Posts Tagged ‘Supply and demand’

Are we in a Buyers Market or a Sellers Market?

May 16, 2011 1 comment

Like I promised, I said I would explain the difference between a ‘buyers market’ and a ‘sellers market’, and explain who has more negotiating power in each situation.  First, let me explain negotiating power. Negotiating power is the amount of influence one party has to ‘make their price’. The two sides of negotiating power are the price makers and the price takers. The weaker party, or the party with less influence is usually the price taker.

Supply and demand is the main factor determining which party is the price maker vs. price taker. When demand for a product is high, many people are willing and able to purchase that product. The buyers become the price takers, because they’re willing to accept the price offered. When demand is low, which means very few people want the product, the buyers become price makers, because they understand there are few customers so the seller is more motivated to accept the price the buyer is offering.

If it hasn’t been clear, we are currently in a BUYERS MARKET. Prices are so low and there is so much competition that it makes sellers lower their price to compete with the guy down the street trying to sell his house. This is a perfect time to buy a house and let the market go up! Contact me if you want a free consultation on helping you find the perfect home for you!

A seller’s market is when the opposite occurs: Demand for houses becomes higher, because there are many buyers able and willing to find a home, and fewer sellers on the market. This drives the price of the houses higher.  
The supply and demand of a certain market, and its analytics are very complicated. I tried my best to simplify it, but economics are not that cut and dry. If you enjoy economics and want to learn about the science behind supply and demand curves, I suggest going here.