What is a buyer’s market?
Buyer’s Market is a market in which there is a surplus of homes for sale than buyers. As a result, buyers keep home prices down because they have more to choose from. This condition follows the law of supply and demand. When you have more supply than demand, there is a surplus, and prices of goods and services go down.
How do you know when you are in a buyer’s market ?
When you have more houses for sale than buyers, prices go down. This condition increases the time houses stay on the market before they are either bought or taken down by sellers.
Buyer’s market is characterized by four main elements
- Houses stay on the market for a very long time
- Houses sell for much less than what they are worth
- Number of buyers decrease (sometimes)
- Number of sellers increase (sometimes)
What do you do when your house sits on the market for 6 months without an offer? You reduce the price. Sellers reduce prices hoping that they will get offers. This creates a competition between sellers and therefore, prices are driven much lower. As a result houses and real estate depreciate during a buyer’s market.
Should you buy a house in a buyer’s market?
Have you heard of the term “buy low and sell high”? Yeah, you should always invest most of your money during a buyer’s market. This is when you buy a lot of properties at low prices.
Causes of buyer’s market
There are a lot of things that can cause a buyer’s market. Of course, there is a buyer’s market when we have more houses or a surplus on the market. What causes the surplus?
The market goes up and down based on many factors such as seasons. You could have more houses being sold in the summer than winter. Generally, one area can have a buyer’s market whereas its surroundings are in a seller’s market. Seller’s market happens due to economic development in the area, new infrastructure, discovery of oil and other natural resources, etc.
On the other hand, natural disasters such as hurricanes, volcano eruptions, and tsunami can push people away and create a buyer’s market. Because no one will want to buy a house in such areas.
There are times when you can have an entire country or country in a buyer’s market. When there is a recession or housing market collapse. People lose their jobs and become unable to pay their mortgages. To fix the problem, they put their homes on the market for short selling, and others get auctioned. This creates a surplus in the market.
