One can say that the state of the real estate market, similarly as in the economy, to be driven by supply and demand.
Both will be affected by changes in such factors as the national interest rates, credit availability, state of the overall economy, political (in)stability, to name but a few.
Furthermore, it’s fair to say that the real estate market undergoes cycles as numerous macro and microeconomic forces influence it. If one regards the property market as an old-fashioned scale with buyers on the one side, and sellers on the other, and as the number of buyers (or sellers) changes, the scale will start tipping.
Here’s what you ought to keep in mind:
#1 – Equilibrium/Balanced Market
Remember that a perfect scale, also known as a balanced market or market in equilibrium, is one where there’s a perfect balance between the supply and demand of properties.
In reality, it’ll always be either a ‘green’ or ‘red’ market, and will likely tilt depending which way the economic pendulum swings.
#2 – Seller’s Market
If the demand for real estate climbs quicker than new properties that come onto the market for sale, one refers to it being a seller’s market. There’s a lack of properties to keep up with the demand of buyers (this is where bidding wars take place).
The buyer who has the best offer(i.e. best price and least amount of conditions) tends to be the one willing at the end of the day.
With (national) economic forces reducing the number of buyers, the overall demand for real estate will start to slow down, where the market tends to recognize it’s working towards equilibrium again before it swings to the other end of the scale (i.e. buyer’s market).
#3 – Buyer’s Market
As a quick recap, if the supply of properties on the market is exceeding the demand, you will have entered into a seller’s market. If home buyers are starting to pick & choose from a variety of similarly-priced properties, prices will eventually be driven down; properties listings will take longer to sell, and any offers will come in sizeably below the asking prices.
In a buyer’s market, however, one tends to market-related pricing, and if one’s similar/passionate about selling.
Another great reason why any home seller should set their asking price at the correct level to attract ample of buyer interest, and eventually offers.