How to tell the difference between a buyers’ and a sellers’ market

Article summary

  • Supply and demand of housing influences the property market, which then determines whether it is a buyers’ or a sellers’ market.
  • Conditions can vary widely from one region to the next and often cycle from one type of market to the other.
  • Gain insight into the current market by checking the local press and online resources, and talking to estate agents and those who’ve either bought or sold a home recently.

Simply put, whether you’re buying or selling a home, you need to know what kind of market you are in. It affects everything from the listing price to your negotiating ability

Here, we explain the difference between a buyers’ and a sellers’ market, and how it affects you during the course of your property transaction.

What is a buyers’ market?

In housing terms, a buyers’ market occurs when there are plenty of homes available, but not enough qualified buyers to ‘absorb’ them all. Housing supply is high while demand is low. Under such conditions, homes take longer to sell and homeowners often have to reduce their asking prices to land a buyer. Sellers have to take whatever they can get, for the most part.

What is a sellers’ market?

A sellers’ market is the exact opposite. It occurs when there are few properties listed for sale, but plenty of buyers ready to purchase. In other words, supply is low but demand is high. In these situations, buyers have to fiercely compete with one another for a limited number of homes. Multiple offers are common, and they can turn into bidding wars.

And everything in between?

However, that buyers’ and sellers’ markets are two extremes and that there is a wide swath of “middle ground” as well. In some cases, housing supply and demand are more balanced. So the market doesn’t really favour one party over the other. There tends to be more negotiating in a balanced market, because the buyer and seller have equal leverage.

What’s more, conditions can vary widely from one province – or even suburb – to another. Where a national or even global recession can create a nationwide buyers’ market, for the most, home prices climb rapidly in some areas – take the Cape, as an example – but fall in others. Supposedly, there is a balance point, but, realistically, the balance point is something that the market passes through while shifting from one type of market to the next. The property market constantly goes through cycles, with opportunities in every market.

How do you gauge the market?

So, how do you know whether you’re in a buyers’ or sellers’ market?

  • Read your local newspaper. Home prices and housing markets are a hot topic right now, so your local news is bound to be watching it closely. Look for stories published within the last three months or so, since property conditions change over time.
  • Use the Internet. Do a Google News search for your city’s name, followed by the phrase ‘property market’ or ‘house prices’.
  • Talk to an estate agent. If anyone is in a position to make the call between a buyers’ market or sellers’ market, it’s an experienced agent. They can be a great source of information. Besides, if you are truly in a buyers’ market right now, you’ll want your name on the books of your chosen area’s agents, not to mention a reputable Home Loan Consultant by your side to help you with your home loan application.
  • Ask around. Seek out friends, family members or co-workers who have either bought or sold a home in the area recently. Ask them about their experience. They should be intimately familiar with the current state of your local housing market.