What does it mean to ask this question when investing in real estate?
Asking whether a market is a buyer’s market or seller’s market is important when investing in real estate because it allows you to set your expectations, whether you’re buying or selling a real estate property, and to determine the price range that you should ask for when buying or selling the property.
Whether a market is a buyer’s market or seller’s market can be determined using the data that you’ve gathered about your market during your market research. As the name suggests, if you’re a real estate investor and you’re looking to buy an investment property, searching in a buyer’s market will give you an advantage. If you own a property and you want to sell it, on the other hand, you will have the upper hand if you’re in a seller’s market.
Note: To learn more about all aspects of real estate investing, continue reading our blog.
What Is a Buyer’s Market?
What does it mean when someone says it’s a buyer’s market?
Generally, a buyer’s market is a real estate market where the supply is higher than the demand. In a buyer’s market, property buyers will have more control over the prices because they have more options available to them, while property sellers have to compete to sell their homes in a market that is overflowing with them.
In order for sellers to compete in a buyer’s market, they would have to list their properties at competing prices that are generally lower in order to sway buyers into purchasing their house. Property buyers, on the other hand, will have the advantage of negotiating the prices and offering lower prices for purchasing the property.
What Is a Seller’s Market?
A seller’s market is the opposite of a buyer’s market.
In a seller’s market, the property supply is lower than the demand, and sellers have more control over the prices of properties.
Buyers who are looking for properties in a seller’s market will have to offer higher prices in order to compete with other buyers, and sellers will have the option to decline an offer that they consider to be too low, which might cause buyers to lose the opportunity to buy the property that they desire.
For this reason, in a seller’s market, property buyers have to be more careful when offering their prices as well as setting their expectations.
Sellers will also have an advantage in that properties sell much faster in a seller’s market due to the higher demand.
Related: The 10 Best Real Estate Markets to Invest in the US for Price-to-Rent Ratio
Is Today’s Market a Buyer’s Market or Seller’s Market?
Generally, today’s market is a seller’s market. Most of the metro cities in the US have an increasing demand for homes and a limited supply, giving the advantage to home sellers.
This, however, can change depending on the season. Typically, the real estate market can turn into a buyer’s market or seller’s market throughout the year. In general, home sales increase drastically during the summer season, which is when the real estate market typically turns into a buyer’s market, while it is usually considered a seller’s market during the winter.
Although the US housing market as a whole can be considered a seller’s market at the moment, it doesn’t mean that there aren’t any great options for real estate investors looking to buy a property in a buyer’s market. In fact, some of the most attractive options for investing in real estate are currently a buyer’s market.
So, let’s take a look at 3 of the top performing buyer’s market or seller’s market cities in the US:
Houston, Texas – Is It a Buyer’s Market or Seller’s Market?
Mashvisor’s stats for Houston, Texas:
- Median price: $350,899
- Median traditional rental income: $1,965
- Median Airbnb rental income: $556
- Average traditional cap rate: 2.39%
- Average Airbnb cap rate: -0.22%
As you can see, the traditional rental income and cap rate in Houston are relatively low. In fact, there are several great options for investing in rental properties and making more profits than in Houston.
This is generally because Houston is a buyer’s market. This means that it is more affordable for people to buy homes than to rent them, causing the rental rates to go down.
However, since Houston is a buyer’s market, it can be a great investment opportunity to purchase investment properties in Houston and wait until the market turns into a seller’s market before you start renting them out as the rental rates will increase when that happens.
Here are some additional stats related to Houston, Texas, being a buyer’s market:
- Sale/listing price difference: -$15,982
- LTV: -7.83%
- Listed inventory: 1,523
- Days on market: 98
- Rental cost change: $31
Related: Best Places to Invest in Real Estate: 7 Cities with Highest Returns
Miami, Florida – Is It a Buyer’s Market or Seller’s Market?
Mashvisor’s stats for Miami, Florida:
- Median price: $400,708
- Median traditional rental income: $2,363
- Median Airbnb rental income: $2,774
- Average traditional cap rate: 1.82%
- Average Airbnb cap rate: 3.11%
Although Miami is considered a buyer’s market at the moment, the rental rates remain very healthy, especially for Airbnb rentals.
This is due to the high amount of tourism and the number of travelers who go to Miami for short stays. The high rental rates in Miami, combined with the fact that it’s a buyer’s market, make it an excellent choice for real estate investors to purchase properties and start renting them out right away.
Related: The 7 Best Places to Buy a Vacation Home in Florida
Here are some additional stats related to Miami, Florida, being a buyer’s market:
- Sale/listing price difference: -$26,998
- LTV: -6.49%
- Listed inventory: 9,961
- Days on market: 115
- Rental cost change: $41
San Francisco, California – Is It a Buyer’s Market or Seller’s Market?
Mashvisor’s stats for San Francisco, California:
- Median price: $1,586,952
- Median traditional rental income: $4,533
- Median Airbnb rental income: $4,991
- Average traditional cap rate: 0.95%
- Average Airbnb cap rate: 1.34%
Just by looking at the median price of properties, you can immediately tell that San Francisco is a seller’s market, and has been for years.
Due to it being a seller’s market, both property prices and rental rates have gone up exponentially, making San Francisco one of the most expensive cities for buying or renting properties in the US.
Here are some additional stats related to Miami, Florida, being a seller’s market:
- 2012 share of sales above listing price: 43%
- 2017 share of sales above listing price: 64.5%
- Median amount paid over the listing price in 2017: $41,000 (6%)
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In Conclusion – Is It a Buyer’s Market or Seller’s Market?
The US. housing market 2018 looks like a seller’s market up to this point. However, the market is expected to turn very soon at the beginning of the summer season, turning several of the current seller’s markets into buyer’s market.
As a real estate investor, you will want to identify the best markets to purchase investment properties in once they become buyer’s markets to take advantage of the lower prices that you can get, and then wait until they are seller’s markets again to start renting out and take advantage of the higher rental rates. This is, in essence, how you take advantage of the seasonal changes between buyer’s markets and seller’s markets when investing in rental properties for profits.
Looking for a place to start searching for and researching the markets? Use Mashvisor to gain insights on investment properties that you can purchase during the summer season and turn into rental properties during the winter season to achieve the highest returns.