The Buyers Market Versus The Sellers Market in Real Estate

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In this blog, we will cover and discuss the meaning of the buyers market versus the sellers market in real estate. The team at Gustan Cho Associates has been following the housing market for over a decade, and we are in some unprecedented times. In this blog, we will give our readers an update on the housing market, and mortgage market, and give some tips to get past these times. The mortgage market has been all over the place since the beginning of the COVID-19 coronavirus pandemic.

Experts are still trying to make sense of the turmoil. The information below will consist of facts and opinions. We recommend you reach out to our team as well as other real estate professionals to analyze the data. You can call our team directly at (800) 900-8569 or email us at gcho@gustancho.com. In the following sections, we will discuss and cover the buyers market versus the sellers market and what this means for home buyers and sellers. In the following paragraphs, we will cover the buyers market versus the sellers market in real estate.

Meaning of The Buyers Market Versus The Sellers Market In Real Estate

Many of our readers have heard the terms “buyers’ market” and “sellers’ market”. So what is the difference between buying a home during the buyers market versus the sellers market. Based on nationwide trends we are seeing; the market is quickly turning from a sellers’ market to a buyers’ market.

How Does The Fed Affect The Buyers Market Versus The Sellers Market?

The federal reserve has a large influence on this sudden change. They have dramatically increased interest rates across-the-board faster than at any time in history. Since they have increased the overnight federal funds rate, this is skyrocketing principal and interest mortgage payments. We have seen the firsthand devastation of rapidly rising interest rates. So how do interest rates affect during the buyers market versus the sellers market in real estate? We will cover how rates affect homebuyers during the buyers market versus the sellers market when buying a home and the rates they are able to get.

How Mortgage Rates Affect Home Buyers Being Able To Purchase Home

We have had numerous pre-approved borrowers who are no longer able to purchase a home because their payments are now outside of their qualifications based on the interest rate. These borrowers may not be able to find a cheaper home in their area due to high prices or they don’t want to settle for a home that is not going to suit their long-term needs.

In 2021, the 30-year fixed interest rates were in the 2 %s. And just a year later, we have seen 30-year fixed interest rates almost creep into the 7 %s. This traumatic change is horrible for potential homebuyers. This change is also hurting home sellers because fewer potential buyers are available to purchase their homes. While it is true, that the housing market has ebbs and flows from a sellers’ market to a buyers’ market, the current change may be one of the sharpest we have seen.

What Is a Sellers’ Market in Real Estate?

We will compare the buyers market versus the sellers market in this section. So what is a sellers’ market? A sellers’ market means a person selling a home currently has the advantage of the market. It means they will typically get an offer very quickly on their home based on a few factors such as low inventory, low-interest rates, time of year (spring season), as well as other factors. When the market is in the seller’s favor, home prices increase more rapidly because sellers may receive multiple offers which result in bidding wars or cash offers.

What Happens To Sellers on The Buyers Market Versus The Sellers Market 

When a seller has multiple offers, they can select the offer that will best suit their needs. Many times, they are able to accept offers without any contingencies. And since bidding wars may occur, they may actually get over their asking price when selling their home. Removing inspection and appraisal contingencies was something we saw during the peaks of 2020 and 2021. Many buyers were forced to buy a home without holding the seller responsible for any repairs. In fact, thousands of Americans purchased homes sight unseen. Many buyers bought homes without ever seeing them in person and relying on their realtor and virtual tours.

What Is a Buyers’ Market?

What is a buyers’ market? This is when the market is tilted in the buyer’s favor, making it easier for a buyer to secure a home. A buyers’ market is when there is ample home inventory which can create less competition, and a buyer may even get a home below the asking price. In a buyers’ market, the buyer has more control over the terms of the contract.

The buyer may have contingencies such as needing to sell their current home before purchasing the next home. Or in many cases are able to force the seller to address repairs that may come up during the inspection. In a buyers’ market, there is less competition so the seller may have to settle for less favorable terms. In a buyers’ market, a buyer is able to add contingencies into the contract and back out after inspection or appraisal and typically get their earnest money deposit back.

