Ask Brian is a weekly column by Real Estate Expert Brian Kline. If you have questions on real estate investing, DIY, home buying/selling, or other housing inquiries please email your questions to email@example.com.
Q1. Cheryl from Bend, Oregon writes: Greetings Brian, I’m hoping you can clear something up for me. A little over two years ago I decided to start looking into buying a house but I didn’t know much about how to do this. When I first talked to a couple of agents, I quickly figured out that I needed to save a much bigger chunk of cash for a down payment than I thought at first. Two years later, I’m close to having the money for a down payment and closing costs. During that time, I did a little more research and learned about home inspections, appraisals, and a few other things. I also kept hearing that it’s a seller’s market and the sooner I could make the purchase, the less I’d have to pay. Now, when I’m close to making an offer, I’m hearing that it’s switching to a buyer’s market. I’d like to know what that means to me today? I’ve asked a couple of agents but got different answers. How do you explain it?
A1. Hello Cheryl, the difference between a seller’s market and a buyer’s market is a question that a lot of people should be asking right about now. It’s been a strong seller’s market for several years but there are clear signs the market is shifting to favor buyers. But as always, real estate depends on the local market and even local neighborhoods. Although there is a general shift towards a buyer’s market, it is happening by different degrees in different locations and you can be certain there are some locations bucking the trend.
At first thought, quite a few people think a buyer’s market means prices are coming down and low-ball offers will be accepted. Probably not at most locations. For instance, in a hot market like Seattle, it means that prices are no longer going up as fast as they have been for many years. It also means that neighborhoods that a few months ago saw bidding wars as soon a s a house went on the market are no longer seeing bidding wars or at least not as many multiple offers and not for significantly more than the asking price. However, due to a pent up demand, sellers in hot markets can still expect to quickly find a buyer at a fair market price.
The best way to understand how significant the shift from a seller’s to a buyer’s market is for your location is by understanding the key drivers:
Cheryl, the economy, interest rates, and inventory all work in tandem. In all probability we have already passed the top of the sales peak. The U.S. economy is fully employed. There may be some wage growth and people shifting to higher paying jobs but very few additional people will become employed (stable or decreasing buyer demand). Full employment greatly increases consumer demand for credit cards, cars, and homes. The increased demand to borrow money will continue to increase interest rates. Higher interest rates put the brakes on increasing home prices which have now reached the maximum affordable price. Inventory of houses for sale will increase. Having passed the top of the sales peak, the trend should be towards a buyer’s market over the next 3, 6, and 9 months. For the most part, buyers can expect listing prices to remain stable, no more bidding wars, and negotiating the final sales prices, terms, and conditions will once again become normal.
Our weekly Ask Brian column welcomes questions from readers of all experience levels with residential real estate. Please email your questions or inquiries to firstname.lastname@example.org.
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