Real Estate 101: Recognizing The Differences Between A Buyer's Market And A Seller's Market

Even though you have just started your search for a new home, you may have already heard that it is a "buyer's market" or a "seller's market". These phrases indicate who benefits most from the sale of a home. If you are not sure what these phrases mean or you do not understand what the difference between them is, then here is a little "Real Estate 101".

The Buyer's Market

Obviously, the buyer benefits when real estate is currently experiencing trends associated with the buyer's market. What this means is that homes cost less, sellers are willing to accept low bids on the sales of their homes, and interest rates on first-time mortgages are the lowest they have been in some time. You, as a first-time homebuyer, have the opportunity to buy a house you not only want, but also can afford with mortgage payments that fit into your budget.

The Seller's Market

It is ill advised to buy a house when you hear that the current trends are associated with a seller's market. This means that interest rates on mortgages are higher than buyers would like, sellers can ask any price for their homes, and sellers can refuse offers that are lower than their asking prices. Usually there are fewer houses on the market than the number of buyers, and/or buyers are not finding the homes they expect to find or find desirable. Knowing that their homes have the potential to be the house a buyer wants and is looking for means that sellers can afford to wait.

Interest Rates and Property Taxes in a Buyer's Market

Mortgage interest rates that are preferable during this time are often between two and four or five percent. The lower they are, the better, especially if you sign on with an ARM, or Adjustable Rate Mortgage, which can readjust after a preset number of years. If you can manage to start house hunting during a buyer's market period and you get a pre-approval for a low interest rate with low property taxes, you have hit the homebuyer's jackpot.

Researching Real Estate

During a recession, it is usually a buyer's market, because banks are trying to jumpstart the economy and sellers are struggling with their debts. However, a recession can also cause interest rates and property taxes to fluctuate dramatically, making it a buyer's market one day and a seller's market the next. If you do not read the real estate news regularly, ask your real estate agent what the current market looks like and what the projected market a month or two from now may be. His or her answer will let you know how quickly or slowly you should move on a property.