6 Signs of a Seller’s Markets

Whether you’re a buyer or seller, knowing what type of market you’re currently in will make a big difference in your approach. Obviously, a seller’s market is a good thing for homeowners who are thinking of listing their homes for sale. Buyers, on the other hand, need to go into their homebuying strategy with a little more caution and ensure they’re adequately supported by an experienced real estate team.

Regardless of what side of the real estate coin you happen to be on, here are some tell-tale signs that you’re smack dab in the middle of a seller’s market.

1. Inventory is Tight

Supply and demand play a key role in determining whether or not the market favors buyers or sellers. If supply is short relative to the demand, that’s typically a sign of a seller’s market. The fewer homes on the market, the more competitive it will be for buyers, which means sellers are typically in the driver’s seat.

2. Multiple Offers Are Common

A sure sign of a seller’s market is the frequency of bidding wars, whereby several buyers submit their offers on the same property at the same time. In a multiple offer situation, sellers are often able to get well over the asking price as buyers compete against each other to come out the winning bidder. It’s not uncommon for buyers to find themselves in several bidding wars before finally realizing a successful deal.

If multiple offer scenarios happen more frequently, you can safely assume that the market is in favor of sellers. And as the frequency of bidding wars increases, so do the sale prices. As such, you can expect to pay more for homes in a seller’s market, which brings us to our next point.

3. Prices Are on the Rise

As the demand for homes increases (with a subsequent decrease in supply), so does the price of real estate. It’s the simple law of supply and demand at play that dictates which direction housing prices will go. And in a seller’s market, housing prices and demand tend to follow the same direction.

California’s housing prices have been on a steep incline over the recent past as the perfect storm of high demand and low inventory has defined markets across the Golden State. As such, California is certainly experiencing a strong seller’s market with no evidence showing that it’s running out of steam anytime soon.

4. Sale Prices Exceed Listing Prices

Not only do prices tend to rise in a seller’s market, they can actually push past the actual listing prices. This is typical in a bidding war, as several buyers are trying to outbid each other.

5. Low DOM (Days On the Market)

A good way to identify a seller’s market is by the amount of time it takes for listings to sell. Real estate professionals can access data that tells them the number of days a listing sat on the market before being sold. The fewer the number of days on the market, the more the market is siding with sellers.

It’s not uncommon for listings in a seller’s market to be sold the same day they were listed. Given this information, buyers may often have to make a quick decision on a hot property if homes are being snatched up as quickly as they are listed.

6. Sellers Don’t Offer Incentives

In a buyer’s or transitional market, sellers may often consider offering buyers incentives as a means of encouraging offers, especially if the listings have been lingering on the market. Sellers can offer all sorts of different incentives, such as offering to cover closing costs, throwing in the furniture and appliances, or even offering cash back to pay for any requested repairs.

But in a seller’s market, incentives are rare, if they even exist at all. There’s no incentive for sellers to sweeten the deal if buyers are flocking to their listings. As a seller’s market heats up, incentives are virtually nonexistent.

The Bottom Line

Homeowners obviously want to get the most money when they sell, and a seller’s market is definitely the best and easiest time to do that. In this market, sellers have the advantage of being a little more selective in the offers that come through and can be more demanding with their sale price and terms of their offer. On the other hand, buyers need to be well-prepared when faced with stiff competition from other buyers, as is customary in a seller’s market.

Right now, it’s a great time to be a seller in California. All the signs of a seller’s market are there and have been for quite some time. Whether you’re buying or selling in this particular market, be sure to team up with a seasoned real estate professional who can help you make the most of the housing climate we’re in today.