Indianapolis Home Buyers - Consider Supply and Demand Before Making an Offer
Many home buyers today believe they can should automatically offer a reduced price if a home has been on the market for awhile. Another fallacy is there must be something wrong with a home if the price has been reduced. Don't mistake the reduction of a home's listed price as a signal that something is wrong with the home, or that a price reduction is automatically in order when you decide to make an offer.
In many neighborhoods around Indianapolis -- the supply of homes for sale has outpaced the demand for homes. When supply exceeds demand, there is a downward pressure on price until a balance point is reached. During the recent boom in real estate, this economic equation was reversed, creating upward pressure on prices.
Nationally, some areas have seen over a 20% reduction in price since 2005. Here in Indianapolis, our average price reduction is about 2.6%. Of course some areas have seen more, some less. It really depends on the neighborhood, area of town and the home. Supply and demand in today's market can be illustrated by a seller listing their home at a price and finding few potential buyers.
When the price drops, however, more buyers suddenly show interest in the home. Further price reductions, of course, bring even more interested buyers until a deal is made and the home goes under contract. When supply exceeds demand over a long period of time, prices tend to drop and that is why a market like this one is called a 'Buyer's Market'.
There are areas in Indianapolis which are creeping close to being a nuetral market, favoring neither the buyer or the seller. Price reductions don't signal problems with a home, but merely that it was priced too high to find a buyer given the current market's supply and demand. When you find a home you want to make an offer on, take all factors into consideration before deciding you want to make a 'low-ball' offer. There could very well be another buyer right behind you who understands the market and value of the home.