"What Is A Buyer's Market?"

You have probably heard the terms "seller's market" and "buyer's market". But what do they mean?

Real estate values go up and down, depending upon supply and demand. Obviously, the quantity of homes for sale is the supply and ready, willing, and able buyers provide demand.

Simply put, a seller's market is when there are more willing and able buyers who wish to purchase a home than there are homeowners who are willing to sell. This puts the seller in the driver's seat - they can demand higher and higher prices and offer fewer terms. The result when demand exceeds supply is rising home prices.

Now we are in a buyer's market. There are more homes on the market than there are ready, willing, and able home buyers. This means not all homes on the market will sell and owners who really need to sell are motivated. Supply exceeding demand means lower prices.

So, if you were a potential buyer, would you rather purchase a home in a seller's market or a buyer's market? The obvious answer seems to be that buyers would rather purchase in a buyer's market. So why don't they?

A funny contradiction in real estate is that buyers tend to leap into the purchase process in a seller's market and not in a buyer's market. Why? The simple answer is they are motivated by greed or fear.

During a seller's market, greed kicks in. Buyers see home values rising quickly. They think they can buy a house and watch the value go up and up. This is the time buyers should be cautious because the market is nearing the top. But instead they charge into the market to get on the gravy train.

On the other hand, during a buyer's market, buyers see house prices declining. This should be the time they enter the market to take advantage of the large selection of homes, bargain prices, and motivated sellers.

However, they are afraid. If the market continues to decline, the property they buy might drop in value. So they sit on the sidelines until the market has already turned around and prices start rising rapidly in the next seller's market.

Buyers would be wise to buy during a buyer's market. In fact, when enough buyers jump into the market, that increased demand is what initiates the next seller's market.

In Southern California, we have been in the current buyer's market for three and a half years. If you are a prospective home buyer and hope to take advantage of the buyer's market, you should take action soon.