Sellers and Buyers

Buyers vs Sellers Market: What is the Difference?

It is almost December of 2021, and the housing market has seen a lot of growth. Interest rates have remained at record lows all year in 2021. As a result, it’s been easier for many buyers to get into homes even while prices have continued to rise. In the past, the skyrocketing costs of homes have only made it harder for buyers to afford. Some have been priced out of the market entirely. This year has been a game-changer for home buyers and sellers. The question is, has this year proven to be a buyer’s or a seller’s market?

Buyer’s Market vs. Seller’s Market

In a buyer’s market, the buyer can purchase goods and services at a lower price. This is possible when there are plenty of those goods and services to sell without shortage or scarcity. Also possible when there’s a plentiful supply of products for sale for those who want to buy them. In turn, this creates the need for sellers to remain competitive by offering these products at a lower price. The more choices a buyer has, the more the seller must compete against other sellers for that buyer’s money.

 

In a seller’s market, the demand for goods and services outpaces the availability. With the scarcity of goods being high, sellers can mark up products. Higher prices are a reflection of a finite amount of goods to sell. In this case, buyers have no choice but to pay higher fees for the goods they want. Having to shell out extra cash than normal puts buyers at the mercy of the seller. Often, at least in the real estate world, buyers will have to compete against each other by outbidding and paying over the asking price to close the deal. The competition in this realm is between buyers. Sellers can enjoy a time where they wear the crown and get special treatment.   

 

 Is it a buyer’s or seller’s market?

While it may seem that both the buyer and seller have been winning this year, there is still a clear winner; sellers. In 2021, homes on the market have remained below demand. Buyers are not scooping up houses as fast as they go on the market because of reasonable selling prices. Instead, it is the complete opposite! 

The seller holds a lot of power right now. Low housing inventory has buyers scrambling to snag homes as soon as they go on the market. As a result, sellers are asking more and more these days for the selling price. In 2020 U.S. homes averaged 25 days on the market, but now the average currently stands at 14-17 days. In Denver, homes were averaging a record 9-11 days on the market before going under contract. The one thing making demand go up instead of down due to high prices is low-interest rates. This allowed for plenty of attractive loan options to open up for buyers, making even expensive homes within their reach.

 

Predicting the future

According to Colorado’s Fox31 news, single-family house prices in the Denver area start around $565,000. Incidentally, they report this was “$20,000 less than June, but higher than any other month prior to June”. In addition,  Fox31 news predicts that “If trends continue, housing supply will only tighten during the winter, driving prices up.” If projections are correct, Denver and Colorado will likely remain a seller’s market for the near, if not long term. 

 

With inventory remaining so low, sellers can raise prices as the demand soars. As a result, until the market demands it, prices will most likely not go down anytime soon. As long as homes keep getting snatched up at higher prices, there’s no market incentive to reduce asking prices. The continued decreasing inventory supplies will also exacerbate this. Demand and home sales usually drop off a bit during the Fall and Winter months. Unfortunately, with inventory already below demand, there still won’t be enough homes on the market to meet that demand, even during cold months.

 

When will it be a buyer’s market?

The forecasting across the real estate world indicates that we will likely remain in a seller’s market through 2022. For example, Fortune.com recently reported that “Back in September, Zillow” forecasted that “U.S. home prices would climb another 11.7% over the coming 12 months. But now the real estate listing site says that their previous outlook was too low”. As a result, Zillow has updated its prediction. They now believe that “U.S. home prices will climb 13.6% between Oct. 2021 and Oct. 2022.” 

 

Zillow’s prediction is steep and the projections from central real estate authorities are all over the place. While this leaves us to wonder how accurate these forecasts might be, most seem to agree on continued price increases. Fortune.com also reports that “Along with Zillow, Goldman Sachs is very bullish: The investment bank foresees home prices climbing 16% by the end of 2022. Meanwhile, Fannie Mae expects growth to remain fairly strong, predicting 7.9% growth next year.”

How accurate are the projections?

Now, these projections may or may not play out in this exact way in 2022. One factor that could impact the housing market is lumber. Will lumber and supply chain problems get worse in the new year? If it gets worse, we might see a further reduction in new builds and homes on the market. This will drive supply further down, demand will stay high, and prices will jump again. 

 

What if the currently low-interest rates go up in the new year while demand and prices are still high? In this case, fewer buyers will be able to get the loans they will need. Unfortunately, the expensive fees and monthly mortgage payments at a higher interest rate will further complicate things. If rates go up significantly in the new year, we may see a shift happen. If this occurs, prices will drop to accommodate this development. Even if this happens, it doesn’t necessarily mean that we are entering a buyer’s market. Specifically, because these higher rates will further impact your buying power. 

 

How to plan for the future

If you are a seller, we would highly recommend that you check out 5 Reasons to Sell Your Home in 2021. This resource goes into more detail about why you should sell your home sooner rather than later. Without assurance that selling prices will continue to rise in 2022, it appears now’s the best time to sell. Before interest rates rise and you have less leverage to sell at a higher price, be aware that nothing remains the same. There seems to be no time like the present to be a seller in the housing market than now.

 

While this may sound counterproductive after reading the above, if you are a buyer, now is also the best time for you to make that home purchase. Today we’ve learned about some of the factors that will most likely continue to drive prices up. You don’t want to wait until rates rise and further price you out of getting into that home. Even if we see prices go down towards the end of 2022, rates will likely have risen. Unfortunately, you’ll get less house than you could have afforded if you had purchased while rates were reasonable.

 

The economy, inflation, supply chain, rates, etc., will dictate what the new year holds in store. Make sure you do your research and make the best decision for you and your budget. Keep up to date with industry rates, as well as where supply and demand are in the housing market. This will help you know when the right time for you to make that purchase. Call an American Home Agent at (303) 695-5900 today to get more tips and assistance from an expert.

 

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