I often hear the mention that in the last several months, real estate is a "buyer's market." Following the classic definition, that would be correct. That is, the supply or inventory of listed property for sale far exceeds the number of interested and qualified buyers.
So, if this is true, why is more property not being sold? You may say it is because there are not enough buyers. I submit that this market cycle has something different: Much of the supply is not real supply. It is artificial with property that is listed as "For Sale" but not listed at prices that will ever induce a sale. That is not supply.
Maybe the property owner is upside-down on the loans and owes more than the house is worth. Maybe the owner just believes, as is common, their property is worthy of a higher-than-market price. Maybe the property owner is getting bad professional advice.
FALSE INVENTORY
Whatever the reason, I submit that to claim a property is for sale does not make it sellable property. It may simply be false inventory that will not be moving. The supply of SELLABLE property is not as big as the list of properties touted as "For Sale. "
I contend "sellable property" is property that has been adjusted to reflect the value and price of current market conditions. In good times, this value goes up. In other times it drops. What you paid for the property only has some, not complete, influence on the CURRENT value and price. This economic reality has not hit home with many property owners and real estate professionals but it is apparently well understood by qualified buyers.
This is why many willing, qualified buyers are still struggling to buy. The problem is the supply of sellable property, reflective of current values, is not only smaller than most people accept but it also takes more work to sift out the sellable property from the over-priced-and-not-going-to-change properties that clutter up the market.
THE BUYER'S DILEMA
A buyer's market also needs a realistic projection that values will increase again. This will happen again but it will likely be a very slow increase over an extended period of time. Thus, the classic incentive to "buy cheap" and make money on the market up cycle is limited at best.
It is even possible that should inflation increase (a likely scenario), real estate values may not increase as fast as inflation. This would further devalue property instead of creating a good investment. Perhaps this will not happen, but it is, at the least, a valid concern of intelligent potential buyers.
Who wants to buy facing this situation unless the deal is fantastic for the buyer? Thus, this so-called buyer's market does not create many buyer's either. Even when supply is unbalanced, a buyer's market needs qualified and willing buyers. Compound that the market offers them few incentives to buy at current prices and it results in few transactions. Our current market reality.
BUYER'S LEAN
In theory, for enough money, everything is always for sale. So simply listing a property "For Sale "does not, alone, make it sellable. A price that is unrealistic for the current market will effectively disqualify this property from the start from the real market supply.
So, it may be a buyer's market but not the way many people have historically considered it. The supply of valid sellable property is much smaller than it first appears and the obstacles to buying are greater. Both hamper buyers and create a market that I believe leans to the buyers but is not theirs to dominate.
To push on buyers or sellers that this is a strong buyer's market may be well intended but creates many false expectations that compound the challenges we all already face.
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Glenn S. Phillips is the author of Nerd-to-English: Your Everyday Guide to Translating Your Business, Your Messages, and Yourself. He helps clients learn to understand the perspectives of others to improve their businesses, sales, growth and customer service.
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