What Is a Buyer’s Market?

A buyer’s market occurs when an asset’s supply exceeds demand, driving down prices and limiting sellers’ negotiating power. 

Understanding buyers’ markets

During a buyer’s market, supply exceeds demand, giving buyers more control over pricing and terms. It’s the opposite of a seller’s market, when low supply and high demand hands power to sellers instead. 

While buyer’s markets can crop up in any market, they’re generally associated with real estate. Buyer’s market conditions are generally characterized by features like:

• Excess inventory
• Lower-priced homes
• Assets spending more time on the market

As a result, sellers are more likely to compete for buyers by offering concessions, extra repairs or lower asking prices. By contrast, buyers may spend more time seeking their ideal amenities. 

Potential causes of buyer’s markets include:

• Economic recessions that shrink the buyer pool
• Local job market declines leading to more people leaving an area
• Higher interest rates that reduce demand as home loan costs soar
• More new construction projects that increase supply beyond demand

Modern examples of a buyer’s market

The years leading up to the 2008 housing market crash were considered a seller’s market due to low supply and high prices. But after the asset bubble burst, a buyer’s market moved in as sellers lost their negotiating power. 

Buyers began demanding more concessions and homes in better condition. Meanwhile, sellers struggled to shed properties due to weak demand and rampant foreclosures driving down prices. 

How does a buyer’s market affect you?

Buyer’s markets impact buyers and sellers in different ways. Understanding the right preparations makes all the difference in coming out on top. 

Buying in a buyer’s market

• Review your finances and credit report to understand your financial and credit position
• Analyze comparable properties to understand the competition regarding pricing and amenities
• Note a property’s time on the market; the longer a home sits, the more likely a seller will negotiate
• Don’t skip the inspection – they may reveal deal breakers or additional points of negotiation
• Take advantage of your leverage to request:

• Less than asking price
• Seller concessions like closing costs or appliances included
• Necessary repairs or upgrades prior to move-in (or the costs deducted from the sales price)

• Don’t rush into the first house you like – view several properties to get a feel of local prices and amenities

Selling in a buyer’s market

• Do a pre-inspection to identify fixable problems before listing
• Make necessary repairs or upgrades upfront
• Price your home competitively for the existing market
• Budget for concessions upfront, such as closing costs or inspections included
• Consider hiring a realtor to assist in marketing and closing
• Stage your home for the digital age and highlight its competitive advantage
• If you can’t get a favorable price, consider converting your property into a rental or waiting until market conditions favor sellers again

What this means for you

Watching housing market trends is crucial to getting the most out of your end of the bargain. As a buyer, buyer’s markets offer a chance to benefit from excess supply and decreased competition. But selling a high-supply, low-demand market means you may not achieve the profits you hope to see.