Posted by EquityHunter1 on July 14, 2005 at 07:59:44:
A buyers’ market has more sellers than buyers. Or conversely I could have said a buyers’ market has less buyers than sellers. It should be a plural noun because it takes more than one buyer or seller to make a market so I apoligize for not putting in an apostrophe.
Buyers or Sellers Market - Posted by EquityHunter
Posted by EquityHunter on July 13, 2005 at 17:53:49:
I posted a message about this before, but I think it is appropriate in light of the recent posts I have read. As any seasoned investor will tell you, you have to know your local market. We define real estate markets as a buyers or sellers market. A buyers market is where there are more buyers than sellers. It’s hard to sell. Prices are declining, stagnant, or increasing at a very low rate of a couple percent a yr. A sellers market is the reverse.
Both types exist nationally at this time. As a “general” rule markets on both coasts are sellers markets. Interior markets are buyers markets. Areas where baby boomers are retiring are big time sellers markets. California, Arizona, Florida are a few examples.
You, as an investor, have to determine what kind of local market you are in. Strategies that work in one market will usually fail in the other. The gurus would tell you all markets are the same. They are not. Those in a sellers market should already be aware. The local media is talking about it everyday. Prices going up like crazy etc.
But what about the other areas? If you are not sure, or are just getting into investing, the easiest way to determine what kind of market you are in is to ask a realtor “what is the percentage of properties under contract in relation to the total amount of properties (under contract and for sale) on the market.” They will have that information at their fingertips. It’s a little tricky but you want to divide the total number of properties under contract (pending) divided by the same amount of pending plus those still for sale. If that number is under 25% you are in a buyers market. Above that, a sellers. Usually it will be easy to see. If it is close, then it’s a wash. Equilibrium. You are in a neutral market. Both methods might work for you.
So now that you know what kind of market you are in you can create an investment plan. Here is where it gets interesting. Markets are always in a state of flux. Todays sellers market could become a buyers market tommorrow. A buyers market in todays atmosphere is doubtful to become a sellers market anytime soon. Things are going to get worse before they get better. There are alot of sellers markets at the edge right now.
Given that, I would not pay market price for any property in a sellers market. That is speculating. You are hoping prices continue to go up. I would suggest you buy low and sell high for a profit right away. If you want to hold in a buyers market, that would be prudent only for a long term plan. I wouldn’t get heavily involved with any rehab and cash intensive project in a buyers market unless I bought at 50% or less of the resale value and could afford the purchase, rehab and holding costs for at least 6 months or more.
Re: Buyers or Sellers Market - Posted by Natalie-VA
Posted by Natalie-VA on July 14, 2005 at 08:45:16:
EquityHunter,
This was a good post. Newbies should definitely take note and educate themselves as to market conditions in their area.
Those of us posting answers to Newbies on this board should also take care not to give an answer that might vary depending on someones market or location without knowing where the Newbie is. I’ve seen a lot of posts that might be true in one area of the country, but completely out of line in another area. This sort of advise could put a Newbie in peril.
–Natalie
You may inverted Buyer & Sellers Mkt - Posted by JT-IN
Posted by JT-IN on July 13, 2005 at 19:05:19:
You state in the 2nd and 3rd line of Para 1 that:
“A buyers market is where there are more buyers than sellers”…/… “A sellers market is the reverse.”
I think that you have things reversed here… as I’m sure you are aware of how it is supposed to be stated, but unknowing eyes won’t be… so I bring it to your attention…
RE is a supply and demand commodity, just like a loaf of bread or gasoline… Shortages tend to raise prices… When there is more demand… which equates to more Buyers than Sellers, then that is a SELLERS market. Hence, prices may be higher, and Sellers may be less negotiable… or even command offers above asking price in the retail arena.
When there are few Buyers, and more folks wanting to Sell, then Seller are competing for the Buyers, hence a BUYERS market… Sellers will be more flexible, and may listen to offers that are considerably below asking prices… or asking prices may be falling…
Hope that this straightens the point for those who may have been corn-fused…
JT-IN