What is a Seller’s Market in Real Estate?

What is a seller’s market in real estate? Simply put, it’s a market where the number of buyers is greater than the number of sellers. When this occurs, home sellers tend to hold the advantage and it’s called a seller’s market. That advantage allows sellers to better control the contract process and terms of any agreement; buyers tend to be more flexible as they want to close the sale.

Months of inventory (months of supply) is often used to describe activity in a real estate market. The months of supply is the time it would take for all current inventory to sell at the current rate without new inventory added. There is no one size fits all number, but for the broad Atlanta area between 4-6 months supply tends to represent a balanced real estate market. Below that favors sellers; above favors buyers. It’s all about supply and demand; when demand is greater than supply, price and competition tend to increase. Buyers tend to act faster and be less inclined to negotiate; their goal is to secure the home and get it closed. This allows sellers significant flexibility when planning a sale and negotiating a contract.

Characteristics of a Seller’s Market in Real Estate

  • More buyers than sellers
  • Prices tend to be increasing due to competition
  • Low volume of “distressed” homes
  • Multiple offers and or over list price offers are seen
  • Fewer days on market
  • Fewer seller concessions

This chart is a five year look back and clearly shows this market coming out of the slump. It was largely balanced by July 2012 and remained so into the first part of 2015. At that time sellers took control and have more or less held it, flexing big during most of 2016. This market is again approaching balance but still leaning toward sellers.

sellers-market

Every real estate market is “alive”; it is dynamic and constantly changing. The factors impacting a market can result in very rapid and significant changes. Even under “normal” conditions, a market will move between favoring buyers and sellers. As above, swings are expected and below is what a “normal” market looks like. Peaks and valleys to be sure but for the most part, it moves with a 4-6 month supply level.

normal-real-estate-market

Here’s an example of extreme swings. In July of 2009 this market had 4 months of inventory, five months later it had 18 when the bubble burst. That meteoric rise was followed by a precipitous drop and that was followed by another drastic rise a few months later. About 6 months of inventory was present in Dec 2009 and about 6 months was present in Apr 2012; between them was about 28 months of frenetic chaos. This market below has since absorbed the distressed inventory and tightened.

changing-real-estate-market

Factors Influencing a Seller’s Market in Real Estate

  • Season – Spring and early summer tend to favor sellers
  • Economy – Low rates, consumer confidence, healthy economy
  • Area – Well regarded schools, location, solid data, good reputation or getting popular
  • House – Usually well kept but homes in upcoming areas can have flaws
  • Buyer & Seller – Picky sellers tend to dictate terms, accommodating and pliable buyers

There are challenges with a seller’s market in real estate and they can cause a deal to fall apart. Timing is everything; sellers often misread the market and fail to fully grasp how fluid it is, that can result in a home not selling despite favorable conditions. Knowing how to price a home for sale is critical and so is negotiating through the contract and subsequent due diligence. It’s vital to understand how an appraiser analyzes data in a seller’s market; rapid changes often result in appraisal challenges. This is the role of an experienced and highly qualified agent; this is when they earn the commission instead of simply collecting it. The importance of properly selecting an agent cannot be overstated; the majority of agents are simply unqualified. The ability to have current market data readily available and be able to effectively understand and explain it is often something the majority of agents cannot do. The final challenge can be the home seller; as fast as fate smiles on them the edge can be lost. It is critical to be realistic and pragmatic; sellers should exploit the advantage and prosper but don’t get overly greedy and lose the deal.

The Hank Miller Team Advantage

We provide confidence to our clients buying and selling homes in the North Atlanta real estate market. Our unmatched sales and appraisal experience, relentless drive and ability to manage transactions allow our clients to make sound, decisive real estate decisions. We offer full time, full service, personal, hands-on attention and concierge level service every step of the way for perhaps the most important financial decision you’ll make.

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