If you've browsed your local home listings, you might have noticed something: There aren't many houses on the market. And the ones that are there today might be gone tomorrow. In almost every case, prices are on the rise.
It's all thanks to the seller's market that many cities have been experiencing since at least 2015. If you're now asking, "What is a seller's market?" then read on—this is what you need to know.
What's a seller's market?
Regardless of whether you're buying a home, selling a home or trying to do both at the same time, understanding the seller's market will help give you an edge over the competition. A seller's market means there's more demand for homes than there is supply, and it's what we see in most real estate markets today.
A buyer's market, on the other hand, happens when there's ample supply but less demand. In a buyer's market, not only is there more inventory to choose from, but sellers must also compete harder for the attention of buyers.
In a seller's market, it's the buyers who have to gear up for competition.
How a seller's market impacts you
In this kind of market, sellers often have more leverage than buyers. They may have a pool of eager buyers hoping to purchase their home. This can lead to competing offers on the same home, bidding wars or contracts that favor sellers. If you're the buyer, you may not be able to negotiate as much with the seller, or you may forgo common requests—like a home inspection—to make your offer more appealing.
It's not uncommon for a house to go for more than the list price in a seller's market. Properties are sometimes picked up by all-cash buyers, who can close faster than someone who needs to finance the purchase.
All of these factors can present a challenge to buyers, who may also need to sell their current home. Your home could sell fast, but then you may face the challenge to buy as quickly as you sold.
What else you should consider in a seller's market
In addition to the list price (and the fact that homes can sell for more than what they're listed for), a seller's market can affect other parts of the homebuying process:
- The average time it takes a home to go from "listed" to "sold" shrinks. In the past, a home might have taken 11 weeks to sell. But in today's market, the average time on the market is just 3 weeks.
- Some homes may never be officially listed at all. When the market is this hot, some houses are sold through "pocket listings" (in which an agent may first look to their personal network for a buyer) or private deals, as opposed to publicly listing the home.
- Increases in homebuying can signal an overall healthier economy, too, which may cause mortgage interest rates to rise.
Although several other factors go into determining the interest rate on your loan, this can impact the cost of borrowing money. To help you choose the best option, BB&T looks at your whole financial picture.
If you're looking to buy, you need to be ready to move fast. Being prequalified provides more advantages in a hot market.
Keep it up. You're getting smarter about home buying.
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