Buyer’s Market or Seller’s Market? The discussion about whether we are in a buyer’s market or a seller’s market comes up a lot these days. A buyer’s market is defined as having 6 months or more of inventory and a seller’s market as having 6 months or less of inventory. The way that is calculated is by taking the listed homes on the market and dividing it by the sales for that month.
This may help in determining who has the negotiating power in a situation but when it comes to putting in an offer or listing a home for sale, there are several other factors that come in to play and the answer is not so cut and dry and you need to look further for correct pricing.
First thing to consider is the locality. Real estate is local and it has to be looked at on the local level first to determine where the inventory stands in that area.
From there you will find that different price ranges have different inventory levels and you need to look at the status in that price level. For instance, in El Dorado Hills where I live and work, the under $400K price range shows 4.3 months of inventory but the $750K and above price range shows 34 months of inventory according to September statistics.
This month Lyon Real Estate’s Trendgraphix press release states that the lower price ranges have stabilized and even moved up slightly. This is because there are so many buyers in that range and they are keeping the inventory to a minimum. With multiple offers on homes in that range, what we are seeing is a seller’s market with offers at full price and even over. Buyers in this instance have little negotiating power.
As the price of homes go up there are fewer and fewer buyers in those price ranges and as I stated in my El Dorado Hills example there can be several months’ worth of supply. Buyers in this scenario tend to have more negotiating power and it is considered a buyer’s market. But not always! Sometimes we find that the house itself is a big factor. As an example, in El Dorado Hills there can be several buyers who are looking for the same thing in a house and when a new listing comes on the market that fits that criterion, they can be facing competition from multiple offers. Whenever there are multiple offers the seller takes control.
To summarize, if you are in the market to buy or sell a home, don’t let the “buyer’s market” or “seller’s market” talk guide your offers and pricing.
What’s your scenario? Feel free to post it in a comment and we can discuss it!
DeeDee Riley - El Dorado Hills Realtor - Lyon Real Estate - CABRE#01499004
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