What Is a Seller’s Market?

A young couple being welcomed to a home by a real estate agent
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DEFINITION
A seller’s market is when there are more buyers looking for homes than there are homes available.

In a seller’s market, there aren’t enough homes on the market to meet the demand from buyers. Since there are fewer homes available, sellers have more leverage to ask for higher prices, and buyers often have to compete with one another to purchase the home they want.

If you’re currently trying to buy a home in a seller’s market, it isn’t impossible, but you may end up having to pay a higher price for the home you want. With the right strategies, however, you can successfully buy a house in a seller’s market.

Definition and Example of a Seller’s Market

In a seller’s market, there are more buyers looking for homes than there are homes available. Since there are fewer homes to choose from, multiple buyers will often be interested in purchasing the same properties.

When a seller begins receiving multiple bids, this can quickly lead to a bidding war and drive up the price of the home. For that reason, a seller’s market is a great time to try to sell your home and receive a premium price.

When the pandemic first hit in March 2020, the housing market came to a halt. But once the country began to reopen, the demand for houses began to go up. In 2021, interest rates for a 30-year mortgage hit a record low, falling as low as 2.65% in early January. The combination of factors led to a very competitive seller’s market.

If you’re trying to buy a home in a seller’s market, remember that the seller has the advantage. Trying to negotiate for a lower sales price could work against you since another buyer may make a better offer and outbid you.

How a Seller’s Market Works

In a seller’s market, the demand for houses outpaces the current supply. This means there are more buyers looking for homes than there are homes to sell. Housing prices quickly go up because of the increased demand, and homes stay on the market for less time.

The housing market is cyclical, and there are a number of different conditions that can create a seller’s market. If you’re looking to buy a home, here are some signs you may be attempting to buy in a seller’s market.

You can get a sense of the market in your local area by reviewing price and time on market data provided by the National Association of Realtors.

High Home Prices

When there are fewer homes available, housing prices start to go up. That’s because sellers often receive multiple offers and can negotiate for a higher selling price.

Homes Sell Quickly

One of the key signs it’s a seller’s market is that homes don’t stay on the market very long. Since there’s a high demand for houses and limited inventory, homes often sell quickly after being put on the market.

Bidding Wars

Low inventory and high demand means that multiple buyers will often make offers on the same property. This often leads to a bidding war, where multiple buyers are competing to outbid one another.

If you’re selling your home in a seller’s market, you will have the upper hand, but you should still carefully consider all home offers. Don’t just look for the highest offer—consider requests for seller concessions and the buyer’s financing situation as well.

Seller’s Market vs. Buyer’s Market

Seller’s Market Buyer’s Market
The demand for homes outpaces the supply The supply of homes outpaces the demand
Sellers have the advantage Buyers have the advantage
Real estate prices tend to go up, and homes stay on the market for less time Real estate prices tend to go down, and homes stay on the market longer

In a seller’s market, the demand for houses outpaces the current supply. This gives the seller an advantage, and they can often ask for higher prices on the home. Real estate prices tend to rise quickly, and homes don’t usually stay on the market for very long.

In comparison, in a buyer’s market, the supply of homes outpaces the demand. This gives buyers the advantage to negotiate for a lower price and ask for more seller concessions. In a buyer’s market, real estate tends to go for less than asking price, and houses usually stay on the market for longer.

Key Takeaways

  • In a seller’s market, the demand for houses outpaces the supply, and homes don’t stay on the market for very long.
  • Since there are fewer homes available, the seller has more leverage to ask for a higher price.
  • Signs of a seller’s market include lower inventory, higher home prices, and bidding wars.
  • In a buyer’s market, the supply of homes outpaces the demand.

Article Sources

  1. Redfin. “What Is a Buyer's Market vs. a Seller's Market?” Accessed Jan 18, 2022.

  2. University of Michigan-Dearborn. “How Does Pandemic + Recession = Seller’s Market?”  Accessed Jan 18, 2022.

  3. Freddie Mac. “Primary Mortgage Market Survey.” Accessed Jan 18, 2022.