Determining the Local Housing Market: Buyers or Sellers Market

If you’ve been toying with the idea of selling your home, but aren’t yet sure if you’re ready to take the plunge, there’s one major factor that can help you make your decision: the state of your local housing market. Being in a buyers market or a sellers market can make a big difference in the length of time it takes to sell, the number of offers you get, and how much you can sell your home for. Here’s how to determine if it’s a good time to sell your home.

What is a buyers market vs. a sellers market?

What is a buyers market?

In a buyers market, there are more homes for sale than there are buyers in the marketplace, so the housing market is favorable to buyers (unfortunately for sellers!).

What is a sellers market?

In a sellers market, there are more buyers looking for homes than there are homes available. This type of housing market is favorable to sellers, as you’re more likely to receive multiple offers — sometimes above your asking price.

How do I determine the current housing market conditions in my area?

Consult with a local agent: Agents make it their business to know a given area's real estate trends, and they can share their expert opinion about market conditions. They'll also advise you on how your home fits into the local market and improvements you can make to ensure your home shines compared to its competition. Zillow's directory of real estate experts is a great place to start if you're still looking for an agent. View agents' current and past listings to see if they're experienced selling a home similar to yours.

Check available inventory: Real estate inventory can vary not just from state to state but from ZIP code to ZIP code, so it’s important to look at what’s available at a local level. Essentially, it’s a sellers market if the local inventory is sufficient for less than five months’ worth of sales. With between 5 to 7 months of inventory, you have a balanced market, which favors neither buyers nor sellers. Anytime you have more than seven months’ worth of inventory, you are firmly in buyers territory. 

To determine inventory in your specific area, take the number of houses for sale and divide by the number of sales in the past 30 days. So if there are 10 houses for sale in your area and only one sale in the last month, that’s 10 months of inventory and a buyers market. But if there were 10 houses sold, that’s one month of inventory and a sellers market.

For help finding this data, visit Zillow Research, scroll to “Home Listings and Sales” and select the dropdown for “Monthly Home Sales.” It will provide a download with information for your local area.

Pay attention to price cuts: If you're browsing listings in your area and notice that many sellers are cutting their prices, that could be a sign of a buyers market.

Check out real estate comparables: Comparables are recent sales in your area of homes that are similar to yours, in terms of location, age, size, and number of bedrooms. Looking at comps in your area from recent sales can give you a feel for the health of the market. What are other houses selling for in your neighborhood? If housing comps are selling for their asking price (or above), you’re in a sellers market.

Note the length of time homes sit on the market: Drive around your neighborhood and note the addresses of a few new listings. Then, watch them on Zillow. Are they still listed as “Active” after a few weeks? Or do they go “Pending” quickly? The faster they go under contract, the more likely your home will, too.

Follow trends in home price sales: Are prices increasing or decreasing in your area? If prices have been rising in the last few months (and if they’re projected to keep going), hello, sellers market.

See how many distressed properties are on the market: Distressed properties are homes that are under foreclosure, short sale, or going to auction. The volume of distressed properties is a good indicator of the health of your local market. The fewer distressed or bank-owned properties on the market, the better the position you're in. 

Follow interest rates: Lower mortgage interest rates allow more buyers to enter the marketplace (which is good for sellers). When rates are high, more buyers are priced out of the housing market.  Interest rates for 30-year fixed mortgages have been at historical lows during the pandemic, allowing many first-time home buyers to enter the game. Check online or keep an eye on financial headlines to watch for signs of rates increasing.

How to use market conditions to determine property value

Once you know if you’re in a buyers or a sellers market, you can start figuring out how much you may be able to sell your home for. When you start talking to a real estate agent or when you begin doing your own local housing price research, you’ll want to know the answers to these questions:

What is fair market value?

The fair market value of your home is the price your home would sell for in the current local real estate market. This number takes into consideration the health of the real estate market in your area, as well as local housing prices, and assumes that both the buyer and seller are knowledgeable, willing, and not under any unreasonable pressure to make a deal.

What is a Zestimate?

Your Zestimate is Zillow's take on the estimated market value of your house, computed daily based on millions of data points, including comparable sales data. You'll notice that your Zestimate fluctuates with the market over time, which can be exciting (or not so exciting) depending on whether you're in a sellers or buyers market. To make sure the Zestimate captures all that your home offers, claim your home and make sure the property details are updated and accurate.

When should I call in an expert?

If you’re getting serious about selling, it can be valuable to hire an experienced local appraiser to give you an objective, professional report on the value of your home. It costs $500 to $700 and can go a long way toward helping you choose the right listing price.

Should I sell my house in this market?

On a national scale, homes are selling extraordinary fast in 2021, but inventory is at a record low. Locally, your considerations might be different. 

Selling a home in a sellers market

Pros

Move fast: Simply put, you’ll sell your house faster than you would in a buyers market.

Negotiation power: When inventory is tight, you have the upper hand in negotiating with potential buyers.

Bidding wars: While not a guarantee, you’re more likely to receive multiple offers that could drive the price up.

Cons

Risk of stale listing: In a fast-paced market, everyone knows that the best houses sell quickly. If your home doesn’t generate interest right away, your listing can quickly lose appeal.

Less leeway when a deal falls through: In sellers markets, deals can fall apart due to high appraisals. Buyers can be skeptical of homes that don’t sell quickly, and may wonder why your home is back on the market.

Selling a home in a buyers market

Pros

Time to prepare for your move: In a sellers market, you can be caught off guard by how quickly you have to be out of your home. Sometimes, a little extra time to pack is nice.

Competing against distressed properties: In a buyers market, there tend to be more foreclosures and short sales listed, many of which have been stripped down and are sold as-is. Your well-maintained, non-bank owned home may look a lot more attractive to buyers who want a smooth transaction.

Cons

Lots of competition: When you’re up against many other similar listings, you’ll have to put in more effort to make your home stand out against the competition.

Slower sales: If you need to sell your home in a hurry, a buyers market can be a challenge, as it can simply take longer to find that right offer.