14 Jun 2019

Mark Zawaideh


When determining how the housing market will perform, the economy provides us with clues. With our economy moving in a positive direction, there is not much worry for a housing crisis, recession, or even a housing bubble. The GDP was 3.4 % at the end of 2018, the unemployment rate is 3.9 %, which is low, and 312,000 new jobs were created in December. With all the positive momentum of a strong economy, people may wonder if this is an opportune time to either buy or sell a house. Does this type of economy indicate a buyer’s or seller’s market? Let’s dive into this topic deeper to understand how economic issues affect the housing market.

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Understanding the Difference Between a Buyer’s and Seller’s Market

When determining whether we are in a buyer’s or seller’s market, we need to understand the difference between the two. The critical factor that determines which way the market leans is the ratio of house inventory to buyers. In other words, the balance of supply and demand. If there is a big demand for a product but only a few of those products, then the sellers have more leverage to set the price. That means sellers can charge more. However, if the conditions are reversed, and the product in question is plenteous and commonplace, then the buyer may have more indirect control over the price. Sellers realize they can’t set costly prices, or people won’t buy the product.

How Does This Apply to the Real Estate Market? 

If there is a shortage of houses on the market, then that means inventory, or supply, is low if, at the same time, demand for houses is high (or even average), then the seller has the advantage. Sellers will likely have multiple people bidding on their home, which naturally drives up the cost. This is a prime environment for a SELLER’S MARKET.

However, if the inventory of houses increases at a higher rate than the demand for them does, then the market will see an abundance of houses for sale. This becomes a BUYER’S MARKET.

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What Type of Market Are We in Now?

According to recent reports, the inventory of houses is increasing, but not because of new construction and a demand for them. The increase comes from a decrease in demand driven by higher mortgage rates. Because of the rising interest rates on mortgages, monthly payments will be slightly larger. At first glance, they may seem to indicate a buyer’s market because there is a greater supply than demand. However, the booming economy plays an influential part in the market trend. Market research indicates upscale homes will continue to be more available than first-time homes. In addition, house prices will continue to rise indicating a healthy housing environment. The existing home median price appreciation is up 2.2%, as well. These factors suggest that it will still be a seller’s market, even if we don’t see the bidding wars of last year.

How Is the Market for the Detroit Area?

Lending Tree studied several of the more populated cities across the U.S. to find out who was affected by home price inequality and what it meant for the area. Detroit had the highest GINI coefficient, which is a measure that determines the degree of economic inequality. This means there are very low-income homes as well as expensive homes in the area. Detroit homes can range anywhere from $32,000 to $431,000. 

The vast range of home prices may seem to be negative at first, but it allows for a broader range of people to have access to homes. It allows the lower income individuals to find houses in their price range. It also indicated the economy is vibrant enough to support the higher-priced homes. If you have an economic environment that is level, then people at the lower end of the economic ladder will be unable to purchase a home. So, Detroit is actually an excellent place for buying or selling a home.

The Detroit-Warren-Dearborn Metro market is predicted to have a boost in its home value amount. The home value index for this area is currently at $158,400, which is 8.6 % higher than last year, and it is expected to increase another 8 % bringing it to $171,000 by the end of the year. This is good news for sellers as they see their home value increase. Investors will also find the Detroit market a prime location to invest. The average cost of a home is below the national average, but the rent for the same area is 65 % above the national average.

Whatever the market has in store for seller and buyers, you need an expert real estate agent by your side. Contact Mark Z Real Estate Experts for more information.

Topics: Seller Tips