Everything You Need to Know About Buyer’s Markets
The Lighter Side of Real Estate • June 12, 2023
The past few years have been tough for buyers. With more buyers on the market than homes, properties have been selling quickly and for high prices — often above asking.
In other words, we’ve been in a seller’s market.
But we won’t be in a seller’s market forever; eventually, the market will shift and we’ll be back in a buyer’s market, and if you want to be successful (as a buyer or seller), you need to understand what that entails.
A recent article from realtor.com outlined the ins and outs of buyer’s markets, including:
- What is a buyer’s market? As the name suggests, a buyer’s market is a market that is more favorable to buyers than sellers.
- What are some of the benefits of a buyer’s market? In a buyer’s market, buyers tend to hold more power, and can typically negotiate a better deal on their home purchase, whether by getting a better price, or getting more favorable terms like choosing their ideal closing date. It can also be less fast-paced, so buyers have more time to look for a home and don’t have to rush as much to make an offer. (Although, a well-priced home that appeals to one buyer will likely appeal to others, so there can still be bidding wars, and you shouldn’t wait too long to make an offer on a house you like even in a buyer’s market!) There is often more inventory to choose from as well, giving you more houses to choose from.
- How can sellers best navigate a buyer’s market? If you’re trying to sell your home in a buyer’s market, you want to do everything you can to make your home appealing to buyers. Get professional photos taken and, if possible, make sure your home is move-in ready when you list. If it isn’t, be prepared to offer some concessions to sweeten the deal, like covering closing costs.
Share this post
Imagine you had to become a real estate agent tomorrow and help someone buy a house from start to finish. Think you’d know everything you need to know? Even if you feel pretty confident, there’s a good chance you’d run into a bit of a learning curve. There are a lot of moving parts in a real estate transaction, and most of what people know about the process tends to come from bits and pieces they pick up along the way. So it’s not all that surprising that, according to a recent survey from HousingWire , about 85% of homeowners said they wished they knew more before buying. Most of them probably did some homework and learned a lot as they went. But looking back, they realized there were things they would’ve liked to understand ahead of time. One of the biggest takeaways from the survey is that 13% of respondents believed they needed a 20% down payment to buy a home. That’s kind of surprising when you consider how often this topic comes up. It’s something agents talk about all the time, post about on social media, mention in conversations… to the point where it starts to feel like common knowledge. But clearly, it’s not something every home buyer (or potential home buyer) knows. So if you take nothing else away from this article, just know that you likely do not need 20% down to buy a house. Why Do People Still Think They Need to Put 20% Down? Years ago, putting 20% down was almost always required. Lending guidelines were tighter, loan options weren’t as flexible, and in many cases, that was just what buyers were expected to bring to the table. Over time, loan programs evolved, new options became available, and buyers started purchasing homes with far less money down than they used to. But somehow the idea that you need a 20% down payment never entirely went away. Part of that is likely because it’s still the benchmark for avoiding private mortgage insurance (PMI), which can lower your monthly payment. So it can come across as somewhat of an ideal thing to do. In reality, though, most buyers are putting down quite a bit less. In fact, the survey found that 72.6% of respondents put down 10% or less when they purchased their home. That Belief Could Be the Only Thing Stopping You From Buying a Home Based on those numbers, it’s pretty clear that a lot of buyers do figure out at some point that they don’t actually need 20% down. They get into the process, start asking questions, talk to the right people, and somewhere along the way, that misconception gets cleared up. But what if you never get that far? While plenty of buyers eventually learn they don’t need as much for a down payment as they first believed, there are likely a lot of potential homeowners sitting there thinking they need to hit that 20% mark before they can even start the conversation. Maybe you’re actively saving and assuming it’s going to take years. Or maybe you’ve just written it off altogether and figure it’s not even worth exploring yet. And if that’s the case, that belief alone could be the thing holding you back from finding out what’s actually possible. The reality is, what you qualify for depends on a lot of variables—income, credit, loan programs, and more—but the only way to really know is to explore it. That’s where talking to a real estate agent can make a big difference. They can help guide you, connect you with the right professionals, and walk you through not just down payment options, but the entire process. Don’t feel like you need to wait until you’re “ready” or have a full down payment saved before reaching out. The earlier you start the conversation, the better. Even if buying a home is just something you hope to do someday… that day may be sooner than you think. The Takeaway: A recent survey found that most homeowners wish they had known more before buying. One of the biggest misconceptions was about down payments. A surprising number of people still believe they need 20% down, even though most buyers are actually putting down far less. While plenty of buyers eventually learn they don’t need as much for a down payment as they first believed, there are likely a lot of potential homeowners sitting there thinking they need to hit that 20% mark before they can even start the conversation. If that sounds familiar, it may be worth reaching out to an agent and starting the conversation sooner than you think. You don’t need to have a down payment fully saved before reaching out—and you might even find that buying a home is more within reach than it seems.
more than 2 in 5 homeowners say they’ve renovated their home in the past year...
