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So-called ‘sellers’ markets’ are really buyers’ markets

Posted by John Reed on

Nobody but my readers understands so-called “buyer’s markets” in real estate. But some of your are new so I need to educate you.

The hoi polloi, including journalists and real estate agents, claim it’s a sellers’ market when homes sell quickly and a buyers’ market when they take a long time to sell. That is dead wrong.

The principle these people are commenting about inarticulately is the fact that SELLERS ARE OFTEN BEHIND THE MARKET. Buyers never are because they are IN the market currently looking at lots of houses and they ARE the market.

When prices are falling, like 2008, the seller is asking too much because he is still thinking prices are what they recently were. People call that a buyers’ market. In fact, it’s NOBODY’S market because that’s who is buying: nobody. Buyers are not happy because they wan’t to buy and everything is priced above current market value. How can it be a buyers’ market if buyers are not happy?

In so-called sellers’ markets, properties sell in one hour. Sellers are thrilled.

Ignorance is bliss. When prices are rising, the sellers being behind the market means they ask too little. In these so-called sellers’ markets, sellers are thrilled because they don’t know current market values and are unaware they left money on the table. Buyers are also thrilled because they got the house cheap. But the buyers, unlike the sellers, are correct. That’s why it’s really a buyers’ market.

There was some unexpected corroboration of this in the book Freakonomics. The author found that when Reators® sell their own homes, those homes are on the market for more days than when the same Realtor’s clients’ homes are on the market. That’s because Realtors®, like buyers, know the market. So why don’t the Realtors® tell their listing clients that the price should be higher in rising markets? Because Realtors® are paid by the sale and their compensation per hour rises if they can take fewer hours to sell the house. So it is in their interest for the house to be underpriced and thereby sell quickly. What about their fiduciary duty? They are violating it.

Thus endeth the lesson. If you read my real estate books or newsletter you would already know such useful things.

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