What is a “Balanced” Real Estate Market
Today we tackle the “balanced market“, which is considered to be an overall real estate market that does not favor the buyer or seller dramatically.
Statistically speaking there are 2 ways to describe a balanced market,
- It is a market where homes are taking an average of 90 – 180 days (3 to 6 months) to sell
- Or a market where 40% to 60% of new listings in any given month sell.
Both definitions boil down to how quickly the inventory (all the homes for sale) are getting sold.
Home Prices in a balanced market tend to increase slowly and steadily, sometimes appearing flat.
One important note: is that an overall balanced market is really composed of several various markets, like this image of some teeter totters. Some areas or neighborhoods may be experiencing down markets while others are up (HOT!) but overall the market (or teeter totters) average out to a balanced line.
Balanced Real Estate Markets
When markets are balanced. Typically, interest rates are affordable and the number of buyers and sellers in the marketplace are equalized. The scales don't tip in either direction, meaning the market is normal without experiencing volatile swings.
Signs of a Balanced Market
- Inventory is normal as compared to previous normal months / years.
- Three to six months of inventory is on the market.
- Comparable sale prices are close to active listing prices.
- Sales numbers have stabilized.
- Median sales prices are flattened.
- Real estate advertising remains uniform.
- For Sale signs are replaced with pending or sold signs within 30 to 45 days.
In a balanced real estate market, neither the buyer nor the seller gets any favor from the market so buying and selling becomes difficult when the market is balanced. Therefore in a balanced market, the buyers and sellers must adopt a different approach to buy or sell homes.
Tips to follow for buying or selling of home in the balanced market
While more balance is a good thing, you still need to know how to navigate the changing real estate market.
- Don’t wait to buy. If you’re ready to move and you’ve found the house, jump on it. Mortgage interest rates are predicted to rise above 5% in 2018 and near 6% by early 2019.
- Closing quickly will be important. With volume still low and prices slowly rising, sellers aren’t as desperate to sell their homes, but you must compete with other buyers.
- Make a realistic offer on a house. There’s enough demand that the seller won’t be desperate to take whatever you offer, so research and let your agent be the expert.
- Remodeling could be a good idea. Some modest improvements could significantly boost your home’s value. Brokers can help spot hidden gems!
- Accurately price your home the first time. It doesn’t matter what you think or feel your home is worth or how much you’ve put into it. Buyers are more educated these days; don’t waste your time or theirs by fighting for an unrealistic price. Ultimately, all that matters is what the home appraises for.
How To Buy A Home In A Balanced Market
There are some instances in which the housing market may be in an equal balance between sellers and buyers. Both could have an advantage and you need to know how to buy a home in this type of situation. When the market is balanced, a home buyer could still get the options that they want with a home. In your offer, you should put down terms that are going to benefit you from the start. This does not mean that you should go crazy with your request but make them reasonable instead.
The Basics of Inspection
Home inspections are an important part of real estate transactions. They provide legal protection for the buyers, sellers and Agent/Brokers…. Waived inspections will become less common.
Ask for a Price that Works for You
Even with the market being balanced, you can still ask for the price that you want. It never hurts and so long as it is not too low, you can continue negotiations with the seller if they are interested. Always have backup offers waiting, especially in a balanced market. This way, you can be ready if the seller turns down the first offer.
Be Prepared to Split Closing Costs
As far as closing costs, this is one of those situations where everything may have to be split up equally. Since the balanced market is advantageous to both the seller and the buyer, most will often agree to split the fees equally between both parties.
- In a balanced real estate market, you can expect a few things to happen like "normal." Get an inspection, offer a fair price that you can pay, and prepare yourself to share or pay the closing costs, depending on the situation.
- For Buyers, after years of rapidly escalating prices, you’ll have a chance to buy your dream home and be less likely to be drawn into a bidding war.
- For Sellers: Just look back at where your home’s value has come from over the last 3 years. You rightfully should be amazed at the increase, but understand that prices couldn’t realistically keep going up at that pace. Enjoy the new-found equity and understand that modest and sustainable property value increases will keep us from having another market correction like what happened back in 2007 -2011.
- And For Real Estate Agents/Brokers: Confidence is key!
As Brokers we often want to hedge our bets and say “the market sets the pricing” and finagle around saying that we need to look at the market statistics, blah, blah, blah.
Potential sellers don’t care about all that, they just want to know what their home is worth.
In a balanced market you really need to have full understanding of your market and convey confidence in your pricing opinion.
You also need to accurately portray the days on market, what to expect an offer to look like, and be confident in your assessments.
For many of you this will be your fist balanced market.
From the crash of late 07 – late 2011, and then to a rapidly escalating market from 2012 until now we haven’t had a truly balanced market in 11 years.
So, trust me; you can have amazing success in a market like this and build a wonderful and steady business.
It’s also in a market like this that all of our investment in technology from the Personal Property Websites, Smart Search, Marketing Boards, Syndication and our PRIME marketing program that you can really make you shine.
Agents that just throwing up a sign and crappy pictures are going to be in for a rude awakening, and as prices slow their upward momentum our value proposition becomes even more attractive…
So, in a nut shell we are perfectly poised to truly Succeed in this Balanced Market!
The Cascade Team provides a full service experience that is a step above; by executing a marketing plan for your home that is technology rich and high in service. We leverage all available technology tools to provide the most exposure possible for your home, and utilize those tools to increase the communication and service to you our client.