Waiting for a Seller’s Market to End Might Cost You More

The housing market is rarely completely balanced. At any given time it most likely favors either sellers or buyers, though the degree to which one or the other benefits is not always very pronounced. Sometimes, though, the forces of supply and demand make it tough for one side while the other benefits significantly.

A seller’s market typically results from a lack of supply to meet the current demand. When this happens, buyers find themselves competing, particularly for the most sought after homes.  It is not uncommon in these situations for a nice home in a popular neighborhood to sell within days, or even hours, of hitting the internet for thousands more than the asking price. Escalation clauses, which basically outline and standardize a bidding procedure in a purchase offer in case your offer is competing against another, slightly better offer, are not uncommon in a seller’s market.

So, if that is the case, it must be a pretty good idea to hold out until a buyer’s market, right? Or at least until the seller’s market passes?

Not really. Seller’s markets drive appreciation rates higher. For example, in early 2017, it was not uncommon for average home prices to rise 5% or 6% per month. Depending on your area, appreciation rates could be even higher than that. The early 2000’s saw annual appreciation rates over 20% in many suburban areas.

The other thing to consider is that no one really knows when the market will tilt in one direction or the other. A seller’s market typically starts to draw down when the increased competition and resulting appreciation drives the prices up to the point that larger segments of potential buyers cannot afford to buy, thus reducing the competition and leveling off the supply and demand equation.

Waiting for a seller’s market to end costs you in several ways, but I will share two here. First, waiting for the market to shift means the sales price of the home you purchase will include all the accumulated appreciation between now and then. This could mean a sales price that is tens of thousands higher. Second, buying now means you get to take advantage of all the accumulated appreciation that remains to be gained in the seller’s market. Instead of paying the higher price later, you pay a lower price now and enjoy a higher value and more equity later. The forces you are fighting during your purchase will work for you when your purchase is complete. The earlier you buy in a seller’s market, generally, the better for you in the long run.

If you would like more information or if you are ready to buy a home, do not hesitate to contact me at your convenience. It is my goal to provide my customers with all the information they need to make informed decisions.