It’s a Seller’s Market. No, It’s a Buyer’s Market

financial issues

We have been talking for quite some time about the seller’s market in Carlsbad, and in San Diego in general…indeed much of the country.

So what does that really mean?

The housing market is all about supply and demand. Both vary over time, sometimes dramatically, for a host of reasons. Simply put, when the housing supply is not sufficient to meet the buyer demand, we have a seller’s market…i.e., a market that favors sellers as far as pricing, competition, marketing time, and other issues. Houses sell quickly, there are often multiple offers because of competition, there is little room to negotiate, and sales prices commonly are at or above asking price. And average housing prices appreciate during sellers’ markets (as they have been doing for quite some time).

The opposite is the case when there are more homes for sale than buyers who want to buy them. Homes languish on the market, sometimes for months, and we see more price reductions as sellers try to appeal to the buyer pool. Typically home prices are negotiated below asking price, sometimes significantly, because there aren’t enough buyers to eat up all the inventory, and average home values often depreciate. Buyers know they are more in control in this type of market.

The reality is that while the OVERALL trend in a particular housing market may favor buyers or sellers, in truth you can have a buyer’s market AND a seller’s market happening at the same time, and even a balanced or normal market.

One of the truisms is about real estate is that it is local. While the media often talks about the overall housing market, what really matters for buyers and sellers as far as market conditions that impact buying and selling is what’s going on at the local level.

Local could mean a particular community, a certain neighborhood, a particular price range or a style of house. This is why talking with a Realtor is important for buyers and sellers in order to understand the local market conditions AND how they impact buying and selling, and not paying attention to the general reports the media shares.

Here are a few examples.

I just looked at the housing market in Carlsbad. Overall, it is a market favoring sellers because of low inventory and strong buyer demand. Indeed, for both attached and detached homes we have about 2.1 months of inventory – at the current rate of sales that inventory would be gone in 2.1 months if no more housing came on the market. In general a sellers’s market is 5 months or less of inventory.

However, you see more differences when you look at price points. For example there is less than 1 month of inventory for detached single homes priced under $750,000. But the market strongly favors buyers of homes priced at $2,000,000 or more (it’s common to see the high end market favoring buyers rather than sellers). The market for attached homes (condos, townhomes, twinhomes) also strongly favors sellers for homes priced under $750,000.

Looking at just townhomes, we see that for homes under $750,000 the market is favoring sellers based on supply and demand (2.4 months of inventory), but it is slightly in favor of buyers when you look at the market for townhomes priced in the $750,000 to $1,000,000 range, at 7.1 months of inventory.

The housing market varies by community, too. In Rancho Santa Fe, not surprisingly given the prices, the market for detached single family homes there strongly favors buyers, with 11+ months of inventory. In contrast the attached home market there is currently balanced or normal, at 6 months (6 – 7 months of inventory is considered a balance or normal market).

The San Marcos and Oceanside housing markets have even less inventory compared to buyer demand than Carlsbad (less than 2 months of inventory), not surprising given the overall lower average price of homes in these communities, both detached and attached.

If I can answer any questions about the housing market please let me know (760-840-1360) especially if you are considering buying or selling. It’s important to understand these local market conditions as they impact buyers and sellers in different ways.