I had a buyer client ask me that very question just a few days ago. It’s a good question. I’ll attempt to answer it in this post.
A general definition of a buyer’s market is a market where more people want to sell than to buy. But even that is a slippery definition because while at any one time there are almost always more homes on the market than there are buyers for them if you stretch the time frame out enough you come at equilibrium.
Right now there are 764 homes for sale on the MLS in the Mat-Su Borough. Yet, over the last year we had 1,125 homes sell. So we have less than one years worth of supply on hand. In fact, using the above two numbers you can deduce that we have about 8 months worth of inventory on the market right now. Some people say if there is more than 6 months worth of inventory you have a buyer’s market.
Probably a better indication of a buyer or seller market is what is happening with prices. If there are not enough buyers for the homes we will have a low demand which Econ 101 tells us will result in falling prices.
We are in fact in that situation today. But prices are not crashing, they are trending very slowly downward. Some homes are actually increasing in prices but the overall trend is slightly downward.
So what does that mean? Does that mean that a buyer can go out and get a steal on a home right now? Many buyer’s believe that to be true but they are wrong. A house almost always sells for exactly what it is worth at the time. The almost always only comes into play in unusual circumtances. Perhaps it’s a relative to relative sale where the seller is willing to let it go for much less than the market value. Or perhaps a buyer or seller are just completely irrational in their approach to the transaction and a house sells for much more or less than it’s worth. But those are rare occasions.
Even though we are in a mild buyer’s market right now, both the buyer and seller have to compete with other buyers and sellers on the open market. A seller may need to drop his price to sell but he won’t need to drop it below market value. A buyer may need to pay a little more for the house they want…but they won’t need to pay over market value.
What is the market value? The market value is exactly the price that a willing buyer and a willing seller agree to on the open market. That price is a snapshot in time. It will go up or down from that number even as close to a month from the sales date. An appraiser needs to agree with that price if the buyer is getting a loan to purchase the property.
So what happened to the buyer’s market? It’s still here, but it is still a competitive market with other buyers ready to snatch up a house that meets their needs at a price they feel is fair. So buyers, be ready to buy when the house you want is available. Otherwise, someone else will get it. Yes…it’s still happening, competitve offers have not gone away. I have been involved in several in just the last month.