When searching for houses for sale, there are many factors property buyers need to take into consideration. Property prices, rental rates, and local laws are all important when studying a real estate market. Another key feature, however, is whether the market is a buyer’s market or a seller’s market. What is a buyer’s market vs seller’s market? What is the status of the current housing market on this spectrum? And how can a real estate investor find a buyer’s market to invest in? Keep reading to learn the answers to these questions!
What Is a Buyer’s Market?
Generally described as a cold market, a buyer’s market is when the supply of a real estate market is higher than the demand for it. With a surplus of housing inventory, a buyer’s market is very conducive to buying investment properties. Competition is fierce among sellers, with buyers benefitting from fewer bidding wars. With fewer bidding wars, property prices are generally lower. These real estate trends are ideal for buying investment property.
What Is a Seller’s Market?
For comparison, let’s define a seller’s market. The seller’s market definition, as you would expect, is the opposite of the buyer’s market definition. As the name suggests, a seller’s market is a market with conditions that favor the selling of real estate investment properties. In terms of supply and demand in real estate, there are more property buyers than properties for sale in a seller’s market. With more buyers than sellers in the market, sellers have an advantage. This is especially true during purchase negotiations, with bidding wars being created due to many offers from multiple buyers.
Property sellers will get the biggest bang for their buck in a seller’s market, particularly in a hot market. This doesn’t mean that buyers cannot land a good deal in a seller’s market. As previously mentioned, however, with tense bidding wars, the process of buying investment property is slightly more difficult.
US Housing Market 2020: Is It a Buyer’s Market or a Seller’s Market?
Understanding the difference between a buyer’s market vs seller’s market begs an important question about the US housing market 2020: Is it a buyer’s market or a seller’s market? Overall, the US housing market is projected to be a seller’s market in 2020, according to Zillow. While the US, as a whole, is a seller’s market, it’s important to note that there are significant real estate trends that are causing a national shift.
The US market has actually experienced some cooling. In other words, it has been coming closer to a buyer’s market in recent years. A few key trends contributing to this are:
- Housing inventory has been decreasing at a much slower rate than before. This points to a stabilization in inventory in 2020.
- Appreciation and house price growth rates, while still climbing, are doing so at a much slower pace than in previous years.
- Mortgage rates have continued to drop throughout 2019, easing the general conditions for property buyers.
So it is safe to say that the US housing market may be a buyer’s market in a few years.
How to Find a Buyer’s Market: 3 Factors to Consider
Now that we’ve discussed what is a buyer’s market and the status of the US housing market, we can begin to talk about how to find a buyer’s market. Even though you can still buy property successfully in a seller’s market, you don’t necessarily have to when you know how to find a buyer’s market!
When searching for a buyer’s market, keep the following factors in mind:
As emphasized in the definitions above, a market’s housing inventory is a large determinant of its status. A seller’s market is associated with low housing inventory, which garners increased demand. A high supply of houses for sale, on the other hand, coincides with a buyer’s market.
An online search can typically reveal how many properties are for sale in a real estate market as well as any significant recent changes in inventory. Specifically, you will want to look for the “months of supply”. A housing market with more than 6 months of supply is typically a buyer’s market.
Days on Market
You can easily check the average days on market for a city. Mashvisor provides this data on our blog and in our market reports. If properties for sale are staying on the market for long (high days on market), then you have found a buyer’s market. If the average days on market is low, then it is likely a hot seller’s market.
Real Estate Seasonality
Like many other things, a real estate market is significantly influenced by seasonality. Buying investment property in certain months and seasons can help real estate investors save considerable sums of money. In the summer, usually from June to August, most housing markets lean towards being a seller’s market. As to be expected, the opposite is typically true in the winter. This principle is merely a guideline and can be reserved or irrelevant in a number of rental markets. An online search can reveal which trends apply to your market. However, it’s best to consult with a local real estate agent who can tell you what the best time to invest in real estate is in your city.
A Few Buyer’s Markets to Consider Investing In
For 2020, the best buyer’s markets (according to Zillow) are:
Once real estate investors find the perfect buyer’s market to invest in, they can use Mashvisor to conduct a real estate market analysis and an investment property analysis. With a real estate market analysis, investors can learn about profitability, expenses, prices, and more. Then, by using Mashvisor’s investment property analysis, buyers can break down a property’s projected return on investment, property features, and learn what the optimal rental strategy is. Want to learn more about Mashvisor and how it can help real estate investors? Then CLICK HERE to start your 14-day FREE trial with Mashvisor