Experts expect 2024 to be a seller's market, as home value appreciation gains momentum and there continues to be a shortage in homes for sale compared to buyers.
In real estate, the pendulum of power can swing dramatically between buyers and sellers. Where that pendulum falls can have huge implications for listing prices, offers, and negotiations. But gauging who has the advantage in the push and pull of market factors can be difficult for novice and seasoned homebuyers and sellers alike.
In a buyer’s market, housing supply exceeds demand, giving buyers leverage over sellers. In a seller’s market, demand exceeds housing supply, giving sellers the upper hand.
Understanding if it’s a buyer’s or a seller’s market is crucial to surviving in the real estate world. Knowing how to leverage that power — regardless of where the pendulum lands — can make a difference in a competitive market.
When housing supply exceeds demand, power shifts to buyers in a buyer’s market. Under these conditions, prospective buyers have leverage over sellers because there are more houses for sale than buyers for them. To compete, sellers may have to lower prices, make more seller concessions, or keep their homes on the market for longer than in a neutral or seller’s market.
Buyers have the upper hand in this market. If you’re a house hunter thinking about buying a home, now is an ideal time. Here are some tips for getting ahead:
While buyers have the advantage, sellers can make the most of a buyer’s market by optimizing their home for purchase. Here are some tips to entice buyers:
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In contrast to a buyer’s market, demand exceeds housing supply in a seller’s market, giving sellers more power. Buyers must compete for the low inventory of homes for sale, driving down median days on the market for listings and increasing asking prices and buyer concessions.
In extreme seller’s markets, like the one following the pandemic, cash offers and bidding wars — where buyers compete for a house by increasing their offer — become more common as buyers try to edge out their competition.
Buyers will need to be strategic about how to get ahead of the steep competition for low inventory in this market. These tips can help buyers be prepared to act when the opportunity to buy arises:
Sellers have the upper hand in this market. They can make the most of their competitive advantage by following the advice below:
As 2023 comes to a close, all eyes are on 2024, which is expected to be a seller's market.
At the heart of the seller's market is a fundamental imbalance in housing inventory, which remains in short supply. The market has an estimated deficit of 6.5 million homes, giving sellers the perpetual upper hand. Still, there are encouraging signs that the market will move to a more balanced place, as interest rates are forecasted to flatten out around 6% in 2024 and as inventory continues to inch closer to the six-month supply mark.
The housing market cooled significant'y in 2023, with one million fewer home transactions than in 2022. But 2023 remained a seller’s market due to the low inventory of houses available for purchase. In September 2023, existing home sales hit a high of 3.4 months of supply, which is still below the six-month mark that is considered normal levels of supply and demand — keeping the market in favor of sellers.
Experts are forecasting a more balanced market in 2023 with a slight favor to sellers, driven by the following factors:
Home values to continued to grow throughout 2023, albeit at a slower clip than the pandemic years. Increased home values will motivate homeowners to sell while driving competition.
While the pandemic has driven down the number of homes available for sale, so too has a decades-long housing inventory shortage. While supply levels are trending towards more normal levels in 2023, they are unlikely to satisfy the demand from the millions of buyers who were priced out and have been waiting on the sidelines since the pandemic.
The Federal Reserve took on an aggressive fight against inflation by raising interest rates. While the Federal Reserve doesn’t dictate mortgage rates directly, their actions have a ripple effect which is reflected in them. Given their pledge to keep raising interest rates, experts estimate that borrowers won’t see another cut in mortgage rates until mid-2024 at the earliest. These hikes, combined with increasing home values, will continue to dampen demand throughout 2024.
There have been rumblings about the possibility of a market crash. However, we experienced a market correction in select regions instead. In a market correction, overvalued markets gradually reduce to more normalized levels (about 10% less than their peak). Supply and demand level out, and more buyers are able to compete in these red hot markets. If you’ve been looking to buy or sell in one of these areas, it may be worth it to wait until the market normalizes.
Your questions about the market, answered.
Interest rates play a significant role in the real estate market. Lower interest rates often drive increased buyer demand, potentially creating a seller's market as more people can afford to buy homes (as the did following the pandemic). Conversely, rising interest rates can slow buyer demand, shifting the market towards a buyer's market due to decreased affordability.
Selling in a seller's market can be advantageous as you're likely to sell your property more quickly and at a higher price. Strong buyer demand and limited inventory often lead to multiple offers, allowing sellers to negotiate favorable terms and maximize their return on investment.
Buying in a seller's market can be competitive, but you can improve your chances by getting pre-approved for a mortgage, staying flexible with your offer terms, and working closely with a skilled real estate agent who can help you identify new listings quickly and craft compelling offers.
Selling in a buyer's market can be more challenging, but you can enhance your prospects by pricing your home competitively, making necessary repairs and improvements, and staging it to make it more appealing to potential buyers. Additionally, consider offering incentives or being open to negotiation to attract buyers in a slower market.
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