Housing Winners & Losers in
Sellers’ Markets & Buyers’ Markets

Every housing market has its winners and losers.

Every housing market.

So, 7-8 years ago, when the market was tanking, the big winners were first-time Buyers — at least ones with (good) jobs and unblemished credit.

With rock-bottom prices and an ocean of inventory, many first-time Buyers who set aside their fears and pulled the trigger have subsequently seen their homes double in value.

Four Categories

But, that’s just one type of Buyer.

In fact, at any given time, the housing market consists of four different types of market participants.

Read the following profiles and see which one you are (Note:  “+” represents buying and “-” represents selling; more iterations signifies a bigger transaction):

I. First-time (“Entering”) Buyers (+).  For Buyers entering the market, the weaker conditions, the better (at least up to the point where a bad economy threatens widespread unemployment).

Conversely, in a strong Seller’s market with tight inventory — the reality in many local housing markets today, including the Twin Cities — first-time Buyers fare the worst.

Cushioning the blow at the moment:  plentiful jobs and interest rates at a 10-month low.

II. Last-time (“Exiting”) Sellers (-).  Typically, these are aging Baby Boomers who are selling long-time family homes — long-time family homes bought for a relative song decades ago.

These are the biggest winners in today’s Seller’s market — provided they haven’t already cashed out their equity, and can find a suitable rental at a reasonable price.

III. Move-up Buyers (-/++). 

Sure, they’ll take a hit when they sell in a weak market.  But, that same discount on a (much) bigger place is worth more.

Conversely, in a strong market, that nice gain they’ll pocket as Sellers pales in comparison to what they’ll have to shell out for the upgrade.

Advantage:  weak market.

IV. Move-down Sellers (+/- -).  The converse of Move-up Buyers.

In a housing bull market, the premium that Move-down Sellers will have to pay for their 1,500 square foot condo or townhouse will be more than offset by the killing they’ll make selling their 3,500 square foot single family home.

Advantage:  bull market.

Zero Sum Game & The Role of Animal Spirits

If, at the transaction level, housing markets are a sort of zero sum game, why do bear markets seem so awful and bull markets so giddy?

My three-part theory:  1) it’s bad form to celebrate at others’ misfortune — especially when no one knows where the bottom is, or how long the downturn is going to last; 2) bull housing markets have lots of ancillary benefits, like strong consumer spending, wage growth, etc. (call it, “elevated animal spirits”); and 3) established agents disproportionately represent home Sellers (as listing agents) rather than home Buyers.

Theory #3 means that when Sellers are getting clobbered . . . so are the most experienced, successful Realtors.

In other words, to quote a certain ex-President, we feel your pain . . .

About the author

Ross Kaplan has 19+ years experience selling real estate all over the Twin Cities. He is also a 12-time consecutive "Super Real Estate Agent," as determined by Mpls. - St. Paul Magazine and Twin Cities Business Magazine. Prior to becoming a Realtor, Ross was an attorney (corporate law), CPA, and entrepreneur. He holds an economics degree from Stanford.

Leave a Reply