Real estate is a safe investment. The average return-on-investment for housing and property is just a little over 10% annually. This is with risks and other hedges calculated into the average.
That’s a pretty sizeable return, even compared to far riskier assets, like stocks and options. But with real estate, there’s a cycle that’s weighed into your risk. A certain push and pull between sellers and buyers.
If you’re interested in buying a house at the right time, look out for these signs of a buyer’s market.
- Count the Number of Signs (Literally)
A buyer’s market is practically distinguished by an overabundance of supply. Meaning, there’s a surplus of people selling their homes and fewer looking to purchase them.
This creates an advantageous position for buyers. Any time a supply of a good exceeds its demand, the purchasing power lies in the hands of the consumer. That, by definition, makes it a buyer’s market.
So, if you start seeing more “for sale” signs in your area, it’s likely a buyer’s market.
- Look at Your Watch
When there’s a buyer’s market, there’s going to be too many houses for sale. More houses are tantamount to more choices for a buyer.
After all, why settle? A house is a huge purchase, you’d like to look around before committing.
This creates a sludge-like delay for sellers.
A good indicator you’re in a market that’s catered toward buyers is the average time on the market for houses. The longer on the market, the deeper in the buyer’s cycle.
- A Wounded Price in a Buyer’s Market
As the demand for houses shrinks in comparison to its excess supply, there’s a huge impact on prices. Think of it like this: nobody wants to pay an absurd price for something so abundant. That’s the general cornerstone of economics and real estate – scarcity sells.
Check prices of houses for sale. Have they been butchered? Then you’re likely in a buyer’s market.
The price accommodates the environment.
- Incentive This!
Look for incentives from real estate companies and sellers. Snicker in their defeat (if you’re a buyer, of course).
When they start offering “closing costs this, rebates that” – they’re showing you their cards. They need to unload the houses they have to sell, and this is their way of doing that.
Use their tell callsign to your advantage.
- Watch Out for Tricksters
Another tactic that realtors use to influence the market is to take the house off the market and relist it. They hope you don’t read more into this, but you should.
This resets the date that it was listed — it effectively mitigates the time delay discussed earlier. Look out for this. If a house is listed multiple times (along with others), then you’re in a buyer’s market.
The real estate market is dictated by a cycle of sellers and buyers. There are key indications that’ll determine which end of that cycle we’re in.
A buyer’s market is just another way of saying “surplus of housing.” Look for indicators of an excess of supply. These signs include incentives, time on the market, and an overabundance of housing listings.
Interested in learning more about real estate? Check out our other articles on how to gauge the market.