The shortage of any valuable product naturally raises the attraction and the price. How else can you explain the infamous Cabbage Patch Kid doll that sold for a few dollars back in the day, but is now worth a few thousand dollars. That’s supply and demand at work. That analogy is similar to what has happened recently with real estate. The limited supply of properties and strong demand from buyers has created an uptick in homes receiving multiple offers. How do the two dynamics affect the housing market?
Sellers Market: When the market demand for properties in a particular area is high and when there is a shortage of good quality properties (i.e. supply is scarce) then the balance of power in the market shifts towards the seller. This is because there is likely to be excess demand in the market for good properties. Sellers can wait for offers on their property to reach (or exceed) their minimum selling price. We are trending toward a seller’s market in many communities throughout the country.
Buyers Market: Conversely when demand both for new and older housing is weak and when there is a glut of properties available on the market, then the power switches to potential buyers. They have a much wider choice of housing available and they should be able to negotiate a price that is lower than the published price. We have been in a buyers market for the majority of the last five years
There’s an endless number of factors that can take us from one cycle to the next. Consumer confidence, mortgage interest rates, job creation and economical barometers are just a few issues that drive housing. Pent-up demand exist now, but it has nowhere to go for a large segment of potential buyers. Lenders are putting a damper on a full-blown recovery with todays tight lending standards. Homeowners that want to sell their current home and purchase a replacement property are in a tremendous position. There’s plenty of eager buyers for their home and mortgage rates on the new home are at historical lows. Mortgage rates have kept demand strong and the main reason why home buyers are so intent on outbidding the competition for that next hot property. Please visit my website www.JohnnyBrooksHomes.com for helpful tips on buying or selling a home, scan my informative blogs and easy access to view local area homes for sale in Davis, California and the surrounding communities