You might have heard this before, “It’s a sellers market right now.” But what does it mean? To over simplify it, it generally means sellers have better negotiating power when selling their property. There are many varying factors that can lead to a sellers market. Let’s look at a few.
Factors affecting Seller’s Market
- Increase in Economic Base – A new company headquarters, new hospital or increase in jobs in the area will attract buyers wanting to be close to work, along with the needed housing for a larger workforce.
- Amenities – Certain areas may become popular for a number of different reasons including schools, jobs, or shopping to name a few. The demand for properties in these areas may start to out weigh the supply.
- Lack of new construction – Bad economic times tend to slow the construction of new homes, such as what happened during the last recession. Once the economy starts doing better, the demand for new construction comes back. However, it is slow to catch up leaving less properties for the buyer to choose from.
- Construction costs – The cost to build including materials and labor could prevent buyers from building. Macro economic factors could have an effect here. One example is hurricanes that devastate cities which then need to be rebuilt. The supply and demand of materials could affect buyers and builders decision to build.
- Seasonal – A lot more homes tend to sell more in the summer months than the winter months. Having a higher supply of homes in the summer months may contribute to a buyer’s market whereas the limited supply in the winter may contribute to a seller’s market.
Supply and Demand
The factors mentioned above are just a few that ultimately affect the supply and demand of available properties for sale. In a seller’s market, the varying factors reduce the supply of homes thus creating a higher demand.
High Demand/Low Supply = Seller’s Market
Low Demand/High Supply = Buyer’s Market
So if you’re a seller looking to sell your property, you’ll have a better chance of getting ask price or better in a seller’s market than a buyer’s market.
Chad P. Harris, Real Estate Sales Agent.