The key to understanding Brantford real estate prices is to know the difference between a buyer’s and a seller’s market. In real estate, the principle of supply and demand determines house prices – and like all investments, home prices ebb and flow in the same way that other investments do.
- Supply and Demand in Real Estate
- The Buyer’s Market in Real Estate
- The Real Estate Seller’s Market
- How Home Prices Are Actually Calculated
- Compare House Prices Yourself
SUPPLY AND DEMAND IN REAL ESTATE
To understand the principle of supply and demand in real estate, let’s use the example of a new cell phone.
In this example, a big tech company decides to sell the greatest cell phone ever invented. It has all the features everyone needs and everyone is going to want one.
There’s a problem though. They’re only going to manufacture 100 of them and they’re going to be really hard to find in stores.
When this happens it means there is a short supply but a high demand for the product.
With a short supply from the phone seller, and a high demand from buyers, the price of the phone goes up.
This is because people are willing to pay more for a rare product. When demand increases, it further increases the price.
In contrast, if the company made thousands of phones it would be considered a high supply, and if not many people want to buy it, this is considered low demand. High supply and low demand is when the price begins to drop.
Supply and demand principles also happen in the real estate market.
THE BUYER’S MARKET IN REAL ESTATE
In real estate, a buyer’s market means there are more houses available than there are people looking to buy them. This is when prices tend to fall, as sellers are trying to attract buyers with a good bargain!
Economists always debate about when real estate markets will shift from a buyer’s market to a seller’s market and vice versa. They examine mortgage interest rates, lending rules, inventory and other indicators.
It’s even been observed that the time of year can factor into how much supply or demand there is.
THE REAL ESTATE SELLER’S MARKET
In a seller’s market, there are many buyers desperate to purchase a home while there isn’t very much inventory of properties available.
This kind of market often results in what people call a bidding war, which is when multiple buyers want the same house and try to out-bid each other by offering more than the seller is asking.
You’ll notice in a seller’s market, that’s when prices begin to rise. If buyers are continually willing to pay more because available homes are so rare, then the market dictates that prices should broadly go up across the board.
In Brantford and most of Canada, a seller’s market can be very discouraging for first time home buyers. It can also be just as frustrating for anyone who is looking to purchase their next home. In a seller’s market, it can be daunting to stick to a budget when everything seems to be selling for over the asking price.
A REALTOR® can help you navigate these tricky markets because they have first-hand knowledge of what houses are actually worth.
Read some great tips we put together on putting in the perfect offer on a house you want to buy.
HOW HOME PRICES ARE ACTUALLY SET
Some people think that real estate agents come up house prices out of thin air. Or that they try to start bidding wars by pricing houses too low so multiple offers come in at a much higher price than the house is actually worth.
The complete opposite is true. Even if a client wants to overprice their home, we strongly advise against it and encourage them to stay within the constraints of current market values.
Real estate agents use a very specific method to price a home to optimize the odds of it selling at a price that works for everyone. These include:
- Examining comparable homes that have recently sold with similar features (e.g. square footage, bedrooms, bathrooms, updates etc.) and in the same neighbourhood.
- Determining what buyers in the recent past have been willing to pay to live in this area.
- Researching whether we’re in a buyer’s or seller’s market to determine what price is reasonable for a house of this kind.
- Adding value to features of your home that may set it apart from others in the area. Fully updated homes with high-end finishes will reflect in the price that is set.
Your number one goal is to set a reasonable price that the market will support. As professionals, nine out of ten times we are bang-on with our pricing and the home sells quickly. If change is necessary, we make adjustments to pricing that reflect any fluctuations in the market that we’re seeing.
COMPARE HOUSE PRICES YOURSELF
Now that you’re equipped with some knowledge of how prices go up and down, you can compare Brantford house prices to yours by yourself. Simply sign up for our Free MLS® Listings service, where you’ll be sent properties that you can easily compare to yours.
When you’re ready, you can also sign up for our Free Home Evaluation service to find out what you could get if we put your home on the market today.
Seller’s markets and buyer’s markets shift back and forth. We are never really ever stuck in one forever.