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How Does A Seller’s Market Affect The Housing Market?

5-Minute Read
Published on April 14, 2021

Whether you’re buying a house or selling one, you may have heard the term “seller’s market” – especially if you’re currently in one. If you’re a seller, this type of market is on your side, as it means that the demand for homes is higher than the current supply, making it a competitive market for buyers. If you’re a buyer, a seller’s market won’t make it impossible to purchase a home. It could make it a little more difficult or expensive, though.

Read on to learn more about what a seller’s market is, how to tell if you’re in one and the difference between a seller’s market and a buyer’s market.

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What Is A Seller's Market?

A seller’s market happens when the number of buyers exceeds the number of homes for sale. This means that buyers have fewer homes to choose from, which in turn leads to less competition amongst sellers. These market conditions may inspire bidding wars amongst buyers, driving up the sale price and giving the seller more negotiating power.

There are several reasons the local housing market may become a seller’s market. For example, there are typically more homes for sale in the summer, when it’s peak home buying season, so chances are greater for a seller’s market in winter than summer. Along with what season it is, what’s going on in your location is another factor in creating a seller’s market. Cities that have steady population growth, several job opportunities and new businesses being planted often will see a higher demand for housing, so that area and those surrounding it may enter into a seller’s market.

In terms of mortgages, another factor influencing the market is interest rates. When interest rates drop, more people may be able to qualify for a mortgage and purchase a home. When rates drop, you may see an uptick in buyers.

Buyer’s Market Vs. Seller’s Market

Opposite the seller’s market is the buyer’s market, which happens when the supply exceeds the demand. In a buyer’s market, home buyers have more inventory to choose from, and it’s the sellers who must compete to sell their homes. This may provide the buyer with more negotiating power, and may cause sale prices to decrease.

Is It A Buyer’s Or A Seller’s Market Right Now?

Wondering if your local area is experiencing a seller’s market? Here are a few signs you’re in one.

Fewer Homes For Sale

Since a seller’s market occurs when there is more demand than supply, fewer homes available can indicate a seller’s market. To get a better idea, if the number of homes currently listed for sale is less than half of the number of homes that sold the previous month, it may be a seller’s market.

Higher Home Prices

When buyers are competing for homes, sellers may have the upper hand and may be able to sell their homes for a higher asking price. If listing prices seem higher or if you’ve noticed some homes on the market go up in price, you may be in a seller’s market.

Quick Home Sales

Due to demand, houses sell faster in a seller’s market than in a buyer’s market. The speed at which homes sell is yet another indicator of the type of market you’re in.

Frequent ‘Bidding Wars’

Oftentimes, when demand is higher than supply, more than one buyer may want a certain home. This competition for ownership may result in bidding wars. A bidding war happens when two or more buyers increase their offer price on the home they wish to buy. This can sometimes cause the home to sell for over its value.

Tips For Selling In A Seller’s Market

If you’re selling a home, a seller’s market is the market you want to be in. But even if the odds are more in your favor, you should still be strategic. Here are a few tips to help:

Go On The Market At The End Of The Week

More people have time to tour homes on the weekend, so listing your home on a Thursday or Friday will keep it fresh in the minds of buyers when they’re scheduling their weekend walkthroughs.

Lower The Initial Asking Price

Yes, sellers may have the upper hand in this type of market, but listing your home at a fair price that’s at or just below fair market value will attract more buyers. And more interest from buyers could mean a higher chance of your home selling fast. It can also result in a bidding war, which may end in your home selling at a higher price.

Spruce Up Curb Appeal And Home Staging

Presentation is everything. If your home doesn’t look like a place people want to live, it won’t attract buyers. Curb appeal offers a great first impression of the home, while proper staging helps show off the home’s best assets and helps buyers envision their life in the home.

Consider Your Offers Carefully

If you’re selling a home in the midst of a seller’s market, you’re likely to get multiple offers. It can be tempting to choose the highest bid, but that isn’t always the best decision. The highest bid could come with a request for seller concessions, or come from a buyer who may have trouble getting the financing to actually follow through on their offer.

An Example Of A Previous Seller's Market

Freddie Mac called 2017 “the best year in a decade” for the housing market. Back then, economic growth and low mortgage rates mixed with a low inventory of homes for sale resulted in seller’s market conditions for most of the country’s housing markets. It was a great time for sellers to sell their homes because while prices did go up, interest rates were still considered low, making mortgages less expensive for potential buyers. This made more people able to purchase a home.

The Bottom Line

A seller’s market occurs when there are more home buyers than there are homes for sale, which can lead to bidding wars, drive sale prices up and cause homes to sell faster. In these kinds of market conditions, it’s a good time to be a seller.

Don’t let a seller’s market deter you from buying a home if you’re ready, though. Get started now on a home loan with Rocket Mortgage® and see what you can find.

Apply for a Mortgage with Quicken Loans®

Call our Home Loans Experts at (800) 251-9080 to begin your mortgage application, or apply online to review your loan options.

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