If you’ve been wishing you could buy your first house, there’s a good chance the headlines are making you feel like it’s probably close to impossible. And to be fair, it’s not easy for a lot of first-time buyers who don’t have the advantage of equity from a previous home. Prices have gone up. Rates aren’t what they used to be. And rent hasn’t exactly been giving anyone a break either, which can make saving for a down payment feel like an uphill battle. It’s also pretty rare to hear anything that pushes back on that perspective. The overwhelming message is that housing is unaffordable, that first-time buyers are getting squeezed out, and that something needs to change to make it more accessible. So even if you’re doing pretty well financially, it’s not surprising if it still feels like buying a home is out of reach. It’s easy to assume you’re not in a position to buy simply because it feels like no one is. But it might not be a bad idea to test that assumption. Why It Might Feel Like You’re Further Behind Than You Are A recent article on Realtor.com touched on something called money dysmorphia. It’s a pretty simple idea. It’s when your perception of your financial situation doesn’t quite line up with reality. In other words, you might be doing better than you think, but it doesn’t feel that way. And that feeling can be influenced by a lot of things: What you see your peers posting on social media. What you hear from friends or coworkers. Or perhaps the constant stream of headlines talking about how expensive homes are. It can create this sense that everyone else is either way ahead of you… or that nobody can afford anything at all. On one hand, it can make you feel like you’re falling behind compared to what you see others doing. On the other hand, it can reinforce the idea that buying a home just isn’t realistic right now… even if your situation might suggest otherwise. Most people probably aren’t even aware that’s happening to them, so they don’t really question it. But now that you are, here are a few questions you might want to start asking yourself. Is it possible I’m actually in a position to buy a home? It might sound like a simple question, but it’s one a lot of people never seriously ask. If you’ve already assumed the answer is no, you may be skipping over the possibility that things aren’t as out of reach as they feel. What’s the worst that could happen if I try to find out? You’re not committing to anything by exploring your options. At worst, you confirm you’re not quite ready yet. At best, you realize you’re closer than you thought. What would I need to do to get a clear answer? This usually isn’t as complicated as it sounds. A quick look at your finances and a conversation with a lender can give you a much more accurate picture than guesswork or headlines. What if the answer is yes? That doesn’t mean you have to rush out and buy something tomorrow. It just means you have options—and you can start thinking about timing, strategy, and what makes sense for you. What if the answer is no? Even if you aren’t in a position to buy a house, at least you’ll get a feel for what you need to do to get yourself in a position to do so. Whether it’s saving a bit more, paying down debt, or improving credit, you can move forward with a plan instead of an assumption. Once you’ve worked through those questions, there’s really only one way to find out where you stand… and that’s to speak with a mortgage professional. Ideally, you’ll want someone who works with first-time buyers and is willing to walk you through things without making it feel overwhelming. They can guide you through the pre-approval process, which will give you a clear picture of whether you’re currently in a position to get a mortgage—or what you need to do to get there. A great way to find the right mortgage professional is to ask a local real estate agent for a recommendation. And while you’re at it, starting a relationship with an agent isn’t a bad idea either. Whether you’re ready now or further down the road, they can be extremely helpful in getting you from where you are today to where you want to be. The Takeaway: If you’ve been feeling like buying your first home is out of reach, you’re not alone. Between rising prices, higher rates, and constant headlines about affordability, it’s easy to assume it’s just not possible right now. But sometimes that feeling has just as much to do with perception as it does with reality. Due to something called money dysmorphia, it’s easy to underestimate where you stand financially, or assume you can’t afford something without ever really looking into it. Having a quick conversation with a mortgage professional can give you a much clearer picture. You may find you’re closer than you think… or at least know exactly what steps to take to get there.
