While some seasons are more active than others, it is the supply and demand principle rather than the season that drives changes in the property market. That's why it's vital to study the market in your area and determine if it's a buyer's or a seller's market.
What do the two terms mean? We'll distinguish between the two markets in this post, but first, let's define the terms.
A buyer's market
When the stock of homes in the market is in surplus, you have a buyer's market. In such cases, more homeowners are trying to sell their properties than people looking to buy. The buyer's market characteristically forces sellers to accept a lower price than they had planned. It also forces sellers to use staging, extensive advertisements, and incentives to sell their homes. This is an excellent time to buy for a purchaser because you have good chances of landing a great deal.
A seller's market
In a seller's market, there are more purchasers than available properties. Here, homes sell fast because they are scarce compared to the enormous demand. The excess demand typically pushes prices upwards, as sellers get many offers on their properties. Excess demand gives sellers leverage in negotiations, and they are likely to turn down many conditional offers.
Here are the three main distinctions between the two markets.
Distinction #1: Who has the power?
The power position is the most significant distinction between the two markets. Because the buyer's market is characterized by an excess supply of properties and decreasing prices, buyers have greater "power" than sellers. On the other hand, sellers' markets provide sellers more clout, allowing them to ask for greater prices and even stimulate bidding wars.
Distinction #2: Market absorption rate
If no new properties were entering the market, the absorption rate is the number of days (in months) it would take to sell all the properties currently on the market. If the market absorption rate is between zero and three months, you're dealing with a seller's market. It's also a clue you're in a seller's market if houses in your neighborhood sell in less than ten days—a condition known as low average days on the market (DOM).
A market absorption rate of more than six months indicates a buyer's market. Furthermore, when there is insufficient demand for available homes, listed houses are much more likely to stay on the market for long. Viewed in terms of DOM, you are likely to be in a buyer's market if the average number of days a home stays active on the market is more than five months—a high average DOM.
Distinction #3: Expectations
Buyers have expectations in any market. In a buyer's market, buyers anticipate discovering plenty of inventory and maybe even an excellent deal. They expect to pay top price and compete with other buyers in a seller's market, but they also expect to obtain a turn-key house for their money.
In a seller's market, buyers are aware that they are paying a premium, and they want their final purchase to reflect that. On the other hand, Sellers must provide a home worth the market's asking price.
Sure, a "sell as-is" house will find a buyer easily in a seller's market, but the ROI can be higher when the property is presented with care. Homes that are expertly marketed, beautifully arranged, and priced just slightly below market rate may receive many offers within only a few days in a seller's market.
In conclusion, although demand and supply laws govern the real estate market, there is plenty that you can do to position yourself for success, whether you're a seller or a buyer. First, keep an eye on what's happening in your Nanaimo neighborhood with the information presented above. Then, if you need more specialized guidance as a home seller or buyer, please give me a call.