There are numerous causes of a real estate buyer’s market, and all of them have converged recently to disrupt the current housing market, such as higher inflation and losses of jobs.
Mortgage Interest Rate Increases
One of the most significant contributors to a buyer’s market is interest rate increases. When this happens, the rate at which banks recover loans, such as mortgages based on a home valuation, goes higher. A fixed-rate mortgage, although often higher, can help offset this when rates increase. And a variable-rate mortgage helps when rates are lower. However, these can skyrocket when a mortgage term ends, which can make it unaffordable to the point of selling.
Massive Hikes in Inflation
Another huge contributor to a buyer’s market is inflation rates. Unfortunately, interest rates alongside mortgage interest rates are higher and have been for some time. Together, these are making current conditions almost unbearable for some homeowners. This is advantageous for a buyer as you would be in a stronger position to negotiate a better deal if a seller is at a disadvantage. This makes a rather unsavoury situation, but it can speed up the sale for sellers.
Bad Economy Causes Real Estate Buyer’s Market
Like the points mentioned above, economic conditions can also force a buyer’s market into existence. A weakened economy can force people to spend less money and tighten their budgets. And if things get too bad, some people may need to desperately sell their homes. 2023 has been a trying time, and in the UK alone, there are over 80,000 mortgages in arrears. This means people might need to sell their homes as fast as possible so a buyer can dictate terms.
Higher than Average Job Losses
There is a common theme throughout this point and all the ones above. And that is that they all converge to make up what a recession really looks like. In times of recession, things can get pretty bad. And although there are some that will suffer, there are others that can ride the storm. Yet one of the most devastating events is job loss, which can cause a home sale. As such, buyers can take advantage of the issues and get a better deal based on the needs of the seller.
Oversaturated Home Construction
In a weird reflection of poor economic conditions, even good conditions can cause a buyer’s market. When times are going better for the overall economy, demand for housing can boom, causing more projects to go ahead. However, this means the market becomes saturated and large developers have too many homes sitting around empty. And an empty home loses money. Therefore, you can negotiate a speedy deal as a buyer as sellers look to close the loss gap.
Summary
Mortgage rate increases, inflation and poor economic times can cause a real estate buyer’s market. These also lead to job losses that force homeowners to sell. And even building too many homes can cause large developers to sell their homes at better prices to reduce void loss.
