"But isn't this a buyer's market?" I hear this question at least once a week. It's the expression of both confusion and frustration that has taken ahold of most of the buyers presently looking for a home or an investment in our very challenging real estate market. You would think the answer would be as easy as a "yes" or "no", but the reality is more of a very muddled "sort of."
In years past, we could chart whether we were experiencing a buyer's market or a seller's market based on a few factors. If there was an excessive amount of inventory and sellers had to be willing to negotiate to get their homes sold. Then clearly this was a buyer's market as the buyer's had the "pick of the litter" and for the most part could dictate the terms of the sale. This environment allows buyers to pay lower prices for more desireable homes. If there was low inventory, which prompted bidding wars on mediocre listings, it was clearly a seller's market. The seller would take their time to pick the absolute highest and most desireable offer and they would dictate the terms of the sale to the buyer.
Today is a weird mix of the two which is leaving all parties very frustrated. Sellers are highly motivated to sell their homes before they lose more value or lose their home to foreclosure, so they're ready to give the control to the buyers to get the deal done, which would indicate a buyer's market. On the flipside, there's actually very few quality listings that the buyers want to purchase, which creates bidding wars, and push buyers to spend more than they expected in a declining real estate market. This mimics more of a seller's market. So how do we have both a buyer's market and a seller's market simultaneously? Well, you add to the mix that the majority of the properties on the market are either bank owned or short sales, and you now have a completely different dynamic. The banks are really not motivated to sell, at least not in the way that a traditional seller is motivated in a buyer's market. Banks want their price and terms, and they are willing to push back and wait for their terms to be met. The banks also dictate how quickly the buyer performs, what escrow and title companies are used (don't get fooled by the rhetoric that buyer's get to choose- they do have the right but the banks then require the buyer to pay for those services otherwise covered by the seller), and levy fees to the buyer for any delays or changes to the escrow. All of these requirements for the buyer to meet, yet the bank gets to take as long as they want without penalty to make their decisions at every step. Sounds like a seller's market, right?
So, where does that leave us today? Homes are priced radically lower than they have been in years and the interest rates are amazingly low right now. These conditions make it a great time to be a buyer in the market. I wouldn't hesitate to buy a new home or investment now because there are great deals out there, so it is a market that will benefit buyers in the long run. Does that make this a buyer's market by definition? Well....I'd probably classify this as a bank's market.