General Question – Buyers’ vs. Sellers’ markets. What’s the difference? What’s the best time to sell or buy? How can I take advantage of the shifts?
Simply stated, the difference is supply and demand. It’s a buyer’s market when there is a surplus of houses giving buyers numerous choices. It’s a seller’s market when there is a shortage of homes and buyers begin vying for the ones that are for sale. Many communities cycle through these markets annually.
There is a general belief that homes don’t sell during the winter months, which isn’t true. The end of the year is a time for corporate bonuses, income tax ramifications, or parents deciding to move between school semesters. The cold winter months turn out to be a hot time for investors who want houses to rehab to flip (resell) or to spruce up for renters (cash-flow properties) in the spring. It is correct though that winter is not a peak season and many times reflects a buyer’s market.
An old Realtor® tale says that the market picks up the day after the Super Bowl. Sounds crazy, but it does have validity. Football has consumed many for months and now it’s over. I can hear a wife say, “Okay, it’s time to get off that couch. We are going to look at houses next weekend no matter what.” Of course, it could be the other way around with the husband making the demands. Either way, it doesn’t take long for the last houses which were listed in the late fall and had not sold during the winter to be grabbed up.
In Johnson County, KS a semi-serious seller’s market emerges around the middle of February, especially for midrange homes. By the first of March, the only thing that hinders the sellers’ market stampede is a foot of snow. Stories flourish about homes selling in a matter of days or even hours. It’s not unusual for reasonably priced, updated homes to receive several offers the first day, causing listing agents to notify the buyers’ agents and ask for their highest and best offer. In these scenarios negotiating with the seller is pretty much out of the question. The seller chooses the best offer, and the rest of the crowd moves to the next house. When showing appointments overlap, it’s not unusual to run into the same prospective buyers over and over. Buyers suddenly face the realization that they may have to offer several thousand dollars over the asking price to get the home they want. This frenzy rages into June before it starts to slow. The problem with these inflated-offer situations is that some houses will not appraise. A lender will not finance a property for more than current fair market value.
I remember the days not that long ago when I would set an appointment to show several homes to a client a week in advance (buyers’ market). Based on what I knew of their needs, I would pick and choose the best homes and meet them on Saturday morning. Times have certainly changed and most buyer’s today find the homes they would like to visit themselves, either on my website or another internet site like Realtor.com. If we don’t find what they are looking for initially, I give them an advantage by setting them up with an auto-email. This system notifies them each morning of newly listed homes that meet their criteria. We make appointments immediately hoping to beat the glut of other buyers.
New government regulations were imposed on the real estate industry back in October of 2015, which lengthen the closing process. Some lenders were still able to process a transaction in 30 days, but for many, it went to 45 days or longer depending on the type of loan. The high volume of summertime rush added to the problem, and in the latter part of 2016, it wasn’t the lenders holding up the process, but appraisers. There weren’t enough for the load, and the appraisal timeline (the time between when a lender gives the order to delivery of the final report) went from about a week to two or more weeks, and we had to extend many closing dates. It’s best to plan ahead when either buying or selling and allow for the worst case scenario. Having to extend a closing date could cause hassles.
Just as with the Super Bowl phenomenon, when school supplies become the main attraction in Walmart, the market shifts dramatically. It can be a good time though for buyers whose decisions are not dictated by school age children. The market will remain relatively solid, but slower, for several more months. As thoughts of the upcoming holiday season begin to consume everyone around Halloween, the market slows even more and finally goes pretty dormant by Thanksgiving except for those who have end-of-the-year incentives, like the ones mentioned above.
There are ways for both sellers and buyers to take advantage of buyer/seller market phases depending upon timetable demands. I suggest to most of my clients that we list their houses before the first of May if at all possible. They may have already missed some of the post-Super Bowl action, but many more houses will sell during the next months. In neighborhoods that attract more middle-aged to older residents, the window is larger than it is in a neighborhood surrounding a school. To grab the early window of opportunity, a seller should try to get any outside repairs made to their house in the late fall and then work on indoor updating during the winter. It may be desirable to buyers who do not have to purchase based on school schedules to wait until later in the summer. There are still great homes on the market, and they will not have to deal with the onslaught of early buyers. With the calmer market, prices have a tendency to level off, eliminating much of the inflated price syndrome of earlier months.
Your best course of action whether you are buying or selling is to contact a Realtor® you trust and talk to them about your unique situation. Good luck.
The opinions expressed in these articles are not necessarily those of Executive Life Magazine or the ACA Business Club. Answers are general in nature and do not apply to particular cases.
Phyllis Cronbaugh is a licensed Realtor® with Keller Williams Diamond Partners and has worked in real estate since 1988. She holds licenses for both Kansas and Missouri and serves both as a Buyer’s Agent and Listing Agent. See her Author’s Page for contact information.