the first half of 2016, Austin saw home affordability, rising home prices, and expanding appreciation outpace the national average considerably and was one of the top performing real estate markets in the country in 2016. This means that Austin has been a strong seller’s market for the better part of a decade. Trends in economies like this can be somewhat resistant to the fluctuations in the national market because demand is high, and upwardly mobile people have a desire to relocate with the finances to back it up.
Just as Austin is currently a booming market, a bust market can have the opposite effect. If you live in an area that has little to no demand, reducing your asking price still may not be enough to get your house sold. You may get the attention of local investors, but if there is no demand for their finished product, even they may move their money elsewhere. Over-regulation, skittish lenders, and rising mortgage rates can all stagnate a market.
Understanding the market takes education, experience, and a keen eye for trends. The good news is that there is a strategy for every situation, but picking an agent that knows how to navigate choppy waters is the smartest thing you can do.