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Buyers and Seller's Markets

Thursday, November 13, 2014 - Article by: Lender411 Member

Most consumers have probably heard the terms Buyer's and Seller's Market. Do the terms still apply today and what does this really mean? There are actually three types of overall market conditions when selling your home:

1. Seller's Market - This is when the inventory in a specific area is low. Properly priced homes generally sell within 14 days to 21 days maximum. If your property has not received an offer within this time period, it is priced too high.

2. Normal Market - This is when there is no real perceived advantage to either the buyers or the sellers. Properly priced homes should sell within 30 to 45 days.

3. Buyer's Market - This is when you have lots of homes on the market for sale in every price range and area. If you price your home just below the other similar homes on the market a sale should result within 60-90 days. Usually, homes are declining in value in this type of market. Therefore, the sooner you sell, the better it is for you.

Lets take a look at the San Diego market over the last couple years to show how the market types come to play. In 2012 San Diego had a lot of inventory primarily due to foreclosures and short sales. Property value was down in general. There was not necessarily a large pool of buyers outside of investors looking to flip homes. Low interest rates, plenty of homes on the market, sellers just trying to unload the property. These conditions made it easy to buy homes at about 80-90% of market value.

As a buyer in 2012 it created perfect conditions for a "Buyer's Market". Move forward to 2013 in San Diego. Almost the exact opposite occurred. Limited inventory and a large buyer pool. The amount of distressed homes on the market dried up. Plus interest rates were still low. Almost a perfect storm if you were selling a home. This lead to bidding wars on so many properties that it drove the market up almost 20% in most areas of San Diego. Every real estate agent looked like a hero! Where are we in 2014 and moving into 2015? If I had to characterize the maket it would be closest to a "Normal Market". Some will argue that invesntory is still low and prices have risen another 5% ?. But the buyer pool has dwindled, especially the investor groups.

You see a lot of homes on the market that are overpriced and not getting any offers. It seems like price reductions are being done on every property? But the prices are being dropped to what would be considered fair market value vs speculation value. Your Pricing strategy today now becomes more important then ever. I will discuss "Pricing Strategy" on another blog.

How do I see 2015 in the San Diego market? In general due to the mortgage crisis from 2007-2012 and the huge upswing with home prices in 2013 I believe at least for the first half of the year we will still see a normal market conditions. But the market is fragile due to a lot of uncertanty and consumer confidence. A swing in interest rates or the large pool of loan modifications which will default again could swing the market in either direction. Obviously every market is different, but people are all the same. How many people are sitting on the fence about selling their home? Just waiting for the news of the next market wave before they make a decision?

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