 What is
a Seller's Market?
by Blanche Evans
Although predictions for the
first quarter of 1999 are that home sales will slack off slightly, that means
that the nation is still in its second best home selling economy of the past few
decades. Both the National Association of REALTORS® and the National Association
of Home Builders announced record sales for 1998 and are optimistically cautious
about 1999, but experts already agree that nothing appears on the horizon to
slow sales for spring. This year may mark the most active home buying season
yet.
If you are planning to buy a
home soon, and your area of choice is enjoying an economic boom, you'd better
get ready for stiff competition from other buyers. There may be more buyers
available than homes for sale. In some areas, supply just can't keep up with
demand - that is a sellers' market.
What is a sellers' market? A
sellers' market is the manifestation of conditions that favor the seller over
the buyer. There are fewer homes for sale than there are buyers. Prices tend to
rise, and homes sell quickly, often with little bargaining.
A sellers' market can
blanket an entire city such as Dallas, one of the top three relocation
destinations in the country. During some periods of 1998, the D/FW Metroplex had
as little as two months inventory of homes for sale on hand.
A sellers' market can also
be limited to a neighborhood, a city block or even a single street. If the
street offers continued desirability and rarely has homes for sale, it acquires
a marquee value, like hairpin-curved Lombard Street on top of San Francisco.
In an average market, one
which favors neither the buyer nor the seller, Realtors maintain an inventory of
approximately six months of inventory (homes for sale) on hand. When inventory
falls below six months on hand, the market is moving into a sellers' market.
In a sellers' market,
several predictable events occur. Prices start to escalate, and homes will start
to sell more quickly. Homes that typically would remain on the market for three
months or longer in an average market, will sell within weeks, days or even
hours. In some hot markets, homes have buyers before they even are listed in the
MLS system.
A sellers' market can be
greatly stimulated by a robust economy and the higher salaries, job stability,
and consumer confidence it engenders. The entrance of one or more major
employers into a market is enough to kick off a sellers' market. A positive
national economic announcement will also stimulate home sales. Word of mouth
also plays a part. A neighborhood that may have lain fallow for a time may be
revitalized by a group of buyers. Witness the urban renewal in many cities
brought about by young non-traditional professional couples and singles, or the
second and vacation home boom spurred by the Tax Re lief Act of 1997.
Realtors go into emergency
mode in a sellers' market. Their businesses change radically. Since listings are
at a premium, they work harder to get listings, and will network with other
agents who have qualified buyers. Buyers' agency becomes more common. Many
Realtors feel there is no time to waste on buyers who aren't prepared to buy or
committed to working with one agent.
When homes are at a premium,
they command top dollar. Even homes with little to offer - few updates, small
rooms, poor location, will find that their values have been lifted by the
sellers' market. Regardless of the market, homes will sell more quickly if they
are updated and in move-in condition.
When homes are selling
faster and for higher prices, many buyers are eliminated because they can't
afford the higher prices in the neighborhoods in which they want to buy or
because they can't get to the homes before they sell. Homes that are less
desirable will start seeing more buyer interest.
But because a home is in a
sellers' market doesn't mean it will automatically sell quickly and for a higher
price. Value is still the great leveling factor in all markets. Even in a home
buying frenzy, no one will give over their hard-earned money for a bad bargain.
A home in poor condition or badly in need of updates will always discourage
buyers because it will appear overpriced and too much work in comparison to
ready-to-show homes and new homes.
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