In real estate, a seller’s market is just what the name implies: an overall market that favors sellers over buyers. If you want to sell your house, doing so in a seller’s market means you can likely price it relatively high and sell it relatively quickly, often with less fuss like negotiations and concessions.

Are we in a seller’s market?

Yes. Generally, a neutral market requires around a six-month supply of homes available for sale. Anything less than that is seller’s market territory — and that’s precisely what we’ve seen in recent years, with NAR’s most recent numbers indicating a 3.3-month supply at the current sales pace.

“According to our latest data, housing supply is still very low,” Evangelou says. “Although there are fewer buyers in the market due to weakening affordability, there aren’t yet enough homes. Housing demand continues to outpace supply.”

However, things may be changing. A combination of low inventory and high mortgage rates have resulted in plummeting sales — existing-home sales have dropped for 10 straight months, according to NAR, with a 35.4 percent decrease in November 2022 compared to November 2021. Homes are also sitting on the market for longer, taking around 21 days to sell in November compared to 18 days the previous year, and prices are starting to drop as well.

“It is very much a shifting market — the tide is going out,” says Ruben Gonzalez, chief economist at Keller Williams Realty.

Kendall Bonner, broker/owner of RE/MAX Capital Realty in Lutz, Florida, agrees: “We’re still in a seller’s market right now, but we’re heading toward a more neutral market, which is good and healthy.”

Tips for when you’re in a seller’s market

For sellers

• Work with a trustworthy real estate agent. Having a pro by your side can make all the difference as you navigate a potentially shifting market, even one that still favors sellers. “We’re back to negotiating again, so the negotiating skills of your real estate professional matter more than ever,” says Bonner. “You need someone who understands how to move and influence others.”
• Be realistic about your list price. Just because it’s still a seller’s market doesn’t mean you can expect the same one-day sales for thousands over ask that we saw last year. “One of the common pitfalls during a market shift is continuing under the assumption that the tide hasn’t changed,” Gonzalez says. “This leads to overpricing. People need to understand current market conditions — how deep is the water? — and market trends — the direction the tide is flowing.”
• Don’t skip doing a little work before you list. Money invested in minor repairs should more than come back to you when you sell. “People will pay for perceived value,” says Bonner. Just don’t go overboard — not everything needs fixing.

Bonner also recommends patience, even in a seller’s market. Every property is different and local markets can vary widely, so try not to compare your situation to sky-high success stories you might have heard. “Understand that your home might be on the market longer than seven days,” she says. “You might not have multiple offers, but that doesn’t mean you won’t get a great offer.”

For buyers

• Work with a trustworthy real estate agent. This advice applies to buyers, too. “A good Realtor will keep their clients informed on [market] cycles so they can avoid common mistakes when conditions are changing,” Gonzalez explains. “They can help home buyers with their offer and show them properties they wouldn’t otherwise find,” adds Evangelou.
• Widen your net. “Because the supply of homes is low in a seller’s market, buyers should consider broadening their search area,” Evangelou says. “That way, they will have more homes from which to choose.”
• Get preapproved. A lot of figuring out how to buy in a seller’s market comes down to beating out the competition. So be proactive and prepared to act fast. Getting preapproved for a mortgage can set you apart from other buyers, showing sellers you’re serious and ready to pull the trigger if they accept your offer.

Again, patience might help here. “Buyers now have time,” Bonner says. “You have time to actually look for and find your dream home.” Talk with your agent about the ideal buying timeline in your area. If your local market is swinging toward a buyer’s market quicker than other locales, waiting might make the most financial sense.

What happens if the market crashes?

First things first: According to economic experts, the housing market is not about to crash. It is, however, likely to experience a slowdown in the coming year, along with the rest of the economy.

Inflation, high mortgage rates and a potential recession are scary, but the changes we’re already seeing in real estate indicate a correction rather than a crash. The last few years have been “more than just a seller’s market — it was chaos,” Bonner says. “What we experienced previously was exhausting for all sides. It just wasn’t normal or sustainable.”

In other words, the downturn we’re likely to see in 2023 is simply a normalization. It might result in a balanced market, or maybe even turn the tables to a buyer’s market, but that remains to be seen.

“Depending on the path of interest rates and the economy, we may land in either a buyer’s market or more ‘normal’ sellers’ market,” Gonzalez says. “Whether we see a supply of inventory above six months remains uncertain.”

“With mortgage rates stabilizing below 6 percent, more buyers are expected to be back to the market in 2023,” says Evangelou. “But inventory will remain tight.”