Posted By Alan Donald @ Sep 11th 2009 3:06pm In: Real Estate

Alan Donald

So, you noticed that three years ago, your next door neighbors put their house on the market one morning, and by that afternoon they had multiple offers to choose from. Now you have been trying to sell your home for eight months and there's just no action...!

The real estate market is unpredictable in the short term, since many factors (like interest rates, the amount of new homes being built and the economic health of the area) come into play. In the long term, the real estate market behaves just like other economic markets. It is a cyclical market (and in many places also seasonal). And it is driven by underlying supply and demand.

In a strong seller's market (defined as one with less than three months' inventory), there is more demand that supply, prices escalate and buyers get into a "feeding frenzy" trying to purchase the few homes that become available. Pricing is important but not critical (if you price your home too low, buyers will push it up through multiple offers. If you price it too high, it's a matter of waiting a little until prices catch up and it will sell).

When prices (especially for entry level homes) rise too fast and reach a certain point where people just cannot afford to buy, inventory starts building up the whole chain, from the cheapest to the luxury homes. If a market has more than six months' inventory, it becomes a "buyer's" market and sellers who are serious about selling need to re-think their strategy. Buyers have so many options to choose from within a narrow price band, that they can afford to be picky, act slowly and deliberately, and demand VALUE.

Markets shifts can occur very quickly - you can count on your REALTOR to give you sound advice on what phase the market is on, and recommend effective strategies that apply to this cycle. Sellers can only control CONDITION, AVAILABILITY and PRICE. You have to realize that in a "buyer's" market such as the current one, you are effectively in the unappealing combination of a BEAUTY CONTEST and a PRICE WAR. Homes have to shine and ALSO be perceived as offering better value than the competition in order to attract active buyers and ultimately sell.

Share on Social Media:

Comments have been closed for this post.
Please contact us if you have any questions or comments.