What Is A Buyer’s Market?
A buyer’s market occurs when there are more sellers than buyers in the market for specific goods or services. In this case, supply exceeds demands. This situation favors the buyers because when the supply is higher and the demand is lower, the sellers reduce their prices to attract buyers. In the buyer’s market, buyers have an advantage over sellers in price negotiations.
A buyer’s market can exist in any market, but the real estate sector is the most common place to find a buyer’s market. It exists in real estate when the houses on sale outnumber the interested home buyers. In this situation, the buyers are in control. The sellers become desperate and will go any length to ensure their properties attract buyers. To lure more buyers to them, most sellers reduce their prices and might succumb to unfair pricing by buyers.
Several factors cause a buyer’s market. They include but are not limited to:
- Economic recession: When people can’t afford to buy a home, the demand is low. As a result, sellers may have no choice but to sell their properties at ridiculous prices.
- Scarcity of jobs: In a city where the unemployment rate is alarming or low-paid jobs, residents may decide to relocate and sell their properties at a low price to attract buyers.
- Entries of new sellers: When new sellers enter a business, it increases the availability of certain goods or services. If there is a decrease in demand, sellers compete with the price to lure buyers.
Buyer’s Market Example
The unemployment rate in Kogo town is becoming alarming, and there are low-paying jobs. But before that, about 200 houses were up for sale. Some residents of Kogo couldn’t take it anymore and decided to relocate to a neighboring town. More homes are up for sale, but the number of interested home buyers is low. Desperation starts to set in for the sellers, and they start competing for prices to attract buyers. The buyers are now in control and see this as an opportunity to acquire houses at a lower price.« Back to Glossary Index