What Is a Buyer’s Market?

Buyer's Market Explained in Less Than 4 Minutes

Definition

A buyer’s market occurs when there are more properties for sale than there are buyers to purchase them.

Smiling, embracing couple in front of new home
Photo:

MoMo Productions / Getty Images

Definition and Example of a Buyer’s Market

Having more homes on the market than there are buyers to purchase them results in a buyer’s market. Homes tend to stay on the market for longer when this happens, and sellers must work harder to attract interest from buyers. This means they’re often more willing to negotiate. A seller is more likely to settle for more contingencies and a lower purchase price. They might cover some of the closing costs just to close the deal.

The average time a home remains on the market in a buyer’s market is longer than it is during a seller’s market. Homes spent an average of 25 days on the market before going under contract during a seller's market that occurred in 2020. This was down from 30 days on the market in 2019, according to Zillow. 

Note

The average time it takes to sell varies depending on the market. Location, the time of year, and the availability of properties can all affect these timelines as well.

How a Buyer’s Market Works

Those looking to buy a home are better positioned to get what they want when there are more homes on the market than there are buyers. Sellers are competing for the same few buyers.

A buyer’s market lets the buyer lead the negotiations. They may want to ask for concessions, such as the seller covering closing costs, and additional inspections. These provisions will minimize their out-of-pocket expenses and better vet the home.

Some common concessions to consider asking for include:

  • The seller covering closing costs, such as inspection fees, title insurance costs, and transfer taxes
  • The seller paying for home repairs, such as those found during inspections
  • The seller paying for new appliances, if necessary
  • The seller paying moving costs

Note

The seller will have to negotiate with the buyer and will likely have to agree to some concessions in a buyer's market.

A buyer may also choose to offer less than the list price, especially if the property has been on the market for a significant period of time.

But real estate markets are cyclical. Drastically increased home prices and a surge in home listings during a seller’s market can turn things around into a buyer’s market. 

Buyer’s Market vs. Seller’s Market

Buyer's Market Seller's Market  
Too many homes, too few buyers Too many buyers, too few homes
Sellers are willing to negotiate Buyers are willing to negotiate
Home might sell at or under list price Multiple offers on a home can drive the list price up

The Bottom Line

It may be in your best interest to wait to sell your home in a buyer's market if you can do so. A seller’s market is a difficult time to be a buyer, but a seller could get tens of thousands of dollars above their asking price if they're a seller in a seller’s market.

Key Takeaways

  • A buyer’s market occurs when there are too many homes on the market and not enough demand from buyers.
  • A buyer's market puts the purchaser in a position of power when it comes to home selection and negotiations.
  • Waiting for a buyer’s market may allow a buyer to negotiate the best purchase offer.
  • A buyer’s market usually isn't a good time to sell.

Frequently Asked Questions (FAQs)

How has the ongoing COVID pandemic affected the real estate market since 2020?

The number of homes available for sale had plummeted by April of 2021, according to the Board of Governors of the Federal Reserve System, prompting a seller's market. Home prices soared during the late pandemic as a result. Some of this can be attributed to more people working from home during this time and not being in a position to easily sell and relocate.

Are there any limits to how much sellers can contribute to closing costs as a concession?

Conventional loans can limit a seller's contributions to closing costs to no more than 3% of the sales price, depending on the amount of the down payment. But the limit is 6% for FHA loans.

Was this page helpful?
Sources
The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Real Estate Board of Greater Vancouver. "What's the Difference Between a Buyer's and Seller's Market?"

  2. Zillow. "What Is the Average Time To Sell a House?"

  3. USMortgageCalculator.org. "What Are Seller Concessions and Why Do They Matter When Buying a Home?"

  4. Board of Governors of the Federal Reserve System. "Housing Market Tightness During COVID-19: Increased Demand or Reduced Supply?"

  5. Metroplex Mortgage Services. "How Much Can a Seller Pay in Closing Costs?"

Related Articles