Facebook Pixel

What Makes Up a Buyers’ Market?

By Mike in Home Buying Tips with 0 Comments

Because the value of real estate is closely tied to overall economic conditions, housing markets are prone to fluctuations. In the case of downtown San Diego real estate, a market dominated by condominiums, lofts, and penthouses, conditions have been favoring sellers for a few years, but certain trends are tilting the scales to the benefit of buyers. As of January 2019, it may be premature to refer to downtown San Diego as a buyers’ market. However, things are going in this direction. To recognize when the housing market is considered a buyers’ market, it helps to understand the following factors.

Definition of a Buyers’ Market

The reason San Diego has been called a sellers’ market since about 2016 is because condo prices have been on the rise at the same time prospective buyers have greatly outnumbered available listings. A buyers’ market is the opposite: prices stay at relatively low levels at a time when plenty of listings come on the market. Supply and demand are the base parameters, but there are many other aspects to consider when it comes to regional real estate markets. Although buyers’ markets usually occur when economic conditions deteriorate, this isn’t written in stone.

Price Appreciation

This parameter, which has been a strong driver of the downtown San Diego sellers’ market, is actually slowing in 2019 and could mark the beginning of a buyers’ market. Real estate value appreciation is driven purely by how much buyers are willing to pay. In September 2018, the Real House Price Index, published by the First American Financial Corporation, indicated that national prices had ceased to appreciate on a year-over-year basis. In San Diego, 20 percent of listings had adjusted their prices downward.

Housing Inventory

When the number of available properties in a market can accommodate demand, conditions will favor buyers as long as homeowners pay attention and decide to put their homes up for sale. Housing inventories may become strained by more than just demand. If there’s a labor shortage in the construction sector, new units will take longer to build. Downtown San Diego condos present a challenge because new units must be vertically developed, which means a buyers’ market is more likely to happen with deep price cuts than with new construction.

Months of Supply

Real estate analysts are fond of counting months of housing inventory for the purpose of calling it a buyers’ market. Let’s say 100 condos are listed for sale in Little Italy. If 25 units sell in a month, this would suggest a four-month supply, thereby signaling a sellers’ market. If only 9 sellers arrive at the closing table each month, it would take nearly a year to sell them all, thus indicating a buyers’ market. In general, six months or more of supply denotes a buyers’ market, while less than six months is a sellers’ market.

Whether you’re buying or selling a condo, loft, or penthouse in downtown San Diego, it’s not a good idea to try to understand the market on your own. Make sure to work with seasoned professionals who know how to read the market and maximize value for both buyers and sellers. The real estate experts at 92101 Urban Living have years of experience with all types of real estate markets. Call one of our friendly agents today at 619-649-0368.