What Is a Buyer’s Market in Real Estate, and Will It Happen in 2022?

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What is a buyer’s market in real estate terms, and will we see one in 2022 — or anytime soon?

This is a common question in 2021, due to the red-hot nature of the U.S. real estate scene. After a year of frenzied sales activity, a lot of people want to know if the market will ever shift back to a point where it favors buyers over sellers.

A “buyer’s market” occurs when the supply of homes begins to exceed the demand from those seeking to purchase them. Houses tend to sell more slowly in this scenario, and price reductions are more common.

But we probably shouldn’t expect to see a true buyer’s market situation in 2022. In most cities, ongoing supply shortages will likely prevent the market from shifting in that direction. Though there are signs of a general cooling trend, as of summer 2021.

What Is a Buyer’s Market in Real Estate?

A real estate buyer’s market occurs when home buyers have more negotiating leverage than sellers — and plenty of properties to choose from.

This scenario can occur due to a number of reasons. But it usually comes down to an imbalance between housing market supply and demand. In this kind of market, there are plenty of properties available to purchase, but not enough buyers to “absorb” them all.

In other words, it happens when the supply of homes greatly exceeds the demand.

Here are some common features of a real estate buyer’s market:

  • Homes take longer to sell and often stay on the market for a fairly long time.
  • The number of properties for sale exceeds the number of people buying them.
  • Price reductions are much more common, due to the relative lack of demand.
  • Sellers are generally more willing to contribute to the buyer’s closing costs.
  • Sellers are more motivated to make a deal, especially if they’ve had few offers.
  • Home prices rise more slowly (or not at all), when compared to a seller’s market.

In short, a homeowner who is trying to sell a house in a buyer’s market has to work harder, in order to attract offers from local buyers. Home buyers, on the other hand, tend to have plenty of properties to choose from and more negotiating leverage when it comes to the price and terms.

Will We See One in 2022?

As of summer 2021, we are still seeing seller’s market conditions in most U.S. cities. This is due to a severe shortage of supply that probably won’t be remedied anytime soon. But there are signs that the market might be starting to shift slightly.

As of summer 2021, a number of recent reports point to a possible slowdown within the U.S. real estate market. One of the signs was a recent decline in home sales nationwide.

Despite this cooling trend, we probably should not expect to see the classic buyer’s market in 2022. If anything, the real estate scene might move slightly closer to being balanced. But there will still be a shortage of supply relative to demand in most cities next year.

In a recent report, the Home Buying Institute explained some of the reasons why there probably won’t be a true buyer’s market in 2022. That report cited the ongoing inventory crunch and a reluctance among some homeowners to sell their properties, among other factors.

Different Cities, Different Housing Conditions

Of course, housing market conditions can vary widely from one city or region to the next. For example, a recent Bloomberg report suggested that New York City is still in a buyer’s market due to a large number of properties for sale. That’s partly due to a mass “exodus” of residents that occurred early on in the pandemic.

But NYC is an exception to the rule. It’s something of an anomaly, in terms of the supply and demand situation. Most cities across the U.S. are still experiencing seller’s market conditions, and that could continue well into 2022.

Due to all of these trends and conditions, we probably shouldn’t count on a buyer’s market happening in 2022. It might get easier to buy a house next year, especially if inventory continues to rise. We might be heading toward a more “normal” or balanced real estate scenario in the months ahead. But it will be a while before the market “flips” to where it favors buyers.

The bottom line to all of this: Sellers will probably continue to have the upper hand across much of the country, as we finish out 2021 and head into 2022. That’s just the reality of the current real estate scene.