You hear it on the news all the time: ”It’s a buyer’s market,” “It’s a seller’s market,” “The ‘bubble’ is going to burst” or “The housing market is on the rebound.” And while you probably get the gist of what these folks are talking about, having a deeper understanding of the St Pete housing market and how it works can help you immensely during the home-buying or selling process.
Let’s start with the basics
The housing market refers to the general market of houses being bought and sold between buyers and sellers. These houses are either bought or sold directly by owners or indirectly through brokers. Like any market, the housing market is governed by the law of supply and demand. When demand is high and supply is low (Seller’s Market), the market appreciates. When demand is low and supply is high (Buyer’s Market), the market depreciates.
Obviously, if you are looking to sell your home, you would want a seller’s market, but if you are planning on selling your home and buying a new home, then a buyer’s market may benefit you on the purchase. So if you are planning to sell then buy, there really isn’t a bad market to do this in.
Now if you are just buying, or just selling, the current market could definitely play to your advantage, but this doesn’t mean that you should wait for a shift one way or the other to buy, or sell. Shifts can take many years to happen, so the benefits you will receive from waiting, may not outweigh the costs of doing so. They say that the best time to plant a tree was 10 years ago, and the second best time to plant one is today. This is the same for real estate.
How inventory affects value
In the real estate industry, we think of supply and demand in terms of available inventory. You can measure inventory by answering the following question: At the current pace of sales, how long would it take all of the houses available on the market to be sold? As inventories rise, home prices tend to decline. This is because as inventories rise, so does the competition among sellers, which drives prices down.
From a buyer’s perspective, inventory will drastically affect your choices. The higher the inventory the more discerning you can be with your list of must haves and nice to haves, not to mention you will get more house for your money due to the competition of the sellers. On the flip side, a low inventory obviously limits your options and may not afford you the same level of discernment as high inventory. You may find that in order to the house you want you may have to pay more, or you will have to sacrifice some of your must haves and nice to haves.
The difference between a buyer’s and seller’s market
A buyer’s market is associated with longer inventory periods. As homes sit on the market for longer and longer, sellers become more and more flexible with their prices. This is great for buyers, as they usually end up getting a good deal (hence the term “buyer’s market”). In contrast, a seller’s market is associated with shorter inventory periods. Homes sell rapidly, giving sellers a lot of pricing power (hence, it’s a “seller’s market”), this is the market in the Salt Lake area, at the time this was written.
Keep in mind that, as with other markets, the St Pete housing market is cyclical: There are periods of rapid appreciation followed by periods of stabilization or depreciation. By studying the market, you can learn to foresee such trends in St Pete.