“Not enough housing to meet the demand” - Dawn Teh

Lack of housing is an issue that's plagued Australia for the past 20 years. A 2021 report from Grattan states that there are around 400 dwellings for every 1,000 people.

The real estate market is determined by supply and demand, deciding if it's good for buyers or sellers. Seasons can affect foot traffic, but the market differs by neighbourhood. I can help determine if it's a buyer's or seller's market and explain it to your clients.

Buyer’s Market vs Seller’s Market: Definitions

What Is a Buyer’s Market?

ℹ️ Key Takeaways:

• Buyers have leverage: In a buyer's market, buyers hold more power than sellers. This implies that buyers have a better chance of negotiating favourable terms and conditions for their purchase.

• Strategic home searching: High inventory makes buyers picky. Analyze market trends to help buyers find what they want.

• Standout sellers: To attract potential buyers and secure offers, sellers and their agents must prioritize marketing strategies, ensure any necessary repairs are made, and set competitive prices. By doing so, they can make their property stand out among similar listings and increase the chances of a successful sale.

• Preparation and presentation: When it comes to selling a home, depersonalization and decluttering are two key factors that can help attract a larger pool of potential buyers. By removing personal items and minimizing clutter, sellers can create a clean and neutral space that allows buyers to envision themselves living in the home. This can make the property more appealing to a wider range of buyers, potentially increasing the chances of a successful sale.

In a buyer's market, the number of homes available for sale is greater than the number of buyers. This gives buyers an advantage as they have more choices and can negotiate better deals. A buyer's market is characterized by a decrease in competition for homes and an increase in the number of days a home stays on the market. To determine whether it is a buyer's market, one can calculate the months of inventory, with anything over six months traditionally considered a buyer's market. 

What Does a Buyer’s Market Look Like?

A buyer's market means buyers have the upper hand in negotiations because supply is higher than demand.

With a buyer’s market, new listings are common. You can expect to see:

• High real estate inventory

• Fewer interested buyers

• Sellers ready to negotiate

What Is a Seller's Market?

ℹ️ Key Takeaways:

• Sellers' advantage: Limited supply in the housing market gives sellers the upper hand, resulting in quick sales and potentially rising prices due to high competition.

• Quick decisions for buyers: In today's competitive real estate market, buyers must be well-prepared to make a firm offer that might exceed the asking price. Given the intense competition, it's crucial to be proactive and strategic in order to secure a home.

• Strategic pricing is key: When selling a home, the seller and their agent need to price it to attract potential buyers. In a seller's market, this could lead to a bidding war that quickly drives up the home's price. Therefore, it is crucial to carefully consider the price at which the house is listed to maximise profits.

• Sellers still need to prepare: Well-prepared listings that are priced right and marketed effectively stand out in a seller's market and may sell quicker and for more money.

• Help your buyer navigate challenges: Coach your clients to be patient and ready to act quickly, as buyers often have limited leverage in negotiations. As a result, it will increase their chances of securing a favourable deal.

In a seller's market, more buyers than homes are available, making it difficult for agents and homebuyers alike. This means sellers have the advantage in negotiations as buyers compete for the limited number of homes on the market. 

A seller's market is typically characterised by a low number of days on the market. It is determined by calculating the months of inventory, with less than six months being considered a seller's market.

What Does a Seller's Market Look Like?

In a seller's market, fewer homes are available than the number of potential buyers, resulting in a high demand for properties. This competitive environment causes home prices to increase, and buyers have limited room for negotiation. As a result, sellers usually have the upper hand in these situations, and buyers may find it challenging to purchase a property in a seller's market.

You can also expect to see:

• Homes selling in under 30 days

• Cash offers increase

• Housing prices increase

• Stiff competition for homes

• Limited home renovations

Buyer’s Market vs Seller’s Market Conditions: What Kind of Market Is This? 

To determine whether the real estate market is favourable for buyers or sellers, it's essential to understand six key data points that define the market. These data points can help you evaluate the current state of the market and make informed decisions. It is essential to know whether it's a buyer's or seller's market because it can impact pricing, negotiations, and overall strategy. By analysing these six key data points, you can better understand the real estate market and make intelligent choices when buying or selling a property:

• Real estate inventory

• Recent sales

• Pricing trends

• Days on market

• Market trends

• Specific local neighborhood trends

To determine the current housing supply, we can use a metric called "months of inventory". This metric tells us how many months it would take for all the homes currently on the market to sell, assuming that homes continue to sell at their current rate. Typically, a balanced housing market is associated with six months of inventory.

ℹ️ How can I calculate months of inventory in real estate: To calculate the months of inventory, you need to divide the number of active listings by the number of homes sold. For instance, if there are 8,230 active listings and 4,040 homes sold, then the months of inventory would be 2.03. This implies that the market has roughly two months of inventory. Anything below six months of inventory is typically considered a seller's market. This information can help buyers and sellers assess the current state of the real estate market.

Conclusion

Navigating the real estate market can be a challenge, but understanding whether it’s a buyer’s or seller’s market can make a significant difference. Timing the market can be tricky, but taking strategic actions based on market conditions can help create a successful outcome for your client. It is vital to make smart decisions by watching the details, including interest rates and other factors that can affect the market. 

Knowing that every neighbourhood is different, you can work with your clients to make choices that work best for them. Armed with this knowledge, you can confidently answer when someone asks, "How's the market?"

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