What Happens To Sellers on a Buyers’ Market?

This can help potential buyers feel more comfortable going under contract and protecting their hard-earned money. When the market is trending in the buyer’s direction, home values stay stagnant, and many times price reductions are required by the seller. As of today, we see the housing market quickly becoming a buyers’ market.

What Does a Neutral Market Mean in Real Estate?

There is such a point in the housing market that is considered a “neutral market”. This is when homes are selling in approximately 4 to 6 months. Meaning all inventory of new listings and new construction homes are closed within 4 to 6 months. We have not seen a neutral housing market in approximately 10 years. In the past decade, the housing market has shifted from a buyers’ market back to a sellers’ market and repeated the cycle numerous times. It is a rarity for the housing market to stay in a neutral market state for long periods of time.

Getting a Mortgage In The Buyers’ Market Versus The Sellers’ Market

Now onto the mortgage market, where the team at Gustan Cho Associates are the experts. Gustan Cho Associates has been originating mortgages for well over a decade. Our highly skilled team of loan officers has been in the trenches and is witnessing the mortgage market shift firsthand.
We are currently licensed in 48 states, and we have seen general and localized trends. The Biden administration and the Federal Reserve have made it clear that they plan on slowing down the housing market to cool off inflation. While many do not agree with this plan, the effects have been devastating.

Buying and Selling a Home at the Same Time in The Buyers Market Versus The Sellers Market

Above and beyond numerous pre-approved clients no longer qualifying, many home buyers and home sellers are now in a bind. Thousands of Americans who need to relocate for family or work reasons are stuck in their current home because they are unable to sell or unable to buy.

Since so many home sellers find themselves in a bind, they may be forced to lower the price of their homes to make a sale. This will result in less money available to complete their move. We have yet to see if this will result in inflation going down. Many experts disagree with this plan, but we will need to wait and see.

How Mortgage Rates Affect Buying Power of New Home?

It is no secret that mortgage interest rates are currently higher than they have been in quite some time. Americans have been spoiled with incredibly low-interest rates for well over a decade. As of today, that luxury is rapidly slipping away. The Federal Reserve is raising interest rates to slow down the economy. Some experts have even openly admitted we need a higher unemployment rate.

Whether you agree with the financial moves of the current administration or not, it seems like we are in for some tough days ahead. If you have investments in the stock market or retirement accounts such as a 401(k), we are sure you are sick to your stomach every time you look at your current balance. With current interest rates, should you still take out a mortgage? This is a great question, and the answer is different for every borrower. In most cases, it still makes sense to move forward with obtaining a mortgage.

Is It a Buyers’ or a Sellers’ Market?

While your investments may be down, real estate seems to be the only market with some stability. While the days of rapid appreciation may be over, Typically, home values increase at a rate that will at least keep pace with inflation (historically outpace inflation). One more thing to consider is you always have the ability to refinance your mortgage.

Depending on your loan program, there are certain seasoning requirements that must be met, but after that, you can always refinance your mortgage loan if interest rates fall. In the past, government-sponsored entities such as Fannie Mae and Freddie Mac has offered mortgage programs to help borrowers lower their interest rate.

FHA and VA Streamline Refinance During The Buyers Market Versus The Sellers Market

After the crash of 2008, they offered the HARP program (Home Affordable Refinance Program). This allowed mortgage borrowers to refinance the balance of their current home into the lower interest rates available without the need for an appraisal, as long as their loan was securitized by Freddie Mac or Fannie Mae. A similar program is currently available on all FHA and VA mortgages as of today. It is called a streamline or interest rate reduction loan (VA IRRRL).

Just because you take out a 30-year mortgage, does not mean you must stay on the 30-year note. The average American is currently on their mortgage for approximately five and a half years. After the five-and-a-half-year mark, they either sell, refinance, or pay off their mortgage. So don’t let the fact that interest rates are currently higher than we are used to discourage you from purchasing or refinancing your home.

