Buyer's Market

Publication Date :

08 Feb, 2022

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Table Of Contents

Buyer's Market Definition

A buyer's market refers to the market of a specific product or service where its supply exceeds the demand, and as a result, buyers enjoy dominance. This phenomenon is normal in various markets like real estate and angel investor markets.

Understanding the market scenario will help people determine the good time to buy, invest, or sell goods and services. One of the easy methods consumers can identify the nature of the market is by looking at the inventory level. If the inventory is high, the situation favor's buyers and vice versa.

Buyer's Market Definition

A buyer's market refers to the market of a specific product or service where its supply exceeds the demand, and as a result, buyers enjoy dominance.
In this market, the inventory will be high and not all products offered are sold. Sellers have to provide discounts and other offerings to boost sales and generate adequate cash flow.
The buyers of such a market enjoy benefits like falling prices, negotiation power, and various choices.
This phenomenon is normal in various markets like real estate and angel investor markets.

Buyer's Market Explained

The buyer's and seller's markets are the basic economic terms stating whether the market has excess supply or demand. When the former states excess supply, the latter signal the situation of excess demand. In other words, it's the supply and demand which determines the market structure.

Change in equivalence or proportionality between supply and demand promptly alters the market's nature. In former times, generally, there was no massive production of consumer goods and services. At that time, producers enjoyed dominant market power; they produced items with specifications they liked without prioritizing consumer preferences because whatever the seller offered, buyers accepted.

The whole scenario changed when the production of consumer goods and incomes increased simultaneously. As a result, the availability of products, substitutes, and buyer purchasing power increased. As a result, the focus shifted to buyers, sellers' competition among sellers increased.

When the focus is on buyers, several features favoring them develop. For example, they can enjoy dominant power in the market, negotiate for better prices, choose from a variety of choices, and competition among sellers' floods market with discounts and other cash-saving offerings.

Example

The buyer's market is a common phenomenon in the real estate industry. The real estate market primarily fluctuates between a seller's and a buyer's market. As the number of available houses increases, house prices tend to decrease. Sellers compete for buyer interest, making it beneficial for buyers. Buyers realize a bargaining power over sellers hence an improved negotiation with the seller to cover some closing costs and ask for discounts and other benefits.

Let's look into the example of the real estate market in the United States turning into a buyer's marketplace when hit by the Covid 19 waves. Amidst the COVID 19 pandemic, more product was available than demand, causing prices to fall dramatically. Many people took advantage of the price drop and moved to their dream areas like New York or brought luxury apartments. However, this shift was short-lived, by 2021, with the new government in place and vaccination programs energized the market. Subsequently, demand increased, causing the reversion to the seller's market.

Buyer vs Seller Market

Let's look into a few differences between the buyer's and seller's markets.

Buyer's Market	Seller's Market
Supply exceeds demand	Demand exceeds supply
Buyers' dominance in the market	Sellers' dominance in the market
Buyers have the negotiation power	Sellers have the negotiation power
Buyers drive sales	Sellers drive sales
Prices are falling	Prices are in the upward trend
Sellers prioritize consumer preferences	No or less priority to consumer preferences
Various choices	Choices are low
Fierce competition between sellers	Buyers may compete for grabbing the offering
Buyers get discounts	Usually no discounts
Sellers should make quick decisions to close the deal	Buyers should make quick decisions and payments to close the deal
The product listed tend to be in the market for an extended period	The product offering will not stay for a long period
Buyers get additional benefits	Minimal scope for added benefits

The buyer's and sellers' markets interpret the opposite concepts. As a result, the events occurring in both markets vary. For example, sellers have to boost sales using discounts and other attractive schemes if the buyers are dominant. However, whereas sellers are at dominance, they don't have to use sales-driving techniques; they already have a good cash flow.

Frequently Asked Questions (FAQs)

What does the buyer's market mean?

It refers to the market where buyers enjoy power dominance. The supply exceeds the demand in such markets, so sellers want more sales to generate sufficient cash flows. Hence buyers are in need, and sellers accept the buyer's demands. Though the term buyer's market can be associated with any industry, it is primarily used in real estate.

How to know whether is it a buyers market right now?

Many factors determine whether the market is favorable to the buyer or a seller. Following are a few factors:
• Supply exceeds demand
• Inventory levels are higher compared to the people looking for them
• Sellers are giving huge discounts with other benefits and ready for negotiations
• In buyers market housing, if a house is listed for sale for a more extended period, than it is likely to be
• There is a rush from a seller to close the deals because buyers have various other options

How do buyers impact prices?

Generally, if there are more buyers price will increase and vice versa. In other words, if there are more sellers price will decrease and vice versa. So ultimately, it's the forces of supply and demand which determine market prices.