It’s common sense. A person buying a new home wants the price to be as low as possible. A person selling a home wants the price to be as high as possible. They meet in the middle when there is a house sale.
However, sometimes things favor buyers and sometimes things favor sellers. If you are thinking of buying a home, the best opportunity for you to dive in is when things prefer buyers, and for sellers, you want to sell when things prefer sellers. It’s all common sense on the surface, but what does that really mean? How does it affect you? And what about the real estate market in 2021?
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What is a buyer’s market?
A buyer’s market arises when more people sell houses than buy houses in a given area. This means that there are many houses on the market and these will stay available longer. Because of competition, this pushes prices down, meaning that people who actually buy from a buyer’s market get a better price.
A seller’s market is just the opposite. It occurs when more people buy houses than sell houses in a given area. This means that there aren’t very many homes on the market, they don’t stay available for long, and there are many home buyers looking to buy a home. In such situations, sellers can ask higher prices for their home – there is less competition to sell and many buyers are starving so one of them will jump up and pay that higher price.
[ See: The History of the Housing Market Over the Past 50 Years ]
As a buyer, you want to be in a buyers market that has lots of homes and competition between sellers. You can get more home for your dollar, or you can buy the exact home you would otherwise have wanted for less, making it easier to get a mortgage.
If you are selling, a seller’s market is great for you. Knowing whether a particular area will be a seller’s market or a buyer’s market, especially in the months ahead, can make an important decision about your home, possibly saving or making extra money in the process.
Housing market forecasts for 2021
What will the real estate markets do in 2021? Will there be a buyer’s market or a seller’s market?
In America’s most expensive real estate markets, house prices are actually falling. Many people who are able to work remotely thanks to COVID are migrating to areas with lower cost of living, which means an exodus from the most expensive places.
However, once you move to other metros with less expensive real estate markets, especially smaller metros and suburbs, the future looks brighter for sellers. In the real estate market in San Diego, for example, analysts expect real estate prices to rise by up to 8.3% this year. In many other smaller metropolitan areas, real estate prices are rising sharply.
Even in metropolitan areas, you can see a mix of buyer’s markets and sellers’ markets, says Gail Lissner, general manager at Integra Realty Resources in Chicago, Illinois. She used the Chicago metropolitan area as an example of this phenomenon.
[ More: These Cities Are Dropping Rent During the Pandemic ]
“In the Chicago metropolitan area, 2020 home sales were strong for the detached single family market segment. Overall, the sales volume increased by 13% compared to 2019, the average sales price by 9%. “
On the other hand, the affiliated houses – such as townhouses and condominiums – did not fare so well, according to Lissner. The sales volume only increased by 2% and the average sales price decreased by 1%.
What made the difference In a word, coronavirus.
“[These patterns are] This is likely due to COVID-19-related factors, where we’ve seen strong interest in residential or suburban home purchases, “added Lissner. “In contrast, condos and townhouses didn’t offer the same amenities buyers were looking for due to COVID-19, including lower-density apartments and larger living spaces.”
Will we have a buyer’s market in 2021? In the largest metropolitan areas, yes. In other areas it is a mixed bag. If you are looking at a condo or townhouse near the city center, you are likely to be in a buyer’s market where prices are mostly static or rising only slightly. If you want a bigger home, especially in the suburbs and outskirts, you’re likely to see a sellers’ market where prices are rising rapidly.
Buying a home in a seller’s market
What if you move into one of the seller’s markets and want to buy a full size home in smaller metropolitan areas and suburbs?
First, be prepared to compete with other buyers. It is tempting to bargain to buy, but you often find yourself in a house that offers war. The best way to deal with a bidding war is to come up with your best offer upfront and get pre-approved before you even start shopping so you can get a quote quickly.
Speaking of pre-approval, it is imperative in a seller’s market because it requires a clear budget and a quick strike is also required. You should do your research ahead of time and look for reputable lenders who offer the best mortgage rates.
Another approach is to simply ponder if you are better off living in a buyer’s market. Is there any other area of the country where the real estate market is currently cheaper and that goes well with your career and other goals?
[ Next: Should You Buy a Home When Mortgage Rates Are at Record Lows? ]
Buying a house on the buyer’s market
In a buyer’s market like you’d expect in New York City or San Francisco in 2021, or looking at an attached home closer to downtown, different strategies apply. You can be much more selective and patient and make lower bids and bargaining with sellers.
If you find yourself in this situation, look around a wide variety of homes – there should be plenty in the market – and watch for price drops as people drop the selling price to get their hands on the property. When you make an offer, don’t be afraid to add some small contingent liabilities, offer a price well below the selling price, or ask the seller to pay the closing costs. When you find a great home with just a problem or two, request a credit so you can pay to fix those problems.
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Too long, not read?
2021 appears to have a buyer’s market in the most expensive areas of the country like New York City and San Francisco, but a seller’s market elsewhere as people newly exempted to work remotely seek lower cost of living. This will lower prices in these more prestigious areas, but increase prices and competition from buyers in other areas.
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Since the beginning of her career, Gail has focused her valuation and advisory work on the apartment / multi-family market, with a particular interest in condominium development, condominium development and the condominium conversion and deconversion markets.