Buying and Selling During a Volatile Housing Market With High Rates

Should you sell your home? As mentioned, a few times in this blog, the housing market is shifting into a buyers’ market, but does that mean you should not sell your home? Well, this answer will be tailored to your current situation. It can still be a good time to sell your home.

While homes may not be appreciating at the pace they were, home values are still historically high. This may allow you to get top dollar for your home. Depending on your family and work situation, you may have no choice but to sell your home. If you are not in a bind but want to
move, it may be a good idea to list your home and at least see what offers come your way. You can always take your house off the market and decide not to sell.

Non-QM Mortgage Options For Home Buyers With Bad Credit

Homebuyers with bad credit are no longer stuck waiting to meet the strict guidelines of government and conventional loans. The team at Gustan Cho Associates offers thousands of non-QM and alternative mortgage loan option programs. Gustan Cho Associates will continue to keep an eye on the housing market and periodically update our readers.

The team at Gustan Cho Associates strives to educate all of our clients to the best of our abilities on all mortgage programs and housing trends. Utilizing a skilled mortgage team is important when buying or refinancing a home. Our team specializes in unique mortgage scenarios and offers programs that many banks do not have access to. Our team of loan officers is very familiar with manual underwriting and NON-QM mortgage programs. That is why we are able to help more mortgage borrowers than many banks.

Frequently Asked Questions (FAQs)

1. Q: What is a buyer’s market in real estate?
   A: A buyer’s market in real estate occurs when more properties are available for sale than interested buyers. This typically leads to lower prices and more favorable terms for buyers.
2. Q: What is a seller’s market in real estate?
   A: A seller’s market in real estate occurs when there are more interested buyers than properties available for sale. This often results in higher prices and increased competition among buyers.
3. Q: How can I determine whether it’s a buyer’s or seller’s market in my area?
   A: You can determine the market conditions in your area by looking at factors such as the number of homes for sale, the average time properties are on the market, and the ratio of buyers to sellers. Real estate experts can also offer valuable perspectives on market conditions.
4. Q: What are some advantages of buying in a buyer’s market?
   A: In a buyer’s market, buyers have more negotiating power, as sellers may be more willing to accept lower offers or offer concessions to attract buyers. There may also be a wider selection of properties available for sale.
5. Q: What are some disadvantages of buying in a seller’s market?
   A: In a seller’s market, buyers may face stiff competition from other buyers, leading to bidding wars and higher prices. Additionally, fewer properties may be available for sale, limiting options for buyers.
6. Q: What are some advantages of selling in a seller’s market?
   A: In a seller’s market, sellers may command higher property prices and sell them more quickly. There may also be less negotiation, as buyers may be more motivated to make competitive offers.
7. Q: What are some disadvantages of selling in a buyer’s market?
   A: In a buyer’s market, sellers might have to demonstrate increased flexibility regarding pricing and terms to entice buyers. Properties may also take longer to sell, and sellers may need to invest more time and resources into marketing their homes.
8. Q: How can buyers and sellers navigate market conditions to achieve their goals?
   A: Buyers and sellers can work with knowledgeable real estate agents that are familiar with the local market conditions and can provide assistance on pricing, negotiation strategies, and timing.

Qualifying For a Mortgage In The Buyers Market Versus Sellers Market

If you have been turned down for a mortgage loan in the past, do not let that discourage you from reaching out to our team at Gustan Cho Associates. We would love to put a second set of eyes on your file. We are able to lend without mortgage lender overlays which help us serve more potential clients. For any mortgage-related questions or questions on the health of the housing market, please reach out to Gustan Cho at (800) 900-8569 or send an email to alex@gustancho.com.

This blog on The Buyers Market Versus The Sellers Market in Real Estate was written by Gustan Cho of Gustan Cho Associates powered by Gustan Cho Associates. Gustan Cho Associates is a dba of NEXA Mortgage, LLC.

This blog on the buyers market versus the sellers market was written and published on February 07, 2024.

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