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What is a Buyer’s Market?
A real estate buyer’s market is a market environment where housing inventory exceeds demand, and bona fide home buyers are harder to find.
A buyer’s market can occur for a variety of reasons, such as an economic recession, mortgage rates moving higher or simply an unsustainable increase in housing supply.
Will 2019 be a buyer’s market?
2019 will likely be a buyer’s market because interest rates are widely expected to continue to increase, which means higher mortgage rates and reduced activity from financed buyers.
Furthermore, many new construction buildings are still being built and due to come online in the following years, such as the huge amount of new developments in Hudson Yards.
Even though the announcement that Amazon will build a headquarters in Long Island City helps absorb some of the supply glut, it won’t be enough given the huge amount of supply overhang.
Purchasing in a Buyer’s Market
Buyers can be more selective, take their time negotiating, spend more time on due diligence, and successfully bid below the listing price in a buyer’s market.
Greater Selection – Buyers won’t feel pressured to make offers on properties that aren’t perfect for them. They’ll be able to pick and choose and wait for new listings that they love.
Time to Negotiate – Buyers won’t be pressured to make a decision because of other bidders. In fact, it’ll be much more likely that you’ll be able to negotiate for an extended amount of time with a seller without worrying that he or she will sell to someone else.
Thorough Due Diligence – Buyers can spend more time on legal and financial due diligence before signing a purchase contract in a buyer’s market. They can take as long as they need assuming that the seller doesn’t have a legitimate other option.
Bidding Below the List Price – It’s much more likely that an offer below the listing price will be accepted during a buyer’s market. In fact, market psychology will tilt in favor of buyers so much that sellers will expect all buyers to make an opening offer below their listing price.
Bidding on Multiple Properties – Buyers should keep their options open and bid on multiple listings regardless of the market condition.
Selling in a Buyer’s Market
Sellers need to be disciplined on pricing and need to make their homes available for open houses as frequently as possible in a buyer’s market.
Undercut the Competition – Sellers should underprice their homes relative to comparable properties on the market. Buyers will be looking for bargains, and due to the supply and demand dynamics will focus their efforts on sellers who appear to be realistic.
Show Frequently – Sellers should show their property as frequently as possible in a slow market. Remember that buyers only put offers in on listings they’ve actually seen.
Open Houses By Appointment – Always having some sort of open house listed is a signal that the property is still available.