When you dive into real estate, you’ll almost always hear about a buyers’ market vs sellers’ market. Which side the market leans toward depends on a bunch of factors, but knowing where things stand can really shape your decisions.
What Is a Buyers’ Market?
When supply in the real estate market outweighs demand, you’ll find yourself in a buyers’ market. With more houses for sale, buyers have more power to negotiate. What are some of the signs of a buyers’ market?
- High inventory of homes for sale – The more homes on the market, the more likely buyers are to have the upper hand. They can be pickier and ask for more from sellers.
- Longer time on the market – A high inventory of homes often means that properties stay on the market for a longer time.
- Stable or falling home prices – In a buyers’ market, home prices will hold steady or drop because there’s excess availability of properties for sale.
- More negotiating power for buyers – Sellers will often be more flexible in an attempt to attract buyers.
In this type of market, buyers can typically nab homes for lower prices. Plus, they’ll have more options to consider on the market. With a glut of sellers looking to attract buyers, you may also be able to negotiate better deals. For example, a seller may agree to make repairs before you close on the purchase of a home.
What Is a Sellers’ Market?
The real estate market can shift to favor sellers. In a sellers’ market, demand is higher than supply. Signs of a sellers’ market include:
- Low inventory of homes for sale – In a sellers’ market, buyers will find very few homes for sale.
- Homes sell quickly and above asking price – With a low inventory of homes, buyers will quickly snap up the available inventory, often paying more than sellers’ asking prices.
- Increased competition among buyers – When demand outweighs supply, buyers will find themselves in competition with one another.
- Price hikes and bidding wars – Increased competition can often lead to increased sale prices and bidding wars among buyers.
In these market conditions, sellers have the upper hand. They can sell their homes faster and for higher prices. With little supply, buyers are less likely to negotiate for repairs.
Current Market Status
Where does the current real estate market stand? The answer can change depending on where you live. Local markets can vary significantly from one another. But overall in the United States, the housing market has been favoring sellers in recent months.
A Shortage of Homes
Experts estimate that there’s a shortage of 3.8 million homes in the country, according to the Center for American Progress. In most places around the country, demand for homes is outpacing the market availability. With a shortage of homes, prices are higher. Cost of living concerns continue to be a significant factor impacting decisions made in the real estate market.
Homes are also selling faster across the U.S. In 2023, the average time for homes to be on the market was 83 days. As of November 2024, the median time on the market was 62 days, according to Fred Economic Data.
High Mortgage Rates
Interest rates also play a factor in shaping the real estate market. High mortgage rates can make people hesitant to take out a home loan. In January 2021, mortgage rates were at 2.65%, according to The Mortgage Reports. The COVID-19 pandemic played a significant role in pushing mortgage rates to historic lows. But as the country began to emerge from the initial years of the pandemic, interest rates began to climb. In October 2023, rates peaked at 7.79%, according to the Consumer Financial Protection Bureau (CFPB).
Rates have come down, but they remain high. As of December 2024, the average 30-year fixed-rate mortgage rate is 6.962%, according to Money. While rates have declined slightly in recent months, the overall trend for the past few years has been one of increasing rates.
Inflation
Inflation has a significant influence on mortgage rates as well. As the U.S. first emerged from the pandemic, inflation levels soared. Those levels have since moderated, but consumer prices remain significantly higher than pre-pandemic levels; 22.1% higher than they were in February 2020, according to Bankrate.
The Federal Reserve is one of the major factors that impacts mortgage rates and the housing market, although indirectly. The Federal Reserve’s goal is to stimulate job growth and manage inflation, according to NerdWallet. It sets the federal funds rate. When the Federal Reserve cuts or increases that rate, mortgage rates fluctuate in response.
Seasonal Trends
While national economic conditions are a big factor influencing the housing market, buyers and sellers will also notice that seasonal trends come into play. The housing market can also shift at the regional, and even local, level. Different areas of the country–think the Midwest, Northeast, West, and South–can showcase different housing market trends. For example, newly listed homes increased in the Northeast by 15.6% in September 2024. In the Midwest during that same period, listings increased 6.1%, according to Realtor.com.
The housing market can be very different even within those regional areas. Sales in one city or metro area may be particularly hot, while they stagnate or fall in another one not so far away.
How Buyers and Sellers Should Adapt
How can buyers and sellers navigate the real estate market as it shifts from one end of the spectrum to the other? Buyers in a sellers’ market have a few different strategies that can help them.
- Make competitive offers – When multiple buyers are clamoring for a limited number of properties, you need ways to make your offer stand out. Consider options like including an escalation clause to compete with other bids up to a certain point automatically. You could also offer more earnest money to show sellers you are committed to closing a sale.
- Be financially prepared – The more prepared buyers are, the easier it can be to stand out in a competitive market. You can get pre-qualified for a mortgage, for example. It’s also important to consider your budget and how much you are willing to up your offer price if you enter into a bidding war.
- Explore off-market opportunities – In a sellers’ market, homes listed on the market can be snapped up within a matter of days, sometimes even hours. Buyers can investigate off-market opportunities, those homes that do not reach a wide audience on multiple listing services. You may be able to find these options by talking to agents and homeowners directly.
When the market favors buyers, sellers can explore:
- Smart pricing strategies – While demand may be lower, sellers can still attract buyers. Do your research to set competitive but realistic pricing. Look at comparable sales, also referred to as comps, in your area to get an idea of how to set a price. You can also offer a pricing range. That flexibility could attract more buyers.
- Enhancing property appeal – When demand is lower, sellers can do a little extra work to make their properties appealing. Are there any repair projects you can complete? Can you clean up your home’s landscaping to boost its curb appeal? Can you hire a professional to stage your home to make it look its best for prospective buyers? Ask your real estate agent for suggestions.
- Remaining patient in negotiations – In a buyers’ market, sellers need to remain patient and manage their expectations. It could take more time to find the right buyer, and the seller may need to be more flexible to close the sale.
How Buyers and Sellers Should Adapt
What could we expect to see happen in 2025? Experts are sharing their predictions with the new year just around the corner. Lawrence Yun, the chief economist with the National Association of REALTORS, anticipates that home sales will rise in 2025: 11% for new homes and 9% for existing homes.
Mortgage Rates
Mortgage financing company Fannie Mae predicts that mortgage rates may decline slightly but remain above 6%. Fannie Mae also includes the “lock-in effect” in its predictions. Homeowners with 2% or 3% mortgage rates may be reluctant to sell, which could dampen the sale of existing homes.
Also, real estate company Zillow expects 2025 to be similar in many ways to 2024. It’s forecasting gradual improvements in mortgage rates resulting in opportunities for buyers. If mortgage rates decline and inventory improves, the housing market could offer more opportunities for buyers.
New Policies
The incoming Trump administration also has the potential to impact the housing market with various policies that influence inflation and other economic conditions. There is still the possibility for uncertainty and volatility in the market. Likely, 2025 could still be a challenging year for the housing market, according to Bankrate.
55places Can Help—No Matter the Market!
The real estate market frequently changes on the national level and local level. It is shaped by seasonal changes and economic influences. Whether you are planning to buy, sell, or both, it is important to keep up with shifting market trends. 55places.com has the professional guidance to help you make informed real estate decisions. Contact us today for help along every step of your homebuying journey!
