6 Benefits of High Inventory for First-Time Home Buyers

When purchasing your first property, it is essential to research the current local market conditions. These conditions significantly impact various aspects of the real estate process, including the price you can expect to pay, the time it takes to complete a sale and the overall strategy your real estate agent will likely adopt. Understanding the market helps you make informed decisions, choose the best time to buy or sell, and tailor your approach to becoming a first-time home buyer. 

The real estate market can be classified as buyer's, balanced, or seller's, determined by the month's sales-to-new-listings ratio (SNLR). In a buyer's market, new listings outweigh sales, giving buyers more choices, and the SNLR is typically under 40%. 

This situation often leads to lower prices and more negotiating power for buyers as sellers compete to attract interested buyers. In a balanced market, with an SNLR between 40% and 60%, demand and supply are relatively equal. Prices tend to stabilize, and both buyers and sellers have a fair chance of achieving their objectives without significant advantages or disadvantages. Finally, a seller's market is when the SNLR rate is over 60%. Demand exceeds supply in a seller's market, giving sellers the advantage. Buyers may face more competition, leading to higher prices and quicker sales. 

According to the Canadian Real Estate Association, by the end of June 2024, approximately 180,000 properties were listed for sale on all Canadian MLS Systems. This figure represents a 26% increase from the previous year but is still below the average of 200,000 properties for early summer. Similarly, the national sales-to-new listings ratio tightened to 53.9% from 52.8% in May, as the increase in new listings was smaller than the gain in sales. The long-term average for this ratio is 55%, indicating balanced housing market conditions. 

However, markets vary greatly by region and community, and high inventory suggests movement toward a buyer's market. Here are six key benefits from the experts at Zoocasa of high inventory for first-time home buyers:

Endless Choices for Your Dream Home

In a high-inventory market, you’re in the driver’s seat with more homes to choose from. Whether you’re eyeing a one-bedroom condo in a bustling city neighborhood or a family home in a top school district, a well-stocked market with frequent new listings increases your chances of finding a home that ticks all your must-haves. In some cities, you might even find that you can score a home with features that go above and beyond what you were hoping for. Overall, if you’re a buyer who wants a specific feature that might be harder to find, such as a ground-floor condo with its own separate entrance in downtown Toronto, a buyer’s market is the ideal time to start searching.

Save Money

High inventory can lead to lower home prices. With more homes on the market, sellers may be more willing to negotiate on price, making it easier to find a home within your budget. According to a recent Zoocasa survey, 42.3% of respondents said rising home prices were their primary concern about buying a home. 

Purchasing during a buyer’s market can often lead to better deals, resulting in significant savings. In this type of market, motivated sellers may lower home prices to attract more viewings and expedite the sale. This increased competition among sellers creates a favorable environment for buyers, who can take advantage of the abundant options and lower prices to find more affordable properties.

Additionally, buyers in a buyer’s market have greater negotiating power. They can negotiate for better terms that suit their needs, such as favorable closing dates. The ability to negotiate more effectively can lead to substantial financial savings and more favorable purchase conditions.

More Time to Make Decisions

High inventory means you’re less likely to be pressured to make quick decisions. Moreover, with less pressure to make quick decisions, buyers have more time to thoroughly evaluate properties, arrange inspections, and ensure they make a well-informed purchase. This careful consideration can help buyers avoid costly mistakes and secure a home that meets their needs and budget.

In a buyer’s market, you have the luxury of scheduling home viewings at your convenience, such as over the weekend, rather than rushing during your lunch break. This flexibility provides ample time to thoroughly discuss your options with your partner or seek advice from people you trust most, like family and friends. With this additional time, you can make well-considered decisions, such as evaluating potential renovation projects with input from a contractor. This careful approach ensures that your choices are informed and aligned with your long-term goals and preferences.

Lower Risk of Bidding Wars

In a market with high inventory, buyers face less competition for properties, significantly reducing the likelihood of stressful bidding wars. Additionally, in a buyer’s market, sellers are less likely to set specific offer dates, which are typically used to encourage multiple bids and drive up prices. This reduced competition eases the pressure of the home-buying process, helping you secure a reasonably priced home. As a result, you are less likely to compromise on important aspects of the home-buying process, such as conducting thorough inspections and ensuring you make a well-informed purchase without feeling overwhelmed by the potential of multiple offers. 

Greater Negotiation Power

With high inventory, buyers have more negotiation power. More information can also help buyers understand the final price of a property or the number of days a home in the area is on the market, which is classified as DOM. For example, a neighborhood with fewer days on the market is a sign that homes sell quickly, and there is limited inventory. Increased DOM indicates that homes take longer to sell due to higher inventory levels.

Depending on their reasons for selling a home, sellers may be more willing to make concessions or cover the costs of necessary repairs. For instance, a seller might agree to repaint a room in a color of your choice or fix a garage door before the sale. Additionally, if a house has been on the market for a while, sellers might be more motivated to close the deal quickly, allowing you to negotiate favorable terms, like making the sale contingent on selling your current home first.

From the perspective of a seller, they might be more willing to accept a low offer if the property has been on the market for a long time without many showings or if they need to sell their own home before purchasing due to circumstances such as moving out of the province for a new job.

Similarly, in a buyer’s market, most buyers tend to gravitate towards properties in the best condition. As a result, sellers often make their homes stand out from the competition in the neighborhood and surrounding area. This often means investing in significant upgrades, such as installing a new roof, updating the furnace or air conditioner, replacing windows, remodeling kitchens and bathrooms, or finishing the basement. These improvements can make a substantial difference, attracting discerning buyers and potentially securing a quicker sale at a better price.

Elevated Buying Experience with Enhanced Homes 

When buyers walk through a home in a buyer’s market, they evaluate individual features and consider how the home makes them feel. They look for a property that feels welcoming, fresh, and move-in ready.

In response, sellers often go the extra mile to make cost-effective improvements that have a significant impact. For instance, they might paint the house to create a clean, inviting atmosphere, add neutral yet colorful artwork, or replace kitchen and bathroom hardware. These enhancements can make a home more appealing to discerning buyers and help it stand out in a competitive market.

In a seller’s market, things might be less organized as the high demand for homes often leads to quicker sales. Sellers may not feel the need to stage their homes meticulously or invest in extra steps to wow potential buyers. Depending on the area they live in and the competition among buyers, some properties can sell quickly without the need for extensive preparation or presentation. As a result, homes might be shown in a more lived-in state, with fewer enhancements or aesthetic improvements, since the urgency and demand reduce the necessity for such efforts. 

Purchasing in a Buyer’s Market

In a buyer’s market, high inventory means more properties to choose from, giving you greater flexibility and negotiating power. This abundance of listings allows you to find a home that meets your needs at a better price, with less competition and more favorable terms. Understanding these market conditions helps you make informed decisions, ensuring you get the best deal possible on your first home.

Visit Zoocasa's blog for more advice about today’s ever-changing real estate market.