A lot of people don’t take the time to consider what state the property market is in when they decide on selling a home. Is the current real estate market suited to achieving the goal of selling your home for the price you desire?
The metaphorical ‘temperature’ of the property market is important to people who see their house not only as a home, but also as an investment. As Australians become more and more interested in investing in property, we are now realising the difference between a buyer’s and seller’s market. Selling at the wrong time could result in huge losses that were unnecessary if you had taken into account current conditions before putting your home onto the market.
Buyer's (Cold) Property Market:
A buyer’s market is simply when the current financial situation in a specific location is more suited to people who would like to buy property. The reason a buyer’s market comes into existence is there are more people selling homes than there are buyers looking to purchase them. When potential buyers have more houses to choose from, it is most probable they will look for their ‘dream home’, as there is less competition from other buyers.
A buyer’s market is the same thing as a ‘cold’ real estate market. People in a rush to sell a home are usually willing to negotiate more, and there is a good chance buyers can pick up a house for less than the original listing price.
Signs you are in the midst of a cold real estate market:
- The number of homes on the market is higher than previous months/years.
- There is over half a year of inventory sitting on the market.
- When compared, current listing prices are lower than previous sales.
- Less people are buying homes, and so the overall closing percentage is lower.
- Average house prices are falling.
- Real estate advertisements become larger to try and attract more attention from buyers.
- Houses in general are spending more days on the market, thus you’ll notice ‘For Sale’ signs taking longer to have a ‘Sold’ sticker put on them.
Working out how many months of inventory is on the market:
1. Figure out how many active listings were on the market last month.
2. Research to discover the total amount of sold or closed transactions for last month.
Divide the amount of total listings by the amount of sales and you’ll be given the number of months of inventory remaining on the market.
Here’s an example: If last month there were 10,465 listings on the market (over a recent 30-day period), and 1,221 homes were sold, you’ll be left with around 8 and a half months of inventory on the market. This is the definition of a cold or buyer’s market.
Please read our article, ’ Selling your home after the listing has expired’ for related information.
Seller’s (Hot) Property Market:
The best time for homeowners to consider selling a home is when the current real estate market is ‘hot’. A seller’s property market comes into existence when there are more people looking to purchase a property than there are houses for sale.
When a real estate market is running hot, people who really want to buy a home are usually willing to pay more than the listing price. If you’re selling your house the result is often a quick sale that potentially achieves a higher sale price than you were hoping for.
Signs you are in the midst of a hot property market:
- The number of homes on the market is quite low when compared with previous months/years.
- There is less than half a year of inventory sitting on the market.
- When compared, listing prices are higher than previous sales.
- More people are buying homes, and so the overall closing percentage is higher.
- Average house prices are rising.
- Real estate advertisements become smaller as buyer demand for homes is already high.
- You notice ‘For Sale’ signs are only up for a few days/weeks before a ‘Sold’ sticker has been attached.
Neutral Property Market:
As suggested by the terminology, the real estate market leans neither towards sellers or buyers. In a typical scenario, interest rates are at an affordable level and the number of buyers and sellers on the market is balanced. A neutral real estate market does not experience large upturns or downturns in supply, demand, or price.
Signs you are in the midst of a neutral real estate market:
- The number of homes on the market is average when compared with previous months/years.
- There is a quarter to a half-year of inventory sitting on the market.
- When compared, listing prices are very similar to previous sales.
- The number of people buying or selling a home has become stable.
- Average house prices are not increasing or decreasing.
- Real estate advertisements remain a normal size.
- ‘For Sale’ signs are up for 1 to 1-and-a-half months before ‘Sold’ stickers have been attached.
Please read our article, ’ Ten common misconceptions about real estate agents’ for related information about working together with estate agents when selling a home.