The housing market, like most markets, is cyclical.
These cycles can be greatly influenced by a number of factors, including interest rates, economic conditions and consumer confidence, which can create a shortage or surplus in housing.
A seller’s market happens when there’s a shortage in housing or more potential buyers than homes. A buyer’s market, on the other hand, occurs when there is a surplus in housing or more homes for sale than buyers. A balanced market happens when there is the same number of homes for sale as there are buyers.
STOP PRESS: January 2021 - It's a sellers market RIGHT NOW
Seller’s market at-a-glance
- More buyers than homes for sale
- Prices tend to be higher because of increased demand
- Homes sell quickly
- More likely to be multiple offers on a home, which gives sellers negotiating power (and conditional offers may be rejected)
- More homes on the market than buyers
- Prices tend to be lower because of increased supply
- Homes are more likely to sit unsold
- Housing surplus can slow rising prices and even lead to price reductions
- Buyers have more choices and more leverage to negotiate
If you’re looking to buy (or sell) a home, it’s important to know which type of market you’re entering into. If you’re unsure, ask your real estate agent. Of course, selling a home in a seller’s market is optimal, as is buying a property in a buyer’s market. But people don’t necessarily have the luxury of timing their home sale or purchase to coincide with the most advantageous market. It could be quite likely, for instance, that you’d be buying in a seller’s market or selling in a buyer’s market.
Tips on selling your home in different housing markets
Selling in a seller’s market is generally quick and easy. In a buyer’s market, with an abundance of properties sitting idle, you may want to do some legwork to help sell your home. There are a number of things you can do to improve your chances for making a sale. These include:
- Understand the local market and your competition
- Price your home right (and conservatively)
- Make sure your home is ready to be shown at all times (consider using a professional home stager who can help show off the best features of every room in your house)
- Be accommodating to your real estate agent's/prospective buyer’s schedules (think of every showing as the one that could get you the sale)
- Be flexible with your terms (offer an extended closing date or lower your asking price)
- Be patient (and stay positive)
If you get an offer early on, give it serious consideration because a better offer may not come along
In a seller’s market, with fewer homes available to purchase and more buyers looking, you’re more likely to get several offers on your home. Here are some things you can do to help increase your likelihood for getting multiple offers:
- Keep your home clean, clutter-free, presentable and ready to show (hire a professional stager if you can – see above)
- Consider pricing your home slightly below its fair market value
Work with your real estate agent to ensure that your home has sufficient market exposure (i.e. list on REALTOR.ca), create print materials, such as flyers or postcards with key selling points and a professional quality photo of your home, post on social media, consider newspaper/magazine ads, list on other real estate listing websites and your agency’s company website)
Be ready to show your house on demand (with no appointment necessary)
Tips on buying a home in different housing markets
With more homes for sale than buyers and potentially lower prices, a buyer’s market could be a great time to buy a new home. Before doing so, however, consider the possibility that home prices could continue to fall, meaning your new purchase might be worth less than you paid for it in no time. Of course, what goes down may eventually come back up. Still, if you wait for prices to drop even further, you might miss out on a great opportunity.
If you’re looking to buy in a difficult seller’s market, there are things you can do to improve your likelihood for success.
- Get pre-approved for a mortgage first, so you know how much home you can afford
- Put forward a strong offer with a significant deposit amount
- Move quickly on a home if you like it (and be aggressive without being annoying)
- Make your offer as attractive and uncomplicated as possible (i.e. eliminate as many contingencies as possible, such as a contingency on sale of your existing property, shorten the closing date or come up with a larger down payment)
- Be agreeable and responsive
- Be flexible with your move-in date
- Appeal to the seller with a personal letter
If you should find yourself in a bidding war with another potential buyer, try to not show your hand to them or the seller. Instead, try to figure out the seller’s trigger—such as a specific closing date that would work for them—and include that in your offer. This could potentially give you an advantage over other offers. Also, keep in mind that sellers prefer offers that have no conditions attached.