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Many buyers and sellers find today's real estate market perplexing. Some listings are still selling quickly, even with multiple offers and for more than the asking price. But, other listings are taking longer to sell. Also, price reductions are more prevalent today than they were just six months ago.
The real estate market is changing, but not uniformly. Generally, there's more competition for homes listed in lower price ranges than there is for higher-priced listings. This is partially due to the seemingly insatiable demand of first-time home buyers.
Record low interest rates have been a boon to first-timers. It's easier for buyers to qualify for financing when rates are low. In many areas, the demand for starter homes has remained high relative to the number of starter homes listed for sale.
A seller's market is one in which the demand for homes to buy exceeds the supply. Well-priced listings sell quickly and the listing inventory remains low relative to demand. When the inventory of homes for sale swells relative to demand, listings can take longer to sell. A buyer's market develops if demand shrinks as the inventory of listings grows.
HOUSE HUNTING TIP:
Real estate economists use various indices to measure market activity. One is the unsold inventory index, which indicates how many months it would take to sell the existing inventory of homes for sale. An unsold inventory index of one to two months usually indicates a low inventory, seller's market. An index of 8 months to a year, or more, indicates a slower market that usually favors the buyer over the seller.
In a seller's market, buyers are less picky. The inventory is low so buyers don't have the luxury of shopping around. In this sort of a market, buyers are willing to make compromises in order to buy at all.
In a buyer's market, the inventory is high so that buyers can afford to be choosier. The sense of urgency is lower because there are many listings to choose from.
One of the reasons that the current market is confusing is that in some locations you may find that buyers have an advantage over sellers in some price ranges while buyers have the upper hand in other price ranges. For example, in Oakland, Calif., there is a shortage of inventory of well-located listings in the $300,000 price range. It's a seller's market for these properties.
However, there are more listings for more than one million dollars on the market in Oakland than there have been in years. Million-dollar buyers now have a lot of listings to choose from. They can take their time and be selective. Consequently, many of these properties are taking longer to sell.
Even in a buyer's market, the best listings can sell quickly and with multiple offers. This is because the demand is always higher for the best houses, regardless of overall market conditions. Such listings are priced competitively, they're well located, well maintained, and they have a good floor plan.
Inventories of homes for sale are growing in some areas. This market shift can present opportunities for buyers who have been previously outbid in a hot seller's market. For instance, it's a good time to sell a starter home, for which demand is high, in order to buy a more expensive home, for which demand is not so high.
THE CLOSING:
Some buyers back off when the inventory grows because they think that if they wait to buy, they may get a better price. But, it's difficult to time markets. If you wait until inventories start to dwindle again, you could end up paying more.
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