Know the Difference: A Buyer’s Market vs A Seller’s Market

three lakefront houses at sunset

In recent years, there has been a lot of uncertainty surrounding the housing market, both locally and nationally. Thanks to the Great Recession of 2008, the last decade has been a roller coaster of bidding wars, increasingly tightened inventory and escalating home prices.

This is particularly true for vacation homes, which have been slower to bounce back from the housing crash than traditional, primary residences.

Now that markets around the country are stabilizing, however, trends are getting easier to analyze. So whether you’re buying a lake home or selling one, it’s important to understand your market’s conditions. Is it a buyer’s or a seller’s market?

That all depends on the current ratio of supply and demand, and each one means very different things for those wading through the buying and selling process.

A Buyer’s Market

Simply put, a buyer’s market indicates that supply exceeds demand. In other words, there are more homes on the market than there are buyers looking for them. This scenario effectively puts the power of negotiation in the buyer’s hands.

With plenty of houses to choose from, buyers will likely have an easier time finding a home than sellers will have selling theirs. In fact, sellers will need to do all they can to stand out in a crowded market.

This sometimes means lowering asking prices to remain competitive. If that’s not an option, offering to pay for closing costs or moving expenses could be enough to secure a sale. And when shoppers have so many options, they have the upper hand on setting conditions like contingency offers and extended closings.

A Seller’s Market

In a seller’s market, demand exceeds supply. With more buyers searching for homes than there are homes on the market, conditions are in the sellers’ favor.

The lack of available inventory can often lead to multiple offers on the same house. And where there are bidding wars, there are homeowners sure to sell for more than the asking price. Needless to say, a seller’s market is the ideal cycle to list your home.

Because this situation puts sellers at an advantage, buyers who may try to haggle down an asking price likely won’t get very far.

In order for shoppers to secure their chances of finding a home in a seller’s market, it helps to not ask too many favors. When sellers have the power, they can easily turn down buyers who are asking for them to throw in the washer and dryer or refurbish the kitchen counters as buying conditions.

Also, cash offers, larger down payments and pre-approvals can propel a potential buyer to the top of the priority list when multiple offers are on the table.

person analyzing market data

How to Judge Your Local Market

Judging the state of your local market is key to maintaining control and perspective throughout the buying and selling process. One way to determine which way the winds are blowing is to check the amount of available inventory.

Low inventory is typically indicative of a seller’s market. However, ratio matters.

If there aren’t a surplus of buyers at the same time, low inventory could just indicate a stalled market.

An area with a rocky economy may see a surplus of available homes as homeowners are being forced to sell. This, in turn, creates a buyer’s market.

But towns or cities with booming industries and thus plentiful job opportunities are the exact opposite. Future residents would flood into prosperous areas to take advantage of burgeoning opportunities, quickly creating a seller’s market.

In the case of lake real estate, where a large portion of the residences are vacation homes, properties tend to take longer to sell, as they aren’t must-have residences. Therefore, determining whether or not it’s a buyer’s or seller’s market can get a little more tricky. There are simply more variables to consider.

Is the lake remote and rural, or is it 20 minutes away from downtown? Is it a retirement community, a year-round residential lake, or are most of the properties vacation homes?

Larger lakes, like Lake Michigan, have a variety of diverse communities surrounding them and, therefore, may have seller’s markets in one and buyer’s market in the other.

In the end, every market is unique and no two have the same determining factors at play. To save time and effort, hire an expert lake real estate agent who can construct market analysis and help you decide the most strategic way to stand out among the competition.

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