Simply put, a buyer’s market refers to markets where the supply is greater than the demand. That is, when there are more houses listed to be sold than there are buyers ready to purchase. If you’re buying a rental property, a buyer’s market is what you’re after. For one, you have many more options to choose from but more importantly, you’re better able to find cheaper deals that give you higher returns. After all, a buyer’s market (as the name suggests), favors the buyer. Here’s how to find that buyer’s market.
Related Blogs: Is it a Buyer’s Market or Seller’s Market?
1. Look for areas with a lot of houses to choose from
This is usually a great indicator that you’re in buyer’s market. When there are many properties to choose from, not only do you get more variety, but you’ll also have greater negotiating power. In this type of market, there just aren’t enough people purchasing homes, or they do not have enough money to do so. That is good news for you, because the seller will then work on your terms.
2. Keep an eye on price cuts
If home prices are decreasing, that's an indication that no one is buying. The demand is low and there is no bidding competition, unlike a seller’s market where prices might actually go up. Think of it like shopping during a sale season - enjoy the price cuts and use it to find your ideal real estate property. Sometimes, you’ll find a gem in a seller’s market and notice a property’s prices are consistently going down. Inquire about that property and why no one is buying it, but make sure to get an inspection.
3. Check how many days the property has been listed
Has the property you’re examining been listed for a while? If it’s been longer than six months, then you have likely found a buyer’s market because properties usually melt away in hot markets in a shorter amount of time. Keep in mind, homes that don’t sell are not necessarily flawed, but that’s the reality of a buyer’s market: the amount of buyers is less than the amount of listed homes.
4. Peaked Interest
Maybe this won’t be the best news about a buyer’s market at a first glance; when prices are declining and more options are available, interest rates tend to go a bit higher. This is usually an indicator that you’re in a buyer’s market. Might sound scary, but you can make up for the higher interest rates from rental property tax deductions.
5. Are the real estate ads getting bigger?
Check areas with many real estate ads! Usually in a buyer’s market, more real estate ads go up to encourage people from purchasing homes. So, having a bunch in an area is a good indicator that you’ll have the negotiating power.
Why should you find a buyer’s market?
Some people have a hard time wondering why they should buy an investment property in a market that has a low demand for property. If you’re purchasing a real estate property for traditional or Airbnb uses, then your target audiences will be much different than those who are trying to purchase homes. You are targeting renters, not buyers. With that being said, look at other factors in the area you’re purchasing. Make sure it has an established and developing economic growth, median income citizens, and steady industries. These are usually indicators that you will find renters. If you’re hoping to sell the investment property and reap in the benefits of home appreciation, hold on tight and wait for a seller’s market.
So, go ahead and start looking for your ideal rental property now on Mashvisor!