We’ve been in a seller’s market – where there is more demand than supply – since spring of 2012. It takes a while to get perspective on a market that is changing. To figure out when price inflation began to pick up again, I looked back on my blogs. I found this one, from February 2012.
It described a house that went unsold from 2008 to 2012. Mostly, it was unsold because it was overpriced in a buyer’s market. When it was priced competitively, in a market that was turning toward greater demand, it sold right away.
The rest of that 2012 blog explains how buyers should conduct their house hunting to see properties that will help them decide on a good place.
The seller’s market:
Since spring 2012, buyer demand has been high, and supply of houses and condos to buy has been low. Prices have been going up. This is a seller’s market. A buyer’s market is when there are more properties than the demand for them; price then are stagnant or going down.
What to expect in a seller’s market: When sellers and seller’s agents can count on high buyer demand, they employ one or more of these tactics:
Price the property below its market value. That brings many buyers in the door. If there are a lot of offers (even if many are below market value), buyers get competitive. Too much competition encourages a spirit of “I have to have it” or “I’ll pay anything to win.” That leads to the highest price for the seller.
Limited showings. Reducing the times a property can be shown results in increasing the chances that buyers will see one another in the property. This increases the fear of loss for the buyer, since those other people might get it, not me.
Setting short decision deadlines. Short deadlines reduces the time for information gathering and can interfere with critical thinking. When buyers get used to short deadlines, they either get good a quick decisions or make bad ones. Paying too much for something that only partially suits you is a bad decision that more people make when the deadline is short.
What to look for as indication that the seller’s market might be slowing down?
Bidding wars where no offer was accepted. As demand slows down, bidding wars with short deadlines work less frequently. Buyers who have more options will take their time to make good decisions. If there was an offer deadline called for Tuesday, and the house is still on the market on Thursday, the seller’s agent didn’t get the demand they expected.
Properties go off the market without being sold, then reappear with another broker. When the demand-to-supply ratio is more even, sellers and their agents must work harder to attract buyers. Some sellers will blame their agents, fire them, and hire someone else. If the problem is price, buyers will see price drops (like the example above from the last recession).
Fewer houses go on the market below market value. When demand is at a normal level in relation to supply, underpricing is risky. In even or buyer’s market conditions, it is a mistake to underprice a house to induce a bidding war. If underpricing fails to spark a bidding war, the marketing fails. What are they going to do, raise the price?
When will there be another buyer’s market? We’re watching for the signs, just like you.