Posted By Alan Donald @ May 16th 2009 1:45pm In: Real Estate


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 six 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, because if you price a home too low, the buyers will push it up through multiple offers.
Then prices (especially for entry level homes) reach a certain point where people just cannot afford to buy, so inventory starts building up.

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. Sellers can only control CONDITION, AVAILABILITY and PRICE. Homes have to shine and be perceived as offering better value than the competition to get buyers' attention and ultimately sell.

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.

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