The Difference Between a Buyer’s and Seller’s Market

Posted by Gurpreet Ghatehora on Thursday, February 18th, 2016 at 9:42pm.

Many news sites are reporting that Edmonton is projected to be a “Buyer’s market” for much of, if not all, of 2016, yet many people are unclear as the what the differences are between a “buyer’s market” and a “seller’s market.” Today, we thought it would be good to clarify what these terms mean, what they refer to in the market, and their pros and cons.

To start, let’s look at what a buyer’s market is compared to a seller’s market. A buyer’s market, simply put, is a market where there are more people selling homes than people buying. In that sense, the buyers have more options and the sellers have to compete more intensely for sales. The buyer, after all, has a larger selection of properties to choose from, less chances of being outbid by someone else, and can take their time looking around as most homes will stay on the market for longer.

A seller’s market, conversely, is the exact opposite, a situation in which there are fewer people selling homes than people looking to buy. In that scenario, people are trying to woo sellers instead of sellers wooing buyers. Homes can often go for more than their asking price, bidding wars can erupt, and housing prices will usually go up as the demand outmatches the supply.

In a buyer’s market, like Edmonton’s projected market, those looking to buy are usually at the advantage in more ways than one. Interest rates are usually lower when there’s a buyer’s market as mortgage companies and banks have to compete for people looking for loans. And, as a result, the buyers can end up spending even less than just a moderate drop in housing prices. It is, for all intents and purposes, the best time to be on the market for a home, mostly because there will be abundant selection, lower prices, and better financing options. Of course, it can be a risky move as well since job markets, markets, and the economy can all be more volatile.

Seller’s markets are the exact opposite in terms of advantages and disadvantages. Housing prices are generally higher, which is great for sellers, financing is usually less competitive, which is good for those in finance, and homes are in short supply, meaning the buying cycle can be much quicker. In this situation, being a seller, or a banker, for that matters, is quite advantageous.

As Edmonton heads into a buyer’s market, it’s important to note that real estate usually has a means of correcting itself. With seller’s markets, more homes often get listed as people try to move up, which leads to more supply. In buyer’s markets, a slowing economy can often mean housing prices are less likely to inflate, and those who can afford will buy because of their financial options. Either way, it’s important to know the difference between these terms so that you can make a better decision when it comes to buying or selling your home.

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