Real Estate Investing
What is The Difference Between a Buyer's Market and a Seller's Market?
Belong on Jan 5, 2023
As interest rates continue to rise and talks of a recession continue, homeowners may find themselves unsure of how to manage their investments, especially their real estate assets. Terms like “buyer’s market” and “seller’s market” are common in discussions around the real estate market, but what do these terms really mean? In this post, we’ll define these terms and discuss how the market you’re in will impact your investment decisions.
Defining buyer’s vs seller’s markets
In a buyer's market, there is an excess of homes for sale, indicated by lower prices and more frequent seller concessions. On the flip side, in a seller’s market there is a scarcity of homes for sale, leading to higher prices and more competitive behavior from buyers.
In a market with surplus inventory, buyers have more negotiating power and sellers may be more willing to accept lower offers. In a market with low inventory, sellers have more bargaining power because there are fewer properties available and more buyers interested in purchasing them.
How to tell if you are in a “buyer’s market” or “seller’s market”
Though many media outlets will discuss the state of the market as a national phenomenon, the truth is that the state of local real estate markets varies widely across the country. Topeka may be a buyer’s market while Albany is a seller’s market. And it’s not static, each local market will shift and change with supply and demand.
There are a few factors to consider when trying to understand your local real estate market:
1. The number of homes for sale: Like so many areas of the economy, the real estate market is greatly impacted by supply and demand. If there are lots of homes for sale in your area, you’re likely in a buyer’s market, and vice versa.
2. Average number of days on market: If properties in the area are taking longer to sell, it may be a buyer's market. In a seller's market, properties typically sell more quickly.
3. Frequent price changes: If the prices of homes in the area are decreasing or staying the same, it could be a buyer's market. The inverse is true for a seller’s market.
If you are in a buyer’s market, is it better to rent out your home or sell it?
If you believe your home is located in a buyer’s market, should you sell your home or turn it into a long-term rental? It depends. Here are a few things to consider when deciding whether to rent out or sell your property in a buyer's market:
1. Your financial situation: If you have the financial stability to hold onto your property and collect rental income, you can continue earning equity and take advantage of tax strategies as your home value grows, while also collecting passive income. If you need liquid cash in the short term, you may be better off selling, even in a buyer’s market where you may not make as much from the sale.
2. Your future plans: If you’re moving out but you think you may want to return to your home or area in the future, renting it out could be a good option. With the right residents in place, your home can be cared for and earn you rental income, while also appreciating in value, before you return.
3. The condition of the property: If your property is in good condition and is likely to attract renters, it could be a good choice to rent it out. However, if the property needs significant repairs or upgrades, it may be more cost-effective to sell it. (Your local Belong team can help you understand how marketable your home is and the cost of any needed repairs.)
If you are in a seller’s market, is it better to rent out your home or sell it?
In a seller's market, there is generally high demand for properties, which can lead to higher prices and more profit for you. However, there are a few things to consider when deciding whether to rent out or sell your property in a seller's market:
1. Your financial situation: If you need to sell your property in order to free up cash, it may be a good idea to sell it, especially in a seller's market when prices are high. On the other hand, if you are able to hold onto your property and collect rental income, this may be an even better option for long-term passive income.
2. The condition of the property: If your property is in good condition, it is more likely to fetch multiple offers, perhaps even above the asking price. However, properties in good condition also rent fast, and for top dollar.
3. The local rental market: It's important to consider the demand for rentals in your area when deciding whether to rent out or sell your property. If there is strong demand for rentals, it may be a good time to consider renting out your property.
Not sure what to do? Belong can help
Whether you own a home in a buyer’s market or a seller’s market, whether you’re determined to sell or interested in renting out your property, Belong can help. Our local experts are ready and waiting to answer your questions and help you understand the pros and cons of turning your home into a long-term rental that residents will love.
Belong is a modern alternative to traditional property management, offering homeowners an unparalleled set of features and perks, including:
- Guaranteed rent, regardless of when it's paid by residents. That’s passive income you can rely on!
- Maintenance and renovation services, provided by vetted, in-house tradespeople
- Full transparency over fees with no sneaky extras like setup costs and lease renewal charges
- Real 24/7 concierge-level support for both homeowners and residents, not just emergency logging
- Protection for homeowners against evictions with up to $15,000 of coverage against legal fees
- True market data and real-time interest from potential residents that maximize the value of homes on the Belong network
- Asset management consultations helping homeowners make the best long-term decisions for their property and investment
- The option to apply any management fees paid to date as a discount towards brokerage fees if it’s time to sell
Ready to learn more about how Belong is changing the world of home management and renting forever? Find out if your home is eligible for Belong here, or become a Belong resident by searching for available homes.