Are you preparing to buy or sell a home? No matter which side of the transaction you’re on, the current market will impact the process. That’s why it’s so important to understand the factors at play. One of the biggest will be whether you’re in a buyer’s market, or a seller’s market.
While these real estate terms are used often, there’s a fair bit of uncertainty about what they mean. In this post, we’ll look at the differences between a buyer’s market and a seller’s market—and how they’ll affect your purchase or sale…
Housing market basics
To grasp how current conditions will affect your transaction, you’ll need to understand the underlying factors at play. Here are a few of the most important things to consider.
The Bank of Canada’s overnight rate has a significant influence on the housing market. Financial institutions use it to determine interest rates for various types of home loans. When it’s low, they can offer mortgages at better rates (which is good for the market). When it’s high, the opposite is true.
Demand is another factor. When interest rates are low, there tends to be an influx of buyers looking to take advantage of them. That increases the demand for homes, which can mean higher prices (especially when supply is low).
Confidence in the economy plays a role, too. When prospective buyers feel secure in their jobs—and their ability to resell a home for a solid return down the line—they’re more likely to take the plunge.
At any given time, there are many intersecting factors that determine what the market looks like. A knowledgeable agent can interpret the data, so you can make a more informed decision.
Buyer’s market vs. seller’s market
The factors impacting the housing market determine whether it favours buyers or sellers. Understanding these conditions can help you and your agent develop a winning real estate strategy.
Put simply, a buyer’s market is one where supply is greater than demand. In other words, there are more properties available than purchasers looking to secure them. If you’re a buyer in this type of market, you’ll likely have more success negotiating for a lower price, favourable conditions, and a timeline that works for you.
If you’re a seller, you should take the number of options buyers have into account when setting a price. In general, you may also want to remain flexible, since buyers will likely have a good deal of leverage.
When demand outstrips supply, it’s a seller’s market. If you’re putting a home up for sale under these circumstances, buyers may be willing to pay significantly more than they otherwise would. There’s also a much greater likelihood that you’ll receive multiple offers, and you’ll be well-positioned to reject conditional bids.
If you’re a buyer in a seller’s market, be prepared to compete—but make sure you know how much you can afford. Your agent can help you put forward an appealing offer while reducing potential risk.
What it all means
There are few hard and fast rules in real estate, and that includes the steps you should take in buyer’s and seller’s markets. For example, here in Toronto (where long-term ROI tends to be high), it’s entirely possible for sellers to receive multiple offers in a buyer’s market.
It’s also important to note that conditions can differ from one neighbourhood to the next. Fortunately, staying on top of what’s happening locally can help you strategize for success. From offers to negotiations to closing, a knowledgeable agent can help you take the right steps—no matter the market.
For over 30 years, our clients have trusted us to minimize risk, offer unbiased opinions, and ensure their best interests are served. Contact us today to talk about your needs, by emailing us at info@christensengroup.ca or calling us at 416-441-2888 ext. 